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One of the key components in planning for your future is establishing the right set of legal directives. A will, living trust, durable power of attorney and advance medical directive are all designed to protect your desires should you no longer be able to speak for yourself. This could be death or an incapacitating medical condition. Each document has its own function while the set of documents help develop your comprehensive estate plan.
Everyone needs a will so that assets are properly distributed to heirs upon death. Without a will, the courts decide how assets are distributed and disputes often arise. Keep in mind that a will alone must be approved by probate courts. It does, at least, give direction on distribution for the courts to follow.
The basic components of a will name the person who is leaving the assets, names the beneficiaries and also designates an executor who works with probate courts to carry out the wishes of the will. Once all parties are defined, the body of the will defines how assets become distributed upon death. A will can be as elaborate as you choose, down to designating who gets what jewelry or garage tools.
There are two basic types of trusts in estate planning: a revocable and irrevocable trust. When a trust is created, your assets are transferred into the trust. A revocable trust with you as the trustee means you can take back your assets at any time. An irrevocable trust means the assets cannot be taken back. Most revocable living trusts become irrevocable upon the death of the trust grantor.
Trusts not only need to be written but they need to be funded. Part of a trust includes the will, listing all assets such as real estate, bank accounts, and investments. Once assets are listed, they must be retitled at the bank or investment firm listing the trust as the owner, otherwise, they are not in the trust and still subject to probate.
Trusts avoid probate and allow the successor trustee to distribute assets as you designate in the trust upon your death. Not everything needs to be distributed immediately, meaning the trust can maintain assets in accordance with the trust language. An example is setting up a college fund for a grandchild who might only be five years old upon your death. The funds remain managed by the trust until the child goes to school and are then distributed according to your wishes.
A durable power of attorney is a document used to name a person to serve as your agent if you become incapacitated. In the durable power of attorney, you name the person you give authority to, usually a family member or close family friend. The document is used for both healthcare and financial interests.
For example, if you are in a coma after a car accident and on life support, the agent makes decisions on whether to maintain life support or not. Additionally, the agent is given the ability to pay bills or manage assets to cover medical expenses or household needs.
A durable power of attorney can be revoked at any time prior to incapacitation. For example, if a husband and wife name each other but later divorce, they may revoke the power of attorney and establish a new one.
An advance medical directive is often created with a durable power of attorney. While the power of attorney names an agent, the advance medical directive establishes your desired for medical treatment if you cannot speak for yourself.
These directives include whether to resuscitate if you suffer cardiac arrest, whether to keep you on life support or feeding tubes. This becomes the outline of your wishes, while still alive but unable to speak for yourself. The power of attorney would use this to execute your desires.
Don’t be overwhelmed by the various documents and their legal descriptions. At the Legacy Law Group of Northern Virginia, we are here to simplify the process and give you peace of mind.