A Will is a declaration of how your property is to be distributed at death, who will be responsible for settling your estate, who should care for any minor children, and who should manage property distributed to minor children. A Will is also a receptacle for tax exemption and property management trusts that are to be funded out of the decedent's estate and managed according to the terms of the Will. The most common types of Will receptacle trusts are the credit shelter trust, the marital trust, the generation skipping trust and the spendthrift trust.
        If you don't make a Will (or use some other means to transfer your property) the laws of intestate succession of the state in which you reside at the time of your death determines how your estate will be divided among your family and relatives. If you leave minor children without another parent available a court will have to determine who will care for them and who will manage their property. In your Will you can nominate personal and property guardians for your children and, in the event you become legally disabled prior to death, guardians for yourself.
        You can name an executor in your will. The executor's job (or administrator if there is no Will or the decedent didn't designate an executor) is to manage the decedent's property until all debts and taxes have been paid, and ensure the remainder of your estate is transferred to those entitled. During probate the executor must set up a bank account to receive money owed the decedent and pay the decedent's debts, taxes and expenses. The executor must notify creditors, legatees and heirs of the probate proceeding, file the decedent's tax returns and make distributions to beneficiaries.
        The executor is generally entitled to payment for his services out of the proceeds of the estate. The amount of the fee is determined by the probate court based on a number of factors which may include the value of the decedent's estate and the time and effort required of the executor. Often close relatives and friends (especially those inheriting substantial sums from the decedent) acting as executors or administrators don't charge the estate for their services.

        A living trust is an enforceable declaration of your wishes with respect to the management and distribution your property during lifetime disability and after death. As with a Will it is also a receptacle for tax exemption and property management trusts to be funded at death according to the terms set forth in the living trust. During your life the trust is revocable and can be amended at any time.
        A living trust can serve as a vehicle to accomplish several objectives. These may include: avoiding probate expenses, keeping your financial matters private, expediting the resolution of your estate at death, and providing an alternative to a property power of attorney.
        Although your assets must be titled in the name of the trustee during your life, you do not have to report trust income separately from your personal tax filings. A special Will (a "pour-over" Will) is used to transfer to the trust any property at your death that was not held in the name of the trustee of the trust. Typically, the grantor of the trust is the trustee until he becomes incapacitated or dies, at which time one or more named successor trustees take over the property management and distribution duties.

        A Spendthrift Trust is a trust designed to protect the beneficiaries from creditors attaching their assets. Spendthrift Trusts are primarily a function of state law, which defines the specific trust language required and the corresponding degree of creditor protection provided. Trusts of this nature are usually created and funded by someone who is not a beneficiary of the trust. Spendthrift Trusts restrict access by beneficiaries to the assets of the trust - if the beneficiaries had complete control and unrestricted access their creditors could attach the assets as if they were personal (as opposed to trust) assets.
        Normally the trustee is vested with discretion to make disbursements to the beneficiaries based on specific needs. In some cases the beneficiaries can possess the power to replace the trustee. A less often used type of Spendthrift Trust - the Self Settled Spendthrift Trust - is one in which the person who creates and funds the trust (the settlor) is also a beneficiary of the trust. This type of arrangement has traditionally been a product of certain overseas jurisdictions. Recently Missouri, Delaware and Alaska have enacted self settled spendthrift trust provisions. Self Settled Spendthrift Trusts are also referred to as asset protection trusts.
        A retirement plan can be set up as a Spendthrift Trust. Generally, retirement plan assets are exempt from a bankruptcy estate of a plan participant only to the extent the assets are needed by the participant for future support. However, as part of a Spendthrift Trust retirement plan assets are excluded entirely from the bankruptcy estate, regardless of future support needs.

        If an intended beneficiary is a recipient of Medicaid, Social Security Disability, or other governmental assistance programs, an outright gift or a gift in trust may disqualify the beneficiary from continuing to receive such assistance until the trust property is spent down. Trusts can be designed so that distributions are made only to supplement the government assistance. So long as distributions made by the trustee are discretionary and not mandatory, trust assets and distributions are generally not considered disqualifying resources.
        Trusts authorized by state and federal law can be set up for disabled persons which insulate their own assets and make them eligible for public aid and other government benefits. These are sometimes called "payback" trusts. They allow the grantor/beneficiary to benefit from the trust as a supplement to public assistance benefits. The downside of this form of Supplemental Needs Trust is that the trust must pay back the government all assistance received to the extent of trust property remaining at the disabled person's death.

        A property power of attorney allows another person (your agent) to make financial decisions and execute documents on your behalf. Most people specify that it is to take effect in the event of their disability or incapacity. You can have a property power take effect in whatever circumstances you desire, including having one become effective immediately should you decide to have someone else take over your affairs.
        You can specify how a determination of your incapacity (or other specified condition) is to be made. You can also specify the powers and responsibilities of the agent. These may include paying your family's expenses, managing real estate and engaging in real estate transactions; collecting government or other benefits, making investments, executing financial transactions, filing and paying taxes, operating your business, claiming property you inherit or are otherwise entitled to, representing you in court or hiring someone to represent you, managing your retirement accounts, carrying out your gifting program, and creating and funding trusts on your behalf.
        If you become incapacitated and you don't have a power of attorney an interested person may have to seek court authority to obtain a guardianship over your financial affairs. The disadvantages of a guardianship are that the guardian often has to post a bond, prepare and file financial reports (or hire a lawyer or accountant to do so), and get court approval for certain transactions, such as selling real estate.
        A living trust can substitute for a power of attorney because your successor trustee can carry out the functions of a property agent - but only with respect to property held by the trust. A separate power of attorney is advisable. The power of attorney ends at your death unless your agent has power to dispose of your remains.

        A Living Will is a directive to physicians and other healthcare providers as to your wishes with regard to specific treatments or procedures to use in the event of your incapacity. Often the document describes the nature of life sustaining medical treatments desired. In some cases instructions include a directive that any and all medical treatment available should be used. Click here for a discussion of the limitations of Living Wills vis a vis Health Care Powers of Attorney.
        A Healthcare Power of Attorney, on the other hand, authorizes another person to make medical decisions for you and your minor or dependant child in the event of incapacity. This authority generally includes the right to authorize the use or withdrawal of life support, admission to hospitals or nursing homes, consent to operations, and access to medical records. As with a Living Will, the Healthcare Power of Attorney can specify what type of treatment you wish to receive.
        Some states have surrogate health care laws which allow a spouse, relative or friend to make health care decisions on your behalf in the event of your incapacity if there is no Power of Attorney. In some cases a guardianship proceeding must be commenced in the absence of a healthcare Power of Attorney. The healthcare power takes precedence over an executed Living Will if your designated healthcare agent is available. Click here for more information about guardianship. Click here for more information about powers of attorney. Click here for more information about living wills.

Where would you like to go now?