An estate plan refers to a comprehensive bundle of documents that provides for the management of your property during life and after death; a person or persons of your choosing is usually named to carry out your wishes in the event of your death or incapacity. Although a living trust can be the foundation of an estate plan, it should be combined with a last will and testament, power of attorney for finances and power of attorney for health care to form a comprehensive estate plan.
A living trust is a trust created during the lifetime of the person who creates it, as opposed to a testamentary trust which is created at death. The primary purpose of a living trust is to provide for the management of property, both real and personal. The person in charge of a living trust is called a trustee. The person who creates the trust, called the settlor or trustor, is usually the first trustee. The settlor names another person to take over as successor trustee should the settlor die or become legally incompetent. At that point, the successor trustee takes over management of the trust and maintains or distributes the trust property to the beneficiaries identified in the trust upon the settlor’s death.
Power of Attorney for Finances
A power of attorney for finances is a document that authorizes a person, called an agent, to act on behalf of the person granting the power, called the principal, with respect to financial matters. A power of attorney for finances may give an agent very broad powers, enabling the agent to act on behalf of the principal with respect to virtually any financial transaction, or very limited powers, such as access to a specific bank account. A principal must be of sound mind when signing a power of attorney and can cancel it at any time, so long as the principal is mentally competent to do so. A durable power of attorney goes into effect immediately and remains in effect should the principal become incapacitated. A springing power of attorney goes into effect upon the happening of an event, typically when a principal becomes incapacitated.
Power of Attorney for Health Care
A power of attorney for health care, sometimes referred to as an advance health care directive, is similar to a power of attorney for finances except it directs an agent to act on behalf of the principal with respect to medical decisions when the principal cannot act on his own. A health care power of attorney usually includes both general and specific instructions. It could give the agent permission to speak with the principal’s doctors regarding the principal’s medical condition or allow the agent to give or deny permission for certain medical procedures. As with a power of attorney for finances, the principal can cancel a power of attorney for health care so long as the principal is mentally competent to do so.