ABC’s of Estate Planning

An Estate Plan is made up of a suite of documents that work together to ensure that the Creator of the document gets their financial and healthcare needs met, avoids probate, and protects assets. Although they may be created on an “ala carte” basis, the following documents work most effectively when created together. A solid Estate Plan should include the following documents:

Advanced Directives

Living Will – This document allows the Creator to document, in advance, the type of care they would like to receive at the end of their life. If in a state of permanent unconsciousness or a persistent vegetative state, with no chance of recovery as determined by two physicians, this document instructs the physician to withhold taking extraordinary measures & refuse any artificial life sustaining treatment.

Healthcare Power of Attorney - This document enables the Creator to name three individuals, listed in order of preference, that would make healthcare decisions on their behalf, only in the event that they are unable to do so themselves.

Basic Documents

General Durable (Financial) Power of Attorney - This document enables the Creator to appoint an Agent to handle their financial affairs in the event they are unavailable or, due to advancing age, illness or other cause, are temporarily or permanently unable to manage their financial affairs. This document takes effect immediately upon signature. This document becomes crucial in the event the Creator is in need of long-term care and would like to protect assets from being spent in totality on the cost of care.

Last Will & Testament - This is the document that states how the Creator would like their property (that they did not otherwise place into a Trust or name beneficiaries to) distributed at their death. The document identifies beneficiaries & names individuals to serve as the Executor of the Estate.

Transfer on Death Designation Affidavit – This document is used to add a beneficiary to real property.

Creating Trusts

Revocable Living Trust: Revocable Trusts are best described as the Creator’s “alter ego.” The Creator is the initial Trustee and manages all assets associated with the Trust. Revocable Trusts may be revoked or amended at any time. The benefits of Revocable Trusts are as follows:

-        Creators are Trustees, maintaining control of all assets

-        Avoids probate

-        Protects from creditors of beneficiaries

-        Protects from beneficiary spousal interference

-        Provides provisions for “what ifs” (Special Needs Provisions, Spend Thrift Provisions)

-        Enables Trustee to hold assets in Trust for minors (avoiding Guardianship)

-        Includes provisions for disbursement at various ages

Irrevocable “Asset Protection” Trust: Unlike Revocable Trusts, an Irrevocable Trust completely insulates assets and protects them from Medicaid Estate Recovery. However, for complete insulation, the Creator cannot be the Trustee of the Trust and the Trust cannot be revoked or amended by Creator. For this reason, it is important that the chosen Trustee is trustworthy. Irrevocable Trusts are extremely effective in protecting lifesavings from being spent in totality on the cost of long-term care.