Estate planning is NOT one-size-fits-all stuff. Therefore, although we can talk in generalities, the simple truth is that not everyone needs or is best served by a full-blown, comprehensive estate plan. That being said, many people are in a situation where it does make sense to engage an estate planning attorney to draft and implement a full and complete estate plan–one that has been customized to such person (or persons), including their current life circumstance, their goals and objectives, their financial situation and also considers and accounts for other individuals who now or will in the future have involvement with such person and/or person’s assets. Because everyone is different, estate planning should consider and address these differences from person to person. Again, this is NOT one-size-fits-all stuff!
Below is a broad overview of various components of a comprehensive estate plan. Again, even when each of these components are warranted and utilized by your estate planning attorney, each of these should be customized for you and your circumstances.
A comprehensive estate plan will often include the following documents, prepared by an attorney based on in-depth counseling which takes into account your particular family and financial situation:
A revocable living trust can be used to hold legal title to and provide a mechanism to manage your property. You (and your spouse) are the normally trustee(s) and beneficiaries of your revocable living trust during your lifetime. You usually also designate one or more successor Trustees to carry out your instructions in case of death or incapacity. Unlike a will, a trust usually becomes effective immediately—rather than waiting until your death. This very important characteristic means that your trust can do MUCH MORE than a Will, in that a trust can be your method of doing a great deal of “life planning”—including protecting against disability, divorce, lawsuits and other things that can occur in your life or the lives of your loved ones on any given day.
Normally, your living trust will be “revocable”, which will permit you to make changes whenever and however you desire to do so and even to terminate the trust. One of the potential benefits of a properly established and maintained trust is the ability to totally avoid probate and thereby also avoid the public nature and potential expenses and delays that can be associated with probate. By the way, “living trust” is the term used to specify that this trust has been established by you during your life. There are also testamentary trusts, which are established after a person’s death, normally through such person’s will. There are pros and cons of testamentary trusts, but one of the reasons we don’t use these more is that such testamentary trusts do NOT avoid probate, as they are established through the will, after the same has been admitted to probate. Therefore, a testamentary trust does not provide the very commonly sought-after probate avoidance benefit.
If you have a living trust-based estate plan, you should also have a short-form will, also known as a pour-over will. For those with minor children, the nomination of a guardian must be set forth in a will. The other major function of a pour-over will is that it provides a mechanism for gathering any “stray assets” (i.e. assets not properly funded into the existing trust upon the death of the trust-maker (the grantor)) and transferring such stray assets into the trust, to be administered along with the other parts of the trust estate. In this regard, the pour over will is really a back-up plan (assuming there are no minor children), a safety measure, designed to be used only in the event that something has slipped through the cracks. It is ALWAYS better to ensure that there are no stray assets existing outside of the purview of the trust.
A Will, also referred to as a Last Will and Testament, is primarily designed to transfer your assets according to your wishes. A Will also typically names someone to be your Executor, who is the person you designate to carry out your instructions. If you have minor children, you should also name a Guardian as well as alternate Guardians in case your first choice is unable or unwilling to serve. A Will only becomes effective upon your death, and after it is admitted by a probate court. Among other things, this also means that a Will-based plan does not contain and really cannot contain much in the way of “during life” protections, such as protections and plans for disability and other life issues. Again, a Will is totally ineffective and dormant during the life of the maker of said Will. In essence, a Will is your request letter to the probate court, to the effect of “Dear Judge, if you’re reading this, I’m dead. I would therefore respectfully request that you do the following with my stuff…”
For those individuals who choose a Will-based plan (i.e. they elect not to establish a trust), the Will should be much more comprehensive than a shorter Pour-Over Will referenced above. This is because in this scenario, the maker of the Will is relying mainly upon the Will to facilitate and execute on all aspects of the estate plan. Therefore, since the Will is then needed to do more, the Will needs more words and pages to meet these stated objectives (as well as to ensure that the Will is legal and valid under Utah law—or whatever applicable state law).
A Durable Power of Attorney for Property allows for others to handle your financial affairs in the event that you become disabled. If it is a “durable” Power of Attorney, this means that it will remain legally effective even if the maker of such Power of Attorney becomes disabled and/or otherwise legally incompetent. Such a Power of Attorney is NOT limited to disability, as it can be utilized and implemented at any time a person desires to give legal authority to another person to act in the name of the first person. However, while such a legal instrument can be helpful and useful in a variety of contexts, it can also create significant problems and unintended consequences for the unwary and uninformed. Many of the horror stories you have heard about children stealing money from their parent’s bank accounts, selling other assets owned by a parent (including the home being lived in by such unsuspecting parent) and other horrors have their genesis in a power of attorney. For this reason, you want to be VERY careful about when you use a power of attorney, when it becomes effective, what is permitted under such power of attorney and who is appointed and empowered under the same.
As a general rule, we normally don’t appoint anyone but a spouse as current power of attorney (in normal circumstances) and when we need to designate a non-spouse as an agent under a power of attorney, we most often do so only under a “springing” power of attorney. This means that in that instance, the non-spouse obtains legal authority to act in the name of the other person ONLY if the first person (normally the elderly parent) is unable to act for himself/herself AND the other spouse is not around or able to act. A Power of Attorney becomes ineffective following the death of the maker of the same—for this reason, a Power of Attorney is NOT helpful in doing end of life planning.
Unless you have a properly drafted power of attorney, it may be necessary to apply to a court to have a guardian or conservator appointed to make decisions for you during a period of incapacity. This guardianship process can become time-consuming, expensive, emotionally draining and often costs thousands of dollars.
As noted above, there are generally two types of durable powers of attorney: a present durable power of attorney in which the power is immediately transferred to your agent (also known as your attorney in fact); and a springing or future durable power of attorney that only comes into effect upon your subsequent disability, as determined by your doctor, a court or through another specified process. Anyone can be designated as agent under a power of attorney, and most commonly it will be your spouse or domestic partner, a trusted family member, or friend. Appointing a power of attorney greatly increases the likelihood that your wishes are carried out as you want them, allows you to decide who will make decisions for you, and is effective immediately upon subsequent disability or otherwise according to the terms of the power of attorney. As noted above, it is possible and sometimes wise to have a power of attorney take effect prior to disability. As with all other estate planning tools and arrangements, these things should be used with great care, after consultation with a qualified estate planning attorney and only as such legal instruments have been designed and customized specifically for the person who will utilize the same. For this reason, it is NOT a good idea to simply download a form from the internet and/or to just copy some papers from another person. That would be somewhat akin to “borrowing” another person’s medical drug prescription. NOT a good idea!
Under Utah law, as well as under the laws of most other states, you are permitted to appoint someone you trust to decide about medical treatment options if you lose the ability to decide for yourself. You can do this by using a Durable Power of Attorney for Health Care or Health Care Proxy where you designate the person or persons to make such decisions on your behalf. You can allow your health care agent to decide about all health care or only about certain treatments. You may also give your agent instructions that he or she has to follow. Your agent can then ensure that health care professionals follow your wishes. Hospitals, doctors and other health care providers must follow your agent’s decisions as if they were your own.
A Living Will informs others of your preferred medical treatment should you become permanently unconscious, terminally ill, or otherwise unable to make or communicate decisions regarding treatment. In conjunction with other estate planning tools, it can bring peace of mind and security while avoiding unnecessary expense and delay in the event of future incapacity. The Utah Legislature has implemented the Utah Advance Care Directive form, which is the combination of the above-referenced health care directives (Health Care Proxy and Living Will). While you are not required to use this state-approved form, it is normally a very good idea to do so, as using this state form will increase the likelihood that your wishes are honored by the facility and health care professions involved in your medical care at the applicable time. This is a form that you can obtain on the internet and fill out by following the instructions that accompany the same. Even so, it can be confusing, so it is never a bad idea to get professional guidance when working with this form.
Many medical providers will refuse to release information, even to spouses and adult children authorized by durable medical powers of attorney, on the grounds that the 1996 Health Insurance Portability and Accountability Act, or HIPAA, prohibits such releases. Therefore, in addition to the above documents, you should also sign a HIPAA authorization form that allows the release of medical information to your agents, your successor trustees, your family and other people whom you designate.