The Complete Estate Plan

For the vast majority of clients, a complete estate plan includes four documents: a Revocable Living Trust, a Pourover Will, a Power of Attorney and an Advance Health Care Directive. Each document covers a different set of concerns, assets, and effective time period. The two basic set of concerns are financial and health care. The two basic time periods they cover is either before or after death, and the two basic types of assets are trust and non-trust assets.

FINANCIAL CONCERNS

For your financial concerns the grid looks something like this:

A valid Revocable Living Trust operates during your lifetime and after your death. Because of its longevity, a Trust can help manage your affairs during your senior years or incapacity, and it can distribute your assets to your loved ones on your death. However, it only governs assets that you have transferred into your Trust estate.

A Power of Attorney operates only during your lifetime and only governs non-trust assets. If you have a bank account in your individual name (not in the name of your trust), your agent under your Power of Attorney can access the money in that account. If the Power of Attorney allows, your agent can file your tax returns, use your credit cards and access your safe deposit box, among other things. However, at your death, the Power of Attorney terminates.

Just as the Power of Attorney terminates, your Will becomes effective. A Will becomes effective at the moment of your death, and it governs only non-trust assets. The sole purpose of most Wills is to transfer assets on your death. To do this, you name a person to be in charge of the transfer (called the “Executor”) and you instruct the Executor how you want your non-trust assets distributed.

PERSONAL CONCERNS

An advance health care directive deals only with your health care and personal care, and it is effective both before and after death. So, whomever you name as your agent under an advance health care directive is authorized to make decisions about whether you will receive medical care, what kind of medical care and the treatment of your remains. The agent’s decisions must be consistent with your instructions. So, if your agent knows that your religious convictions do not include medical treatment, your agent should not authorize medical treatment for you. If your agent knows that you do not want life sustaining treatment, your agent should not authorize it for you. If you instruct your agent to have your organs donated and your remains cremated, your agent should follow those instructions. However, you have the right to make these decisions for yourself as long as you have the mental and physical capacity to do so. In other words, you can delegate someone else to make these decisions for you if you don’t want to make them or if you can’t make them, but as long as you have the mental and physical capacity, you can override your agent’s decisions.

Keep in mind that these four documents are the skeleton of a complete plan, and your situation may differ. Many clients also have separate property trusts to maintain their separate property apart from their community property, life insurance trusts to more efficiently manage large life insurance policies, irrevocable trusts for a variety of reasons, community property agreements, pre-nuptial agreements, etc. However, if you have these four documents in place, they offer complete coverage both before and after death, both trust and non-trust assets and both financial and personal concerns.

Originally published by Susan on June 16, 2014.