Common Estate Planning Documents Explained
For Oregon residents, the four most common estate planning documents are a will, trust, power of attorney, and advance directive. Each serves a different purpose, but your financial and family situation governs what documents you need.
Will
A will gives instructions for distributing your property after your death and names someone to follow those instructions (called your personal representative or executor). It may also name guardians for minor children and pets.
Property governed by a will usually goes through probate. Probate is the legal process of having the court oversee distribution of your property after your death. Probate formally transfers ownership of your property to your beneficiaries and settles your debts.
A will is beneficial even if your situation is relatively straightforward. Naming a personal representative and waiving their bond requirement in your will saves time and money needed to distribute your property. A will also makes the process easier on your family because it tells them exactly what you want them to do with your property rather than leaving the decision up to the court and state law, which may not be the result you want or your family needs.
Trust
A living trust, or revocable living trust, serves the same purposes as a will by giving instructions for how your property should be distributed after your death and naming someone to follow these instructions (called a trustee or successor trustee). However, a trust also provides instructions for how the property may be used during your life, both when you are healthy and when you are unable to manage your property yourself due to incapacity.
A trust works by holding title to your property in the name of your trust, rather than in your name as an individual. It is common for the person who creates the trust to name themselves trustee and control the trust and the property in it during their lifetime just as they would when they held title to the property individually.
This more complicated method of estate planning is justified by several benefits. First, property held in the trust at the time of your death avoids probate. Because the trust, and not the deceased individual, holds title to the property, your successor trustee may distribute the property without the need for a formal court process. This saves a lot of time and money because probate usually takes six months to a year and can cost several thousand dollars.
Probate may still be required if some property was not in the trust at the time of death. A pour-over will is a shorter version of a regular will that supplements the trust by acting as a safety net to capture property left out of the trust. Typically, a pour-over will transfers anything left over into the trust, and the instructions in the trust determine how that property is distributed. For this reason, getting help from a lawyer who can create your trust documents and advise you regarding how to transfer your property into the trust will benefit you in the long run.
Another benefit of the trust is the privacy it offers. Because trusts do not have to go through probate, your financial and family information is kept out of public court records.
A third benefit of a trust is that your successor trustee can help manage your trust for you if you cannot manage it yourself while you are alive. Your successor trustee can step in to help if something happens to you, without waiting for the court to act and without making the information public record.
There is sometimes confusion about what trusts can do, so it’s also important to clarify that trusts generally cannot help you avoid creditors or taxes, with some exceptions.
Trusts are generally more expensive and complicated to create and maintain than wills, so it is important to consider whether a trust is needed. However, the benefits of a trust often outweigh the costs of initial creation. A lawyer can help you decide what works best for your situation.
Power of Attorney
The power of attorney gives another person (called your agent or attorney-in-fact) the ability to make financial and health care decisions for you when you cannot do so yourself or if you want some assistance.
A power of attorney can either take effect immediately after creation, or it can take effect after a certain event, such as your doctor declaring that you are incapacitated. The power of attorney terminates upon your death because your personal representative or successor trustee appointed by your will or trust would take over managing your assets at that time.
A power of attorney is different from adding someone to your accounts as a joint owner. Although both a joint owner and an agent can manage an account for you, your agent does not own or have any personal interest in your accounts. Your agent has a duty to act with your best interests in mind and within the scope of the authority you have given them in your power of attorney.
Although the agent has a duty to act in your best interest, a power of attorney gives another person the ability to make financial and contracting decisions for you. It is critical to make this decision carefully and pick someone you trust.
Advanced Directive
The advanced directive names someone to make medical decisions for you if you are unable to do so yourself, and it provides specific instructions for how you want certain medical decisions to be made. The advanced directive is sometimes known as a medical power of attorney or living will. It is different from a Do Not Resuscitate (DNR) order or Physician Orders for Life Sustaining Treatment (POLST) form that you may create with your physician, even though some of the instructions may overlap.
Thinking about your estate plan can be overwhelming and emotional, but putting these plans in place before an emergency arises helps protect your interests and reduces the burden on your family. Pawlick Law, LLC can help you understand how these estate planning documents apply to your specific situation so you can make an informed decision that meets your needs and budget.