A lot of times when we meet with clients and ask what they are looking for, they say: “We would like to have a living will.” Unfortunately, what it means to them is not what it really means. A Living Will, which is called an Advance Healthcare Directive in California is not a Will or a document that protects your estate or your loved ones. It is a very essential but a very small part of any estate plan, which in short allows you to designate a person to act on your behalf when it comes to your health.
This article aims to explain the most common terminology used in estate planning:
Estate: It is all of your property including but not limited to your clothes, books, tools, papers, your bank accounts, house and anything else in which you have an interest.
Revocable Living Trust: An estate planning tool that enables you to designate who gets whan upon your passing. This tool is more inclusive than the standard will and enables you to leave more detailed instructions regarding the distribution of your property. A revocable living trust enables your family to avoid probate, to which, with just a will, your family will be subject.
Will: A writing/document (usually signed by two witnesses) through which you leave instructions as to how you would like your property distributed upon your passing.
Pour-Over Will: The pour over will accompanies the revocable living trust. The pour over will is a document that directs that all property in the estate be handed over to the trustee of the trust upon one's passing. It can be seen as a catch all for things left outside of the trust either intentionally or inadvertently. However a word of caution is that if there are assets valuing $150,000.00 or property worth $50,000.00 left outside of the trust upon one's passing, the estate will still go through probate.
Durable Power Of Attorney: A power of attorney is a powerful document which enables you to designate an agent to act for when it comes to financial, personal and private matters in the event that you are unable to do so yourself. Your agent can act for you in as many ways as you so choose, such as property, finances, taxes, legal matters etc. You can choose for the durable power of attorney to come into effect on incapacity or immediately.
Living Will/Advance Healthcare Directive/Power of Attorney for Healthcare: Although called three different things, all three are the same thing. The most common term in California is Advance Healthcare Directive. An Advance Healthcare Directive enables you to choose a person to make healthcare decisions for you in the event that you are unable to act for yourself. You can also document what medical treatment you would or would not like upon the occurrence of a specific event, when it comes to life prolonging treatment or otherwise. You can also document your wishes with relation to donating organs among other things.
Another common reason why people fail to put an estate plan in place prior to their death is due to the misunderstanding of what can be achieved with “Estate Planning”. The “Planning” for any estate includes the systematic development and redevelopment of goals, policies and procedures pursuant to your wishes. Estate Planning can be defined as follows: “the systematic development and redevelopment of goals, policies and procedures for all the property one owns, has an interest in, whatever it is worth, and wherever it is located."
Among the many benefits of planning, Estate Planning enables you to do the following:
- Preserve your estate for your spouse and heirs.
- Retain control of your property as long as possible.
- Define your healthcare wishes upon your incapacity.
- Make provision for disabled heirs.
- Direct who will receive your estate.
- Clearly provide when and how much they will receive.
- Avoid unnecessary fees, costs, and commissions.
- Minimize Estate Taxes.
- Pass on your values to the next generation.
- Incentivize beneficiaries.
Empower yourself tomorrow, in the face of the inevitable, by putting an Estate Plan in place today.