The Estate Plan.

Wills vs. Trusts

Both serve as vehicles for distributing assets upon death, but they have differences in terms of privacy, asset control, and distribution timing. 

A Will

A Will is a legally binding document appointing a person to oversee personal affairs including naming caretakers for children and pets, deciding how debts should be paid, and distributing assets to intended beneficiaries upon death. An existing Will can be amended and updated, and beneficiaries can be added or changed a legal attachment called a codicil without entirely rewriting the Will. 

Most people hire an attorney to prepare a Will, but there are also reputable options available online. “Do-it yourself” options are available as well with requirements to ensure they are legally binding varying from state to state. If a donor is interested in proceeding with the do-it-yourself option, make sure they are aware of the requirements in their state. 

With a Will, documents, accounting ledgers, and subsequent court rulings become a part of public record, accessible by anyone through the County Clerk’s office. With a Will, the person maintains control over their assets until they die at which point the Will determines how the assets are distributed.

Trusts 

Think of a Trust as an active, functioning, standalone entity. A Trust’s appointed Trustee has total power and control over the assets “placed inside it.” A Trust is its own separate entity, functioning similarly to a corporation – a corporation that owns all of your assets. A Trust can own property, business interest, public and private stocks, and even cars and recreational vehicles. 

Because the Trust has control over the assets, Trustees will distribute assets according to the Trust's terms, while the person who created the Trust is still alive or after they are deceased. A Trust directs the Trustee to manage and/or distribute assets to beneficiaries without court involvement and with significantly more privacy. A Trust is a private document only available to the Trustee and the Beneficiaries. 

Living vs. Testamentary Trusts

When trying to understand Trusts, it is critical that you first understand that they fall into two general categories-Living Trusts and Testamentary Trusts. The critical distinction is when the assets are placed into the Trust, it becomes active, either while the donor is alive or upon their death. In addition, living Trusts can be either revokable or irrevocable. 

Living Trusts are active and operational while the donor is alive, and the generated income is distributed according to the terms outlined. With Testamentary Trusts, the assets are placed into the Trust and become active only upon the donor’s death. 

Revocable Trust: Can be changed or revoked after it is created.

· The Trust Creator may act as Trustee and maintain control over the assets or may name a separate party to act as Trustee.

· The Trust Creator can make changes or revoke the Trust while they are alive. 

Irrevocable Trust: Typically, can’t be changed or amended after it is created.

· Typically requires the Trust Creator to relinquish ownership over the assets to the Trust, to be overseen by the Trustees. It’s worth mentioning that a Trust Creator(s) cannot serve as Trustee(s). 

Testamentary Trusts become active upon the donor’s death. The terms of this type of Trust outline the management of the assets and/or distribution to named beneficiaries. 

Durable Power of Attorney

A comprehensive estate includes two separate documents that designate individuals to make medical and financial decisions on behalf of the person if they become incapacitated. A DPOA, sometimes referred to as Attorney-in-Fact, specifically names the person (and a backup) to be your appointed and empowered agent for financial decisions, and another person (and a back-up) to be a Health Care Agent for medical decisions. The Financial DPOA has access to bank and investment accounts and real estate. They can pay your bills, taxes, medical expenses, etc. The Health Care DPOA can make medical decisions including treatment plans, aftercare centers, and end of life choices.

Advanced Healthcare Directive

In the process of making medical care decisions on your behalf, your Healthcare DPOA (Durable Power of Attorney for Healthcare) will refer to the Advanced Healthcare Directive. This document serves as a comprehensive guide, outlining your specific wishes concerning critical aspects of medical care, including preferences regarding feeding tubes, pain management, resuscitation, and hospice care.

Distribution of Tangible Personal Property

Tangible Personal property is your stuff. Things. Mementos. Furniture. Art. Collections. Cars, boats, and recreational vehicles. Furniture. Jewelry. Heirlooms. The Distribution of Tangible Personal Property document is used in some states to specify beneficiaries for tangible personal property outside of the will. Choosing beneficiaries for these items, using a form separate from the Will, makes it simple to update and change without an attorney.

Letter of Instruction

A Letter of Instruction plays a crucial yet often undervalued role in an estate plan. This document provides a clear, direct narrative that guides your executors and loved ones through various non-legal aspects of your estate, from the location of important documents to your preferences for funeral arrangements. Unlike the formal legal directives found in wills or trusts, the Letter of Instruction addresses practical details and expresses personal sentiments easing the burden on those you leave behind and ensuring your legacy is honored in the manner you envision.