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Understanding Your Estate Planning Trust Documents

What documents are included in a trust?

This is a question many people have when establishing an estate plan. The following is a brief summary of the most common documents involved in trust-based planning.

Living Trust

A Living Trust is a legal document designed to make sure that upon your death, your assets will be distributed to whom you want, the way you want, and when you want. A living trust should also be designed to save as much in court costs, attorney’s fees, and estate taxes as possible. And finally, it is designed to avoid the need of guardianship in the event of your disability and the need of probate upon your death.

A well-designed living trust performs the following functions:

  • Provides one, integrated planning document with instructions for your care and the care of your loved ones.
  • Provides continuity in the handling of your affairs by efficiently transferring your property to your loved ones.
  • Avoids probate upon your death. This dramatically reduces the costs of settling your estate and will ensure that your financial affairs and the inheritances of your family and beneficiaries will not become a matter of public record.
  • Avoids the need for multiple probates if you own real estate in more than one state. This is important because the state in which you reside does not have the ability to probate real estate in another state. A timeshare is often deeded property which would require probate to be conducted in the state where it is located. A living trust can avoid such multiple probates.
  • Avoids the need of a guardianship in the event of your disability. This eliminates the need to hire an attorney to prosecute a guardianship petition and will ensure your medical and financial affairs do not become a matter of public record.
  • Provides planning benefits for your family, heirs, and loved ones
  • Can be easily changed and adjusted should you desire to do so.

Limitations of a Living Trust

A living trust only controls the property that has been transferred to it. Unless you or your trustees demonstrate that ownership of a particular asset has been transferred to your living trust, that asset may be subject to guardianship proceedings in the event of your disability and may be subject to probate upon your death.

Our planning process ensures that ownership of your assets and your beneficiary designations are properly aligned with your living trust. This is called often called “funding.”

Affidavit of Trust or Certification of Trust

As you buy and sell various assets, you will be transacting your business as trustee of your living trust.  The people with whom you deal may want to verify that your living trust is active and operational, that you really are one of its trustees, and that you have the authority to transact the business at hand as a trustee. Such verification is often made with an Affidavit of Trust. An Affidavit of Trust is a one-page, notarized statement under oath that summarizes the terms of a living trust.

In most cases, an Affidavit of Trust, along with specific pages from your living trust, contain the information needed by people with whom you have legal dealings.

“Pour-Over” Will

Upon your death, your Pour-Over Will designates your living trust as the beneficiary of any assets that were not transferred to your trust during your lifetime. Any such assets may be subject to probate. Although the goal for a person with a living trust is to have all assets owned by the living trust on the date of death, sometimes that does not happen. Assets acquired after the living trust was signed and not transferred to the trust require probate upon your death. If that happens, your pour-over will is used to ensure that the probate assets “pour over” into your living trust so that they are ultimately distributed consistently with the instructions in your living trust. In other words, the pour-over will functions as a safety net to ensure any property you did not transfer to your trust is ultimately distributed pursuant to your instructions in the trust.

If you have minor or disabled children, your will designates the guardians with whom you want your minor or disabled children to live.

If you diligently put all of your assets into your living trust, the personal representative designated in your will should have little or nothing to do upon your death.

Durable Financial Power of Attorney

A Durable Financial Power of Attorney permits your designated agent or attorney‑in‑fact to act on your behalf with regard to your financial affairs.  Your agent under the Power of Attorney has the authority to manage and make decisions regarding any assets that have not been re‑titled to your living trust, Additionally, your designated agent has the power to make decisions on matters that are outside the scope of authority granted to the trustee of your living trust.  One of the powers given to your agent under the Power of Attorney is the power to transfer your assets to your Living Trust.

Advance Health and Personal Care Directives

An Advanced Health and Personal Care Directive authorizes your health care agent to make health care decisions for you if you are unable to do so. Advance Health Care Directives are sometimes referred to as a Living Will or a Durable Health Care Power of Attorney. This document may also provide the required designations under the Health Insurance Portability and Accountability Act (“HIPAA”). These authorizations can be incorporated into one document or may be addressed in two separate documents. Our office prefers to use two separate documents, a Living Will and a Durable Health Care Power of Attorney.

HIPAA Authorization

A HIPAA Authorization is used to permit the release of your medical information and directions to persons who may need access to such information to implement the instructions in your estate planning documents.  The authorization is prepared to comply with the Health Insurance Portability and Accountability Act (“HIPAA”), which permits the disclosure of “protected health information” only to people whom you expressly designate.

Personal Property Memorandum

The Personal Property Memorandum provides for the transfer of various tangible personal property items to specific individuals. These personal property items may have financial,  emotional, or sentimental value to specific people. This document is often very personal to your family and friends.

Memorial Instructions

You may want to share your burial or cremation wishes, as well as information about the kind of memorial service you would like, with your trustees or loved ones.  You may also desire to express your feelings about the general amounts that should be spent on these remembrances.  A memorial instruction letter gives your loved ones general guidelines and suggestions in these matters.

HOW WE CAN HELP

Our office specializes in estate plans that work. We offer client-centered counseling to develop a plan custom-designed for you. The initial counseling interview is used to learn about you, your family, your estate, and most importantly, your goals. The next step is to design an estate plan based on your goals using a team approach that involves your other advisors, such as accountants and financial planners, in the planning process. Such a “team approach” ensures an estate plan that is designed especially for you.