Below is a description of the different documents that are used to create an effective estate plan.
What is a will?
A Will (Last Will and Testament) is a legal document dictates how your estate is to be managed after your their death. A Will allows you to name long-term guardians for your dependent children after you pass; the Sluder Law Firm Family Protection Plan element of your planning addresses short-term or temporary guardianship of your children in order to prevent them from ever becoming wards of the state and placed into foster care, even if only temporarily.
A Will also allows you to name the executor (male) or executrix (female) who will be in charge of administering your estate. Without a valid Will in place, the courts can and will decide what happens to your assets and who is ultimately responsible for your dependents. When you decide on an executor or executrix, you should pick one that you completely trust with your afterlife affairs. You will also need to let this person know exactly how you want your estate distributed. Filing your tax returns and taking care of any debts that are owed to creditors are also tasks that your representative will be responsible for.
What are the benefits to a will?
Having a Will in place when you die is important. One benefit of having a Will in place is it means you and not the State decides how your estate will be distributed. A Will can provide peace of mind for both you and your family and friends because you are ensuring that the people you love are provided for when you are gone. A Will can allow you to leave items of sentimental value to whomever you choose. Depending on the value of your estate, there may be some other planning that along with your Will may be necessary to prevent your estate from being attacked or contested. Some other benefits of having a Will in place is you may be able appoint guardians for your dependents and pets, and you can also decide who is going to administer your estate. You can also specify your wishes for your funeral as part of your "final disposition” document.
Even if you use a revocable living trust, described below, a Will is still used to “pour over” any assets not owned by your trust upon your death, and to provide for guardianship of your dependants.
What is a living will?
This is where the terminology can get confusing...a Last Will, a Living Trust, and a Living Will! Is it any surprise people’s eyes tend to glaze over by the time we get to this point?!?
A Living Will is a legal medical document that is an “advance directive” to your doctors and other caregivers as to what life-prolonging and saving measures you do or do not want them to take based upon your medical condition at the time.
This document is often called an instruction directive because it provides instructions to your loved ones and your medical team regarding your end of life care. It is designed to be submitted to your health care providers by your health care representative (who you appoint using a Health Care Power of Attorney) once you have started the dying process, are in a persistent vegetative state, irreversible coma, or similar condition. Yes, it is all very depressing stuff to think about, but putting forth your wishes in writing may save your loved ones an enormous amount of emotional pain. Avoid having the courts involved in your end-of-life decisions, as they (and Congress and the President) were in the case of Terri Schiavo. A comprehensive Living Will can provide a lot of guidance, including information on what organs/body parts you want to donate, reference to your religious beliefs, when to withhold fluids, nutrition, and CPR, and, basically, when to pull your plug.
A Living Will document is usually combined with a “health care power of attorney” or “healthcare proxy.”
What is a Health Care Power of Attorney?
A Health Care Power of Attorney may also be referred to as a proxy directive, healthcare proxy, health care surrogate, or durable power of attorney for health care. It appoints your primary (and two or more alternates) health care representative, who is the person your doctors will be asking the tough questions regarding your care when you are unable to answer for yourself. It is important that you discuss your decisions with your health care representative(s) and provide them with copies of this document so they are not surprised to be informed that they have to make life and death decisions on your behalf. You should also make sure that they do not have any religious beliefs that might prevent them from carrying out your wishes.
Sometimes, a Living Will is combined with the Health Care Power of Attorney; such document may be referred to as your “Advance Directive for Health Care.”
What are the benefits of having an Advance Directive (Living Will and Health Care Power of Attorney)?
Having an Advance Directive for Health Care will help to ease the strain for your loved ones, especially the person who will ultimately be required to make these type of decisions for you if you fail to do so in advance. One big benefit is that your medical professionals will know how to care for you if you become incapacitated, and it can help eliminate any conflicts amongst your loved ones who might not agree on the type of care that should be given. It is never easy to talk about these topics, but it is better to know that everything has been discussed and decided by you before you are incapacitated and unable to make decisions for yourself.
What is a Durable Power of Attorney?
A Durable Power of Attorney (“DPOA”) is a financial legal document that appoints someone to handle your financial affairs. Such document can be effective immediately or not until your disability or incapacitation, often referred to as a “springing” DPOA. Besides your primary agent (who may also be referred to as your “attorney-in-fact”), you can also name one or more alternatives to serve as your fiduciary. Every person over the age of 18 should have a DPOA, even if it just names one or both parents. Without it, the parents will need to petition the courts to allow them to pay the bills and otherwise handle the financial affairs of a child who is injured or incapacitated. With it, a parent can sign checks, deal with the bank, and otherwise act on behalf of the child until such time as they recover and can go back to taking care of themselves. A DPOA can be general, meaning it applies to everything, or limited, with specific things that the agent it authorized to do. For example, if you were trying to sell your car but had to go out of town for awhile, you could use a limited POA to authorize someone else to sell your vehicle for you while you are gone.
If there are co-agents named, the document should specify whether they must act together or can act separately.
What is a pet trust?
A pet trust is a legal plan providing how you want your pets taken care of in the event of your death, and establishing a fund to provide the financial resources required for their care. The main reason why a pet trust is so important is that most of us consider our pets family members and their continued care after we pass away is very important to us. A pet trust allows you to ensure that your pets (and/or other animals) will be well cared for after you pass.
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What is a living trust?
A Living Trust is a type of document where a Trustee holds the legal title to and maintains an asset for the benefit of another person, referred to as a “beneficiary.” The beneficiary receives the benefits and enjoyment of the asset without directly owning it. A Trust will help you spell out what your desires are in regards to your assets, your heirs, and their dependents. Having a Trust in place will help you to avoid probate, reduce your estate taxes, and establish a long term property and asset management plan that will continue on long after you have passed. A Trust is especially well-suited for individuals who have a substantial amount of assets, a blended family, property in other states, and/or own a business. A Trust can also be a very effective planning tool for individuals who are not married.
What are the benefits of a living trust?
One benefit of having a Trust in place is it can help you to avoid probate, which this means that your assets can distributed and divided up between your family and loved ones a lot faster and without having to go to court first. You can also avoid expensive and time-consuming guardianship or conservatorship proceedings, which may be necessary in the event you become incapacitated. Without a Trust, your loved ones will be unable to act on your behalf without getting a court order first. Using a Trust keeps things private, whereas only having a Will, which has to be probated, means everything filed with the court becomes public record. It will also force you to get organized--meaning less of headache for your loved ones when you die. It does typically cost more than only having a simple Will, but it is money well spent.
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Sluder Law Firm PLC provides legal services in both New Jersey and Arizona and specializes in corporate/business transactional law, including trademarks/branding, estate planning, asset protection, and real estate. An ounce of legal prevention is worth a TON of cure, so contact us today!