Estate planning is an important part of your life as it encompasses events that happen both during and after your life. Typical estate planning goals include appointing people to act for you medically and financially during an incapacitation, nominating guardians for dependent children and controlling distributions of an estate.
Documents used during one's lifetime might include:
Medical power of attorney
Mental health care power of attorney
Financial power of attorney
Revocable living trust
Documents used after is deceased might include:
Last will and testament
Revocable living trust
Other types of trusts
While the concepts of power of attorneys and last will and testaments are straightforward, the concept of a trust is often foreign to many people. Unlike a will, which can be thought of as instructions on paper, a trust can be pictured as a box.
The box (trust) takes ownership of the assets and can hold them long after the trust's creator(s) passes. Reasons for holding assets are to:
1. Control distributions to young beneficiaries
2. Allow an asset to be used by someone before being distributed to someone else
3. Protect the privacy of an estate
4. Avoid probate
5. Potentially reduce estate taxes.
There are many types of speciality trusts for large estates but the most common type of trust families utilize are either a living trust or testamentary trust. Living trusts are created while the trust's creator is still living as opposed to a testamentary trust, which is created by a last will and testament after the testator (the wills creator) passes. The other major difference between the two trusts is a living trust helps assets avoid probate. A testamentary trust does not help assets avoid probate.
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