Your “last will and testament” is a legal document you create to direct the management of your estate and provide for the care of your minor children when you die. If you die “intestate,” without a will, then your state decides how to distribute your property and care for your kids. This court-supervised process to validate your will is “probate.” Probate may include these seven steps:
To avoid probate, you could title individual property as joint tenancy or payable-upon-death, and fund a living trust. A living trust can avoid probate. If assets are in trust, then you no longer “own” them as an individual. The trustee manages the trust assets as if they were their own. When you die, your property goes through probate. However, if you no longer “own” property because it is in trust, then your assets do not go through probate.
On another estate-planning topic, your “durable power of attorney” is another legal document that appoints an attorney-in-fact to make financial decisions for you. This appointment can take effect immediately or only if you become unable to make financial decisions on your own.
Furthermore, your “living will” or “healthcare power of attorney” appoints a healthcare agent to make medical decisions on your behalf if you cannot make them for yourself.
Community property is applicable in nine states where a spouse or registered domestic partner owns 50% of property acquired during the marriage or domestic partnership. Unless a couple has created a “community property agreement,” money earned before marriage or the domestic partnership and anything purchased with that money is separate property, subject to probate. However, a “community property agreement” automatically transfers individual separate property to your spouse or domestic partner when you die.
We have not discussed guardianships, pour-over wills, AB Trusts, Credit Shelter Trusts, or other estate planning topics. But, a licensed attorney at law in your state can answer your questions, furnish legal advice, and document your estate plan Keep in mind, when your life changes, it is time to update your plan.
Question: Do you have a will, power of attorney, and health care directive?
Chris Bryant is an American financial advisor.