Powers of Attorney
In my ideal world, everyone would have a financial and health care power of attorney. If a person becomes incompetent without these powers of attorney in place, the Court, if it finds the person to be incompetent, appoints guardian(s) to make financial and health care decisions. These are positions of trust and personal preference. Powers of attorney allow you to make these decisions without the necessity of a court hearing – a simple step for peace of mind. Powers of Attorney only operate during your lifetime.
Wills direct the distribution of assets at your death. Wills can be simple or complex, depending on how you want assets distributed. Wills can include trusts for descendants, disabled family members or pets. A Will and any trusts created therein lay dormant until your death.
Revocable Living Trusts
A second option for directing the distribution of assets at your death is the revocable living trust (‘Trust”). The primary advantage of a Trust over a Will is avoiding probate. An asset that is in the name of your Trust at your death is not a probate asset. Click for a brief discussion of probate assets and probate. A Trust comes into being during your lifetime on the day you sign the trust agreement. You are the trustee of your Trust. The Trust is revocable and amendable; you can put assets in and take assets out. During your lifetime, it operates under your social security number and income and expenses of the Trust are reported on your personal income tax return. A Trust can be for one person or a joint trust for a couple. In addition to directing the distribution of assets at your death, your Trust also directs the distribution of assets if you become incompetent, incapacitated or just don’t won’t to deal with finances any more (similar to a financial power of attorney). In such case, the person you name as successor trustee takes over the administration of trust assets. Even if you choose a Trust, you do still need a financial power of attorney and a Will. Your financial power of attorney handles financial matters outside of the Trust, such as signing a tax return or applying for social security. Your Will would be a “Pourover Will” – a “catch-all” directing your executor to put in the Trust any rogue assets not in the Trust at your death.
In the living will (or advanced directive) you choose whether or not you receive solely palliative care when you are close to death.