In the November/December issue of the Virginia Woman Magazine (page 29) we reviewed the definition of estate planning and provided a list of the legal documents and action items included in a foundational estate plan. In this issue, we will provide a summary of each of the foundational documents.
The Last Will and Testament takes effect at death. The primary purpose of the Will is to identify the individuals and/or organizations that will inherit your assets upon your death. It may also include provisions to:
- Designate the person(s) responsible for administering your estate.
- Designate the person(s) to serve as a Guardian for any minor children.
- Establish trusts to receive and hold assets for your heirs.
- Provide for the minimization of income, estate, inheritance and other transfer taxes.
The Revocable Trust takes effect upon execution of the document. The primary purposes of the Trust are to provide for the administration of your assets during your lifetime and to provide for the disposition of your assets upon your death. It is often combined with a simplified form of a Last Will and Testament called a “Pour-Over Will” as a strategy to “avoid probate” and to achieve a level of privacy not available with a Will alone. The Trust may also include provisions to:
- Designate the person(s) responsible for administering your trust while you are alive and after your death.
- Establish additional trusts to receive and hold assets for your heirs. These trusts offer the potential for financial oversight and mentoring as well as a higher level of asset/creditor protection for your heirs. A single trust can also provide benefits to a group of beneficiaries without the need and complications of joint ownership.
- Provide for the minimization of income, estate, inheritance and other transfer taxes and probate expenses.
The Durable Power of Attorney identifies the person(s) you have designated to handle personal and financial matters for you in the event you are unable to do so. Without this document, it may be necessary to have a court appointed guardian/conservator to handle your personal and financial affairs if you become temporarily or permanently incapacitated.
An Advance Medical Directive is a common name used for the legal document that contains the provisions of both a Living Will and a Durable Power of Attorney for Health Care Decisions.
- The Living Will component directs your attending physicians regarding the use of life sustaining measures, which include artificial administration of food and water and the use of pain relieving medications, in the event you are diagnosed as terminally ill with no reasonable chance of recovery.
- The Durable Power of Attorney for Health Care Decisions component identifies the person(s) you have designated to handle medical decisions for you in the event you are unable to do so. This is particularly important should you become incapacitated – either temporarily or permanently.
HIPAA Authorizations identify the person(s) that you would like to have access to your medical information. Without this authorization, your family/agents will not have access to information needed to make decisions on your behalf. HIPAA authorization language is commonly included in a POA, AMD and the Revocable Trust.
The Durable Power of Attorney for Burial Arrangement identifies the person(s) that are authorized to make arrangements for the disposition of your remains and plan your funeral/burial. Powers of Attorney for Medical Decisions involving Minor Children are a form of POA that allow you to identify the person(s) to handle medical decisions for your minor children in the event you are unable to do so.
If you would like to learn more about your estate planning options, we are here to help.
Dawn M. Dale, JD, LL.M., CFP®
McLean, Virginia 22102