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Estate Planning Resources

Below, we share basic information about some estate planning terms, documents, and processes. For more detailed information, download our Estate Planning FAQs and take a look at our articles and videos on estate planning topics.

Wills

Will: A legal document containing an individual’s wishes regarding their estate following their death

Testator: The person making the will

 Living Will: See Powers of Attorney below

Holographic Will: A hand-written, un-witnessed will

 Personal Representative: The individual who is responsible for administering the estate of a deceased person (sometimes also referred to as an executor)

Pour-Over Will: A will that directs the estate’s assets be “poured over” from the estate into a trust

Heirs: Those who receive funds from an estate under intestate succession laws due to their relationship to the decedent

Devisees: Those who are specifically named in a will as a recipient of a portion of a decedent’s estate

Intestate succession laws: State laws that dictate the distribution of a decedent’s property if no will is in place

Estate: All of an individual’s assets owned in their name alone with no named beneficiaries

Beneficiary/ Transfer on Death (TOD) Designee: An individual designated to receive an asset, such as a financial account, upon the death of the asset’s owner

Why Wills are Important

A will provides instructions to make sure your wishes are carried out upon your death. Two of the main functions of a will are to appoint a personal representative to administer your estate and to dictate how you wish to have your assets distributed. A will can prevent confusion and disputes regarding both who should be personal representative and how an estate should be distributed. Such disputes can turn into legal battles, which could be costly for your estate.

In terms of distributing assets, a will can be as specific or as general as the testator wishes. It can simply designate that one or more person receive or divide your estate, or it can itemize specific items to be given to certain people.

Trusts

Trust: A legal entity created by a trustor into which assets can be transferred. These assets are managed by a designated individual, a trustee,according to the trustor’s instructions. These instructions may include when and how the trust’s assets

Grantor/ Settlor/ Trustor: The person who creates the trust

Trustee: The person designated by the trustor to manage and distribute the trust’s assets

Beneficiary: Those who are designated to receive distributions from a trust

Revocable Trust: A trust created during the trustor’s lifetime that can be altered by the trustor if desired

 Living Trust: A trust created during the trustor’s lifetime, often with the trustor serving as trustee until their death

Testamentary Trust: A trust that is created by the direction of the trustor’s will upon the trustor’s death

Irrevocable Trust: A trust that cannot be changed once it is signed

Special Needs Trust: A trust designed to allow a beneficiary to receive funds for their care without making them ineligible for government benefits

Funding a trust: Transferring assets into the trust’s ownership

Probate: The legal process in which the court oversees the process of the administration of a deceased person’s estate

When and How a Trust can Help

Trusts aren’t just for the wealthy, and there are many types. A trust can be a wonderful tool for moving assets to family members or charities, providing for family members with special needs or who are financially irresponsible, or providing for the educational expenses of progeny. Trusts can also be useful in avoiding high estate taxes and probate fees, and for preventing the mishandling of assets. They offer the opportunity to dictate exactly how and when funds are released to beneficiaries, so you can indicate, for example, that beneficiaries should receive a certain amount each year, a certain percentage as they reach certain ages or other life milestones,or that trust funds be disbursed only for certain purposes.

You may want to consider creating a trust if:

·        You cannot manage your own assets

·        You want to avoid probate

·        Someone,often a child or disabled family member, is incapable of managing money or assets

·        You want to transfer assets quickly after death

·        You want to lower estate taxes

·        A disabled family member has been awarded monies and you want to avoid the loss of government benefits

·        You want to provide for your descendants’ future educational needs

Powers of Attorney & Advance Directives

Principal: The person granting the power of attorney and signing the power of attorney document

Attorney-In-Fact: The person granted authority under a power of attorney, also known as an agent

Durable Power of Attorney: Power of attorney gives written authority to another person to make decisions and act on behalf of the principal in business, legal and private matters. A durable power of attorney is a document that remains valid even if the principal becomes incapacitated,disabled, or suffers illness, and it becomes invalid only when revoked by the principal or when the principal dies.

Medical Durable Power of Attorney: Generally, a Medical Durable Power of Attorney allows you to appoint a person as your agent to make decisions for you regarding medical and personal matters. It also allows you to give some direction to the person making those decisions.

Advance Directive: Also referred to as a living will, an Advance Directive is a document that details a person’s wishes regarding medical treatment in life prolonging situations.

Why Powers of Attorney are Important

Powers of attorney and advance directives are your opportunity to designate who will have the power to act on your behalf during your life in different situations. In addition to naming your designees, these documents can provide guidance to those individuals regarding your wishes. It is critically important to have carefully and thoughtfully drafted documents, as they give others the power to make life-altering decisions on your behalf when you are incapacitated and unable to express your desires. Having a Power of Attorney in place for your business or finances also ensures that someone will be able to access your funds and keep your business going or bills paid if you are incapacitated.