Estate Planning Is Life Planning
By Mark O. Costley
What is the first thing that leaps to most people's minds when they think about estate planning? A will. We've all seen the dramatic scenes in films of yesteryear: the reading of the will. The truth of the matter is that the will is no longer the focal point of estate planning.
A well-rounded estate plan includes five documents: a revocable living trust, a general durable power of attorney, a health care power of attorney, a living will and a will. Probably the least important of these is the will. A will is effective only at death, the other four documents have an impact during your lifetime. In order to be effective, a will must be admitted to probate. Probate is a process to clear title of property from the person who died to the people designated in the will. As with most legal processes, probate can be costly, time-consuming, and public. Assets that go through this probate process are a matter of public record, open to the prying eyes of nosey neighbors and relatives, as well as con artists and other nefarious individuals. Assets which are in a trust do not have to go through the probate process. In theory, when you place your assets in your trust, the legal title is no longer vested in you as an individual, but in the trustee of the trust. The assets remain titled in the trustee of the trust upon your death, and, as a result, no probate process is necessary to clear title to the property. Thus, the trust bypasses the will and the probate process entirely. A "revocable living trust" is a trust, which is created while you are living, and which you can revoke or amend at any time. A well-drafted trust can be extremely flexible and can facilitate management of your assets while you are well, during a period of incapacity, and long after your death. While you are alive and well, you would be the trustee and manage the assets in your trust. Upon your incapacity or death, someone designated by you would take over as trustee and would manage the trust, making investment and distribution decisions in accordance with the instructions you set forth in the trust, providing continuity in asset management.
A general durable power of attorney is a legal document through which you appoint someone to make decisions regarding property not controlled by the trust, or regarding legal issues unrelated to the trust. For example, your "agent" could file income tax returns for you, change beneficiary designations on life insurance and retirement plans, or sign a deed to sell real estate owned by you in your individual capacity, rather than through the trust or another entity. In the event of incapacity, the agent can enter into contracts on your behalf, and also transfer any forgotten property into the trust, so that it can be managed by the Trustee you have selected for those circumstances. Again, this provides for a smoother transition during periods of incapacity.
In a health care power of attorney, you appoint someone to make medical decisions for you in the event you can no longer do so for yourself. You may also express any wishes you have regarding life-prolonging measures. The living will, which in North Carolina is called the Declaration of Desire for Natural Death, allows you to express a preference regarding life support and artificial nutrition and hydration in the case of your final illness or if you are in a persistent vegetative state.
Finally, the will disposes of any property which remains titled in your name rather than the trust. The typical will provides simply that the assets controlled by the will "pourover" into the trust. This means that, if any property passes pursuant to the will, it simply becomes part of the trust. Another important role of the will is the appointment of guardians for minor children. Estate planning really is life planning. An attorney that specializes in estate planning can help you plan for management of your assets during your life, during periods of disability, as well as after you are gone. Mr. Costley is a graduate of Duke University and Duke University School of Law. He is a member of the American Academy of Estate Planning Attorneys and has been engaged in the practice of law for the last eighteen years. Walker & Lambe, P.L.L.C. is a Triangle Area Law Firm with clients throughout North Carolina, representing businesses, and helping families with their business. The firm's practice includes corporate, tax, estate and financial planning, trust and estate administration, real estate, and business and estate dispute resolution. For more information or to attend an upcoming seminar, call 919/493-8411.