In the simplest terms, an “estate plan” contains your instructions for getting your assets to the people you want to have it after you die. When you die, all of your assets, no matter how valuable they are, will be part of your estate. Your estate plan allows you to give what you want to who you want in the way you want.

An estate plan must meet certain legal requirements, including that it must be in writing, it must be signed by you, and other people must witness it while you are signing the documents. Your estate plan may be simple or complex, depending on how many assets you have, how long you want your assets to provide for the people you care about, and when you want them to actually get your assets.

How Trusts Work:

When you set up a living trust, you transfer assets from your name to the name of your trust, which you control either yourself or through your trustee — such as from “John and Jane Smith, husband and wife” to “John and Jane Smith, trustees under trust dated (date of trust).”
Legally you no longer own anything (do not worry: everything now belongs to your trust), so there is nothing for the courts to control when you die or become incapacitated. The concept is very simple, but this is what keeps you and your family out of the courts. Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the person or corporate trustee you selected, until your beneficiaries reach the age(s) you desire for them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, ex-spouses and future death taxes.

Understanding Living Trusts:

A will may not be the best plan for you and your family - primarily because a will does not avoid probate when you die. A will must be verified by the probate court before it can be enforced. Also, because a will can only go into effect after you die, it provides no protection if you become physically or mentally incapacitated. Thus, the court could easily take control of your assets before you die, which is a concern of millions of older Americans and their families.

Fortunately, there is a simple and proven alternative to a will: the revocable living trust. It avoids probate, and lets you keep control of your assets while you are living, even if you become incapacitated, and after you die.

A living trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die. However, unlike a will, a living trust avoids probate at death, can control all of your assets, and prevents the court from controlling your assets if you become incapacitated.

Letting the Courts Make Your Choices:

If you are unable to conduct business due to mental or physical incapacity (ex: Alzheimer’s, stroke, heart attack, etc.), only a court appointee can sign for you, even if you have a will. (Remember, a will only goes into effect after you die.) Once the court gets involved, it usually stays involved until you recover or die. The court, not your family, controls how your assets are used to care for you. This public process can be expensive, embarrassing, time consuming and difficult to end if you recover. In addition, it does not replace probate at death, meaning your family could have to go through the court system twice!

Durable Power of Attorney:

A durable power of attorney allows you name someone to manage your financial affairs in the event you are unable to. However, many financial institutions will not honor one unless it is on their own specific form. And, if accepted, it may end up giving someone a too much control to do whatever he/she wants with your assets. Durable P.O.A. can be very effective when used with a living trust, but risky when used alone.