These days folks are bombarded with ads for estate planning seminars and webinars about estate planning. They are asked to choose between wills and trusts without really understanding the practical effect of their choice upon themselves, and upon their heirs. Here is a practical description of the documents that we would typically discuss with a husband and wife, for example, who have adult children that they trust, a son who is a banker, and a daughter who lives nearby:
1. Advance Medical Directive. This document is a kind of power of attorney whereby in the event you are in extremis medically and unable to make your own medical decisions for mental or physical reasons you appoint each other to make medical decisions, including final medical decisions for you; your alternate agent is your daughter who lives nearby. The document goes into some detail regarding type of treatment that you would, or would not, like to receive upon your incapacity. It can also be recorded on a website hosted by the commonwealth of Virginia so that it could be accessed by a physician or hospital anywhere in the world.
2. Durable General Power of Attorney. In this broad, powerful document you appoint each other as your attorney-in-fact to sign for you in your stead at your convenience. Your alternate agent is your son, who is a banker. The document is very comprehensive and should serve you well for many years to come. Unless revoked by you, this power of attorney will be effective so long as you are alive. The original document, once signed, should be stored in a safe place.
3. Revocable Trust Agreement. This trust agreement would serve primarily as a repository for your assets and is a substitute for the dispositive provisions of a last will and testament. You are the initial trustees. Upon the death or disability of one, the other may continue to serve alone or may appoint a co-trustee. Upon the second to die or become incapacitated, then your son and daughter would take over the co-trustee’s duties. Many clients amend their trust agreements as changes occur in their families over the years.
4. Last Will and Testament. I have drafted a “pour-over” last will and testament for each of you. You appoint each other to serve as executor. Your son, is nominated to serve as alternate executor. The executor’s job is to collect the assets of the estate that have not already been placed in trust and pour those assets over to the trustee of your revocable trust for payment of outstanding bills; then to distribute the trust assets according to the terms of the trust. In a well-planned estate where the assets are already titled in the trust, or your son or daughter are jointly listed on the bank accounts the Last Will and Testament will not be probated. In fact it will not be used at all. But, sometimes there are assets that require that the will be put to probate, and that someone be appointed as executor.
Of course, this is just an example of an estate plan that would be appropriate for a particular family. Not every family needs a trust or will. Some families really only need a power of attorney. There are additional documents, such as Transfer on Death Deeds that we will discuss in next month’s blog.
Every family and every client is different. We personalize every estate plan to help each family get through life and then death with the documents and the understanding that will ease the way.
Patrick B. McDermott and Sarah M. Saville