Although most people do not like to consider the thought of their own passing, delaying having a will prepared to control the distribution of your assets and a testamentary trust to appoint a guardian for your children is not a wise decision. In the event you die intestate (without a will), the state probate statutes will determine how your assets will be distributed and, if minor children survive, the court will determine who will become the guardian of your children. Therefore, it is strongly recommended that you have a will prepared which includes a testamentary trust to ensure not only that your assets are distributed in accordance with your wishes but also to ensure that the desired individuals are appointed to care for your children.
A will is a document that specifies how your assets are to be distributed upon your death. A will includes the appointment of a Personal Representative who, once appointed by the court, will be responsible for carrying out the directives of your will. Within the will, beneficiaries are identified. Beneficiaries are those individuals who will receive the assets of your estate. The will may contain a general allocation of assets as well as provide for specific bequests. For example, a will may divide your money into three equal parts to your surviving children as well as provide that a specific item such as your antique doll collection passes to your aunt.
If you have minor children, the will should also name a guardian and substitute guardian of your minor children. A guardian is the person who will have the legal authority and duty to care for your children. The guardianship will only become effective upon your death and the approval of the guardianship by the court.
A testamentary trust is a trust created within a will that will come into existence upon your death. You name a trustee who, once appointed by the court, holds the trust property and manages it on behalf of your beneficiaries for a specified period of time. For example, a mother and father pass away in a car accident leaving behind a child who is ten years old. The will establishes a testamentary trust that is to last until the child is twenty-one years old. The trustee uses the property or funds from the parents, which are deposited into a trust account, for the benefit of the child until the child turns twenty-one.
In addition to creating a will and testamentary trust, it is recommended that you also prepare a living will, durable medical power of attorney and general power of attorney. Unlike a will and testamentary trust which take effect upon your death, these documents are only valid during your lifetime. A living will is also known as a health care directive. By completing a living will, you control whether your life is to be artificially prolonged by extraordinary medical measures.
Durable Medical Power of Attorney
A durable medical power of attorney designates a surrogate decision maker for health care matters upon your incapacity. The difference between a living will and durable medical power of attorney is that the living will is a directive from you instructing the physician to end artificial support as well as the option of not receiving food, water and medicine. Conversely, the individual decision maker appointed by the durable medical power of attorney may not make the decision to end artificial life support, but may make decisions such as whether or not to proceed with surgery.
General Power of Attorney
A general power of attorney is an instrument that appoints an individual to act as an agent on your behalf. It is useful in instances such as selling, buying, refinancing real property, signing checks, entering into contracts or other legal matters when you are unavailable or otherwise incapacitated and therefore cannot personally attend to these matters.
These documents may seem daunting and the thought of your own death unsettling, but they are necessary to protect your assets and your children. We can assist you with this process and verify that the documents required to protect your family upon your passing are in order. If you would like more information regarding these documents or if you would like to discuss your estate planning needs, please contact our Business Law Group partner, David A. Closson at [email protected].