EZ-Estate Plan FAQs
A will is a legal document that allows an individual to specify what happens to their physical body and possessions after they pass away.
If someone dies without a will, state law will dictate the funeral proceedings and who the heirs will be.
A will must go through probate — and it can be cumbersome and expensive for heirs.
A trust is a legal document that directs management and ownership of a grantor’s assets while they are alive. Upon death, the ownership of the trust is owned by the “trust,” which then distributes assets to heirs (beneficiaries) per the instructions of the grantor. The trust may include restrictions to assets, or it may offer the assets outright to the heirs and beneficiaries.
The two advantages of having a trust include avoiding probate and management of assets post-death. Trusts can be revocable (changeable) or irrevocable (not changeable).
No, but we wish it did! This is the most misunderstood concept in probate. A will must be proved to be valid in court. You must get a court order proving the will valid. After this is done, the nominated executor can act.
Estate planning is not just for the wealthy. With a proper plan, you can plan and care for your family after you are gone. Most importantly, you will remove the burden (emotional and financial) of probate to whoever is in charge.
No! A living will is a document that states your wishes for your health care if you are unable to do so yourself.
Unfortunately, a living will has many legal loopholes, and doctors and hospitals may largely ignore them. Unless you can proactively describe the exact situation of your incapacitation, a living will is useless.
A durable power of attorney allows the person nominated to legally act on behalf of an individual.
For instance, a person with a durable power of attorney usually has the capacity to:
- Open/close accounts
- Sign legally binding documents
- Instruct transactions in financial institutions
This power can be broad or specific depending on how the POA is drafted.
Using the term “durable” is important as it denotes that the power continues to be held, even if the individual granting the power is incapacitated. If this term is not specified, the power will cease.
A durable medical power of attorney document is similar to a POA but is specifically for medical decisions.
Many people have an advanced directive (also known as a living will) that provides guidance on medical issues. These provide helpful guidance, although they are not legally binding. In fact, most hospitals will ignore them.
The Durable Medical POA is the only document that legally grants authority to someone else to make medical decisions.
A comprehensive estate plan will utilize all of the above documents to accomplish the wishes of the grantor. Additionally, it will ensure that beneficiary designations (for retirement accounts and life insurance) are updated. Often, the trust is designated as the beneficiary.
A pour-over will is a last will and testament that instructs the executor to transfer all of the assets of the estate to a trust that is already created. The estate "pours over" the assets to the trust and then follows the instructions of the trust. This type of will is only used in conjunction with a trust.
Any asset that automatically transfers to another person without the need for a court order avoids probate. Assets such as IRAs, and life insurance with valid beneficiaries, or assets owned by a trust avoid probate. Joint assets with rights of survival automatically transfer to the surviving owner without probate. Lastly, any legal contract established prior to death, like a business buy-sell agreement, also avoids probate.