UNDERSTANDING the Difference between Wills, Trusts and Power of Attorney
Wills, Trusts and Power of Attorney are legal vehicles (documents) used by an attorney to create an estate plan for individuals and families. Creating these documents is part of an overall estate planning process to establish objectives relating to one’s property/assets.
What is a Trust?
A living trust is created to keep your information private and to protect property and assets held within your estate during your lifetime. A trust is funded by assets that you possess, such as property, land, stocks, bonds, and bank accounts. It is a legal document that allows a trustee (third party), to hold assets on behalf of a beneficiary or beneficiaries.
A trust can help you:
- set up the timed disbursement of inheritance
- avoid probate and probate court
- reduce your exposure to lawsuits from creditors
- decrease your estate taxes
- set up lifelong access to your assets for your special needs child/adult
When you pass, the assets in your trust are distributed in a time sensitive manner to your designated beneficiaries by your chosen representative (successor).
What is a Will?
Almost every person you talk to knows that a person should have a will; also known as a “Last Will and Testament.” It is a legal document that states your final wishes.
A Will should outline, at a minimum, the following:
- who will handle your estate when you pass, also known as the “Executor”
- how taxes and debt (if any) are paid
- the name of the Guardian(s) for your children
- discuss asset allocation/distribution
- what happens to your personal property & real property (if you own a house, condo or land)
Items that are very important to discuss with us, when writing your will are:
- disinheritance of a spouse
- disinheritance a child(ren)
- possible challenges to your will
- future care for your pets
A Will is read by the county court after your death. The court, known as a “probate” court will get involved to make sure that your final wishes are carried out. A “self-proving” Will does require a notary and can speed up the probate process, as the court will accept the Will without needing to contact the witnesses who signed it.
What is Better to Create a Will or a Trust?
The two big difference between a Will and a Trust are when they take effect after your death and the cost to create them.
- A Trust takes effect as soon as you create it
- A Will will only go into effect after you die
- A Trust takes more time and effort to create and has costs associated with creating and managing
The most important consideration is a trust avoids the possibly expensive and drawn out Probate process. This in turn will save your beneficiaries both time and expenses. Your beneficiaries will receive their gifts immediately in accordance with the instructions you listed within your Trust. The choice between creating a will and trust is up to you. Our recommendation is that you discuss your specific situation to determine which option is best for you.
What is a Power of Attorney?
Power of Attorney (POA) is often established when a senior of sound mind, can appoint a person to act on their behalf, giving that person the “powers” to make decisions on his or her behalf. When a person grants another person the responsibility of being their Power of Attorney (POA) that person needs to find out what authorities were granted to them regarding the person’s medical and financial decisions.
The Two types of Power of Attorney’s
- Power of Attorney – is also known as a “durable” Power of Attorney because it does not terminate if you become disabled or incapacitated, is a written document that authorizes another person (grantor/principal) to represent or act on your behalf in private affairs, business matters, or other legal matters.
- Health Care Power of Attorney – is a document that designates a representative or agent to advocate for you when you are unable to make or communicate health care decisions. The person you select should be someone you trust (family member relative, friend, co-worker, doctor, nurse) to act as your agent if you are unable to speak for yourself.
What Do I Do When A Loved One Dies?
Losing a spouse, (grand) parent, family member or close friend is very difficult. It’s often a time of reflection and sadness. During this time, we encourage our clients (those still living) to remember to take care of themselves and others suffering from the loss. You typically have no immediate legal deadlines. You can address any major life changing decisions when everyone is less emotional. It is a moment for everyone to breath, avoid confrontation and give yourself time.
When you are ready to move forward, here is a list of tasks for you to be complete:
- Contact your lawyer or the executor of the estate
- Order several death certificates – your loved one’s funeral home should be able to assist you and provide the number of original copies needed
** Death Certificates will need to be provided to many of the companies and agencies listed below in order to close accounts.
- Notify the Social Security Office (arrange to return the social security benefits obtained for the month of their passing)
- Notify banks, investment, retirement accounts & credit card companies
- Inform their doctors, dentist and pharmacist (cancel prescriptions)
- Contact their health insurance company & supplemental insurance carrier to cancel coverage (if applicable)
- Tell their life insurance company/agent (if they have a policy)
- Contact the local Post Office to forward their mail
- Collect and pay outstanding bills and cancel subscriptions and utilities if they lived alone (newspaper, magazines, cable TV, phone, etc.)
What Happens if there is no Will or Trust?
If a Will or Trust is in place, the executor will be given instructions on the wishes of the deceased, which will assist in moving the estate forward. If a Will or Trust was never set up by your loved one, then they passed “intestate”. Please contact us so that we can assist you in navigating through the probate court process.
If you would like to find out more information on how we can help you and your family set up a Will, Trusts, or Power of Attorney, simply contact our offices to set up a meeting!