Estate Planning: A Quick Look at the Basics

Estate planning is a big topic, and for many people, it can be an intimidating one.  The idea of preparing for your own death or incapacity can be uncomfortable enough.  Add to that all of the important decisions to make (who inherits what, who handles assets, etc.), the wordy legal documents to review and sign, and the various tax and estate administration rules to try to comprehend, and it can quickly start to feel overwhelming.  I hear this sentiment from clients quite often, and I understand where they’re coming from.  That’s why I try to present these concepts in a way that clients can easily understand, so that they can feel empowered to make the best choices for themselves and their loved ones in their estate planning documents.  To that end, in this blog post I’ll give a quick summary of the documents that make up a typical estate plan (there’s more than just the will!) and explain a bit about what each document does.  If you would like to have any of these documents prepared for you, I invite you to give me a call or send an email to schedule a conversation about your own personalized estate plan.  Initial consultations are always conducted free of charge.

General Power of Attorney:  This important document allows one person to manage another person’s financial assets.  The person executing the general power of attorney is called the “Principal.”  The Principal chooses another person to be their “Agent” and gives the Agent the power to deal with the Principal’s assets during the Principal’s lifetime to the same extent that the Principal can deal with the assets. The document is usually drafted in a way that allows the Agent to start acting on the Principal’s behalf the moment the document is executed.  This means the Principal can have someone helping with banking and bill paying (and much more) without having to first be incapacitated or placed under a guardianship.  This document is also sometimes referred to as a “durable power of attorney” or “financial power of attorney.”

Health Care Power of Attorney:  This document, like the general power of attorney, involves a relationship between a Principal and an Agent chosen by the Principal.  The document gives the Agent the power to make health care decisions on the Principal’s behalf in the event the Principal becomes incapacitated.  This includes the power to employ or discharge medical providers, consent to surgeries the Principal may need, consent to the Principal’s admission to the hospital, and more.  Unlike what we saw with the general power of attorney, the health care power of attorney does not give the Agent authority to act on the Principal’s behalf while the Principal has capacity.  Through this document, the Principal may give the Agent directions concerning the handling of the Principal’s bodily remains after death, including whether to donate organs, whether the body should be buried or cremated, and the manner in which the bodily remains should be buried or otherwise disposed of (i.e., where to bury the body or scatter the cremated remains).  If the Principal chooses, they can put limitations on what the Agent is able to consent to on the Principal’s behalf.

Advance Directive for a Natural Death (Living Will):   This document expresses a person’s wishes regarding life prolonging measures in an end of life situation.  In it, the person executing the document can specify the circumstances under which they would like to be taken off of life support and allowed to die a natural death.  Like the health care power of attorney, this document only takes effect if the person who executed the document becomes incapacitated.  It is important to note that this document is not the same thing as a Do Not Resuscitate (or “DNR”) order.

HIPAA Authorization:  HIPAA exists to protect sensitive patient health information from unauthorized disclosure.  A HIPAA authorization form lets a person name other individuals who may access this protected health information.  Having this form in place allows these named individuals to do things such as review medical records, have conversations with medical providers, and communicate with insurance companies.  HIPAA authorizations provided by a doctor’s office, hospital, or other treatment facility may be limited in scope and may be written so that they only apply while the patient is in that specific office, hospital, or facility.  An attorney-provided HIPAA authorization form is typically broader in scope and designed to remain in effect even as a person changes care providers or treatment facilities.

Will:   A will is a document that takes effect at a person’s death.  It names an executor and tasks that executor with paying the deceased person’s debts and disposing of the deceased’s remaining assets as directed by the will.  Wills can do much more than this, though.  For example, wills can name guardians to look after a person’s minor or incompetent children after the deaths of both parents.  Wills can also establish testamentary trusts (trusts which are created under the terms of the will and which take effect at death), which have a variety of uses, including to put up limitations around how a beneficiary can access and benefit from their inheritance.  There is much more that could be said about the potential of a well considered and well written will, but this blog post only aims to scratch the surface.  Please consider scheduling a free consultation to learn more about the importance of a will and how it can help you achieve your estate planning goals.

Revocable Trust:   Not every estate plan will include a revocable trust, but having one provides a number of benefits that individuals often find attractive.  For example, revocable trusts may make it possible to avoid the probate process altogether after a person’s death.  Trusts can also facilitate easier management of assets during a person’s lifetime should that person become incapacitated.  Trusts are also useful tools for protecting beneficiaries and their inheritances from creditors and estate taxes.  Once again, this discussion of revocable trusts is only scratching the surface (for a more thorough one, click here).  Consider scheduling a free consultation to learn more about the benefits of utilizing a revocable trust in your estate plan.

I hope this brief overview of the most common estate planning documents has shed some light on estate planning and its benefits.  To learn even more, please consider browsing the other articles posted on this website or scheduling a free consultation to discuss how these estate planning documents (and perhaps others) could be utilized in an estate plan that helps prepare you and your family for whatever the future holds.

The information contained in this blog post is intended only as general legal information and should not be construed as formal legal advice on any matter, nor should its presentation be construed as intent on the part of The Law Office of Ryan A. Layton, PLLC to form an attorney-client relationship with any user of this website.  For more information, please see this disclaimer.