(Powers of Attorney, Living Wills, Marital Property Agreements, Instructions for Survivors, Trust)
In addition to wills and trusts, various other documents may be used to carry out your wishes, either in case of death or in case of illness or accident.
Powers of Attorney
Powers of attorney give another person the power to act in place of the principal (the person signing and authorizing the power of attorney). The power of attorney can be drafted so that it would only become effective upon the disability or incapacity of the principal, or so that it is effective immediately.
The power of attorney allows someone else to handle affairs such as payment of bills, cashing checks, and selling assets. A specific power of attorney may be drafted which grants only very specific, limited powers to the person named as attorney-in-fact (the person given power to act for the principal). This could include the power to manage a particular piece of real estate, or a particular account, investment or business.
Living Wills/Durable Powers of Attorney for Health Care
Living Wills are directions regarding prolonging life by artificial means if the condition is terminal. These documents provide family members or others appointed by the document with authority to make medical decisions for you if you are unable to do so.
Instructions and Location of Information
It is a very good idea for everyone to make a list of assets and directions for loved ones to use in case of death or incompetency. This list can include directions for funeral arrangements and memorial services, location of documents including insurance policies, deeds, securities and evidence of other assets, location of bank accounts and names and addresses of professionals who would have information regarding the estate, including the attorney, accountant, insurance agent and other financial advisors. Location of the records, safety deposit box, will, trust, and any other pertinent documents should also be listed.
Life Insurance Trust
This trust is set up to hold your life insurance polices and to remove the proceeds of these policies from you taxable estate. The Trust is also named as the beneficiary.
The life insurance trust is a popular method of saving estate taxes. The Trust is designated as both the owner of the policy and the beneficiary. In this way, the insurance proceeds are not part of your taxable estate.
Any couple in a situation where one partner has a lot more money or property that the other or where one partner is substantially older than the other, should consider entering into a prenuptial agreement as part of their estate planning.
Older people with grown children from another marriage may want their property to go to their own children after they die, rather than go to the new spouse. A prenuptial agreement can accomplish that purpose.
Another device to accomplish these objectives is the Q-TIP (Qualified Terminable Interest Property) Trust. Money goes into this trust at your death. Your surviving spouse is entitled to all of the income for as long as she or he lives. At the death of the spouse the assets can be distributed to your children.
Family Limited Partnerships
A Family Limited Partnerships is probably the ultimate estate planning vehicle. They are used to minimize estate taxes and also protect your assets from any potential creditors. With a family limited partnership, you own shares in the Partnership while the partnership owns the assets. Your assets are shielded from creditors seeking damages as a result of a lawsuit. You can transfer partnership shares to your children and still retain full control of the assets. The value of the transferred assets are subject to valuation discounts for purposes of calculating the taxable estate.