WILL
A Will is a document by which a person (called a “testator”) can direct the distribution of his or her assets when he or she dies. The Will is used to carry out the intention of the testator as to who gets his or her assets and what each person gets at his or her death.
Will has many benefits. First of all, it ensures that the testator’s assets are distributed according to his or her wishes. This provides peace of mind that loved ones will be properly taken care of in the event of death. Without a Will, the State steps in and distributes assets according to rigid guidelines that do not consider the wishes of the deceased. Second, a testator may place conditions on the use of assets passed through the Will to maintain control of the assets after he or she has died. Third, the testator can name the person (the “executor”) in charge of distributing assets in the event of death, instead of having the court appoint someone. Fourth, the testator can declare in the Will who is to take care of minor children. In addition, with proper planning, a Will can take advantage of the tax laws that may greatly reduce the tax burden of a decedent’s estate.
The principal duties of the executor are to (1) inventory and collect the assets of the deceased testator, (2) manage and care for the assets during administration, (3) receive and pay the claims of creditors and tax collectors, and (4) distribute the remaining assets to those entitled under the Will.
TRUST
A trust is a device for making dispositions of assets. A trust is made when a person (called a “settlor”) puts assets in the hands of another person (called a “trustee”) and places him or her in charge of the distribution of the assets for the benefit of the person or persons designated by the settlor (called “beneficiaries”). The settlor may designate himself or herself as the trustee, or even a beneficiary of the trust. The purposes for which a trust can be created are endless.
A settlor can establish a trust to either pass assets during his or her life to others as a gift, or at death through his or her Will. There are many reasons why someone would wish to set up a trust.
First, it is a way to give a gift that gives the settlor greatest control over its use. The settlor can direct the trustee how to manage and distribute the assets. Trusts are often established to provide a stream of support to the beneficiaries and this control allows the settlor to dictate how assets are invested and distributed, without taking an active role in the trust management.
Second, a trust can be used to avoid having the assets pass through a Will, so as to keep the make-up and value of the assets passing confidential. In some limited circumstances, this technique is advisable to save the time and expense of probate (e.g. when a person owns real estate in other states).
Third, it can provide personal management of a person’s finances and assets. Many times banks are designated by the settlor as the trustee. The trust will provide guidance and the bank will be able to act within the bounds of that guidance.
Fourth, a trust can be used to gain savings on income tax, gift tax, inheritance tax, and federal estate tax that are not obtainable by the use of other forms of estate planning vehicle.
The person designated as the trustee has many duties and must act in the interest of the beneficiaries. The trustee must preserve the trust assets, make them productive, and pay out income according to the trust document. The trust assets must be kept separate from the trustee’s personal assets. The trustee is also required to keep proper accounts of the trust funds, invest prudently, and delegate his or her trust powers. Because of these duties, a person is only a trustee if they accept the position, and they are normally compensated for their services.
LIVING WILL
A Living Will (a/k/a Advanced Healthcare Directive) is a written document a person (the “Declarant”) may execute indicating to a healthcare provider their desire to initiate, continue, withhold or withdraw certain life sustaining medical treatment in the event the person becomes incompetent or terminally ill.
The wishes of the Declarant, as to whether to prolong his or her life on artificial life support systems, are stated in a valid Living Will and must be followed by his or her health care providers. If a Declarant wishes to change his/her Living Will as to whether to receive life support treatment, he or she can easily amend or revoke the Living Will.
The Living Will has many benefits for both the Declarant and his or her family. The Living Will can give the attending physician the authority to terminate life support treatment, which often only prolongs the process of dying and causes loss of patient dignity. Also, maintaining a person on life support systems may be a very traumatic and costly process for the person’s family.
HEALTHCARE POWER OF ATTORNEY
A Healthcare Power of Attorney is a written document in which a person (the “principal”) appoints another person (the “agent”) to make healthcare decisions for him or her in the event that he or she is unable to make those decisions. These decisions include the provision of medical treatment or nursing care, if appropriate. The Healthcare Power of Attorney also allows the agent to access the principal’s medical information in order to assist the agent in making decisions regarding the principal’s care. The person appointed as agent should be someone that the principal trusts and who understands the principals wishes.
DURABLE POWER OF ATTORNEY
A Durable Power of Attorney is a formal written document whereby an individual (the “principal”) can designate a trusted person (the “agent”) to have the power to act on his or her behalf in various personal and financial matters. Through this document, the principal can share with the agent almost every power the principal has, including the power to enter into contracts, issue checks, endorse checks, pay bills and file tax returns. The Durable Power of Attorney is written specially for each principal according to what powers they wish to convey to the agent. A Durable Power of Attorney can be general, giving the agent broad powers to act on the principal’s behalf. The Durable Power of Attorney can be a valuable tool for the management of an individual’s assets and affairs.
The Durable Power of Attorney differs from other forms of Power of Attorney in that it does not become void should the principal become incompetent. This feature of the Durable Power of Attorney makes it especially valuable today with the increase in instances of organic disease, senile dementia, and Alzheimer’s Disease. The alternative is having the Orphans’ Court appoint a guardian for the incompetent, which is extremely costly and time consuming. Moreover, there is no guarantee that the court will appoint a loved one or close relative as the incompetent’s agent. More likely, the court would appoint a local attorney to act in that capacity.
ANATOMICAL GIFTS
The “Gift of Life” as Anatomical Gifts are often called, provides that specific organs, skin, tissue, or unlimited organs may be harvested from your body at death and gifted to another human being to prolong that individual’s life, or at the very least, improve the quality of that person’s life. The United States suffers from a severe shortage of organs for transplant. For more information, visit the Coalition on Donation website.
The estate planning instruments set forth above are specially designed legal documents with special legal requirements, and therefore must be drafted by someone with a complete understanding of the law. Should you be interested in finding out more about the value of estate planning, please contact:
