Candid Answers To Your Estate Planning Questions
Do I Need A Will?
If you die without a will, Connecticut law determines who gets your assets. Connecticut’s intestacy statute (the law that sets out who gets what) does not and cannot take into consideration your specific wishes or the particular individual needs of your family members. As a result, your assets may be distributed to someone you do not intend to share in your estate. You have the power to decide to whom, when and how you want your estate to be distributed after your death. Without a will, you let the state decide that. You owe it to your loved ones to take this simple step to express your wishes.
What Is A Revocable Living Trust?
Revocable living trusts are valuable tools that can help you to:
- Avoid probate and reduce estate administration costs and delays. Assets in the trust don’t have to go through the probate process to be distributed, saving time and legal fees associated with the probate process.
- Protect the privacy of your beneficiaries. Upon your death, the will is filed in the probate court and becomes available to the public and, more and more, is posted online through the court website. A living trust agreement is typically not filed in the court system and does not become a public record.
- Avoid litigation or reduce the costs. It is more difficult for an unhappy heir to contest a revocable living trust than a will. During the probate of a will, the heirs must be given written notice of their opportunity to contest the will. A trust is not subject to this requirement.
Revocable living trusts have become extremely popular in recent years; however, like everything else, they are not for everyone. If you own property in different states, or if you have a family business that you intend to pass on to your heirs, a revocable living trust could be right for you. If your estate is small and you have reliable adult children, you can often accomplish the same goal of avoiding probate associated with a revocable living trust without the time, complexity and expense associated with creating one. That said, a revocable living trust is a great way to ensure that a trusted person will handle your affairs should you become incapacitated.
What Is A Durable Power Of Attorney?
Perhaps even more important than planning for your eventual death is planning for the possibility you will be disabled or incapacitated. If for some reason you were unable to manage your affairs, what would happen? Injury, illness or age can leave you unable to transact your day-to-day business and look after your property and finances. Unless you have taken proper precautions, it may be necessary to go to court and have a conservator appointed to act on your behalf.
A durable power of attorney (“DPOA”) is a legal document that enables you to designate another person, called the attorney-in-fact, to act on your behalf, even in the event you become incapacitated. It is “durable” because it specifically states that it continues to be in effect even if you become incapacitated. So, if you are incapacitated, your “attorney-in-fact” or agent, can use the durable power of attorney to go to the bank and withdraw money, sign documents to sell or transfer real estate, or do pretty much anything that might need to be done on your behalf.
A durable power of attorney is like a blank check, so you have to be certain that the person you name is going act in your best interests and in accordance with your wishes.
Challenges With Durable Powers Of Attorney
While a DPOA is an essential part of every estate plan, it is not a silver bullet. Some financial institutions may refuse to honor any power of attorney that is not on their own form or if they believe it is stale (more than a year or two old). A bank may be reluctant to honor a power of attorney because they may be worried about their liability for elder financial abuse.
Tips To Avoid Problems With A Durable Powers Of Attorney
- Keep your durable power of attorney up-to-date.
- Ask your bank, brokerage house, IRA or other retirement plan provider, and insurance companies if they will honor your form of power of attorney and ask for their response in writing. If they say they will only honor powers of attorney on their own forms, obtain copies of those forms and provide them to your attorney to make sure they are completed properly.
- If you spend time in different states, set up durable powers of attorney that comply with the state laws in each place. Financial institutions are supposed to honor out-of-state documents, but some bank tellers may not recognize the forms and be unwilling to accept them. Consider setting up a revocable living trust to provide for the management of assets during a period of incapacity or disability in case the power of attorney approach breaks down and third parties will not accept the agent’s authority.
What Are Advance Medical Directives?
In your advance directive for health care, you appoint your health care representative (the person who will make medical decisions on your behalf if you are unable to do so), state your wishes about end-of-life decisions (a “living will”), make clear your wishes about organ donation and, finally, designate your choice of a conservator in case one is necessary or requested. This is all done in a single Advance Medical Directive.
What Does A Health Care Representative Do?
Your health care representative, sometimes called a health care agent or proxy, is the person you want to handle medical decisions in the event that you are incapable of doing so. This is the person whom doctors will talk to about surgical procedures, medications and end-of-life decisions. It is a good idea to have at least one, and preferably two, backup health care agents. You should let your health care agent know that you have named them as your medical decision maker, and let your doctor know that you have designated a health care representative.
Do I Need A Living Will?
Modern medicine and technology mean that doctors have the ability to keep your body alive for years in a vegetative state. If you have strong feelings about the type of medical care you want provided or withheld should you became unable to express those preferences, then you need a living will. A living will is your legal declaration of whether or not you want to receive life-supporting treatments, including cardiopulmonary resuscitation and artificial nutrition should you become incapacitated and unable to make your wishes known.
A living will takes the difficult burden of decision-making away from your loved ones. Without a living will, someone else will have to make decisions about life support systems. This can be a horrible predicament to put your loved ones in, especially when it is so easy to take this burden away with a living will. Like all other estate planning documents, a living will puts you in control of your future.
What Is The Difference Between Revocable And Irrevocable Trusts?
An irrevocable trust is a trust that may have been set up as irrevocable, or it may have been a revocable trust that became irrevocable because of a death. In either case, the biggest difference between a revocable trust and an irrevocable trust is that you generally can’t revoke or change an irrevocable trust.
Who Needs An Irrevocable Trust?
Just because you can’t change or revoke a trust doesn’t mean there aren’t good reasons to consider setting up an irrevocable trust. Irrevocable trusts can sometimes reduce estate taxes. So, it is no surprise that the number one reason for setting up an irrevocable trust is for tax purposes. The other main purpose of an irrevocable trust is to protect property.