When it comes to estate planning, the abundance of terms and roles can often be perplexing. Especially considering that one person can occupy multiple roles, or multiple individuals can share co-roles. What?!
Let’s delve into some of the key roles to consider when constructing your estate plan.
While you are alive:
While you are alive, several roles can be assigned:
Power of Attorney (POA):
There exist several forms of a POA. However, the overarching role is that you grant certain powers to an individual “while you are alive”. All powers of attorney terminate upon death.
Limited Power of Attorney:
This type of power of attorney is, well, limited! For instance, you can grant your financial advisor limited power of attorney to execute trades on your accounts on your behalf. Similarly, you can grant your children with limited power of attorney to view your assets. This limitation ceases either upon your revocation or if you become incapacitated.
General Power of Attorney:
This type of power of attorney delegates all financial and legal powers to someone other than yourself to sign and transact on your behalf. However, this power may terminate upon your incapacitation.
Durable Power of Attorney:
This is typically a General Power of Attorney that remains effective if you become incapacitated. For instance, if you’re hospitalized for an extended period, a Durable Power of Attorney can aid in managing your affairs.
A “Springing” Power of Attorney:
This type of power of attorney comes into effect only under specific circumstances. It “springs” into existence in the event of a serious health issue such as disability or incapacitation.
Health Care Proxy
If you’re unable to make medical decisions for yourself while in the hospital or if you become incapacitated, you’ll need someone you trust to obtain important information or make critical decisions:
Health Care Agent
This individual will make health care decisions for you if you’re unable to do so. They will adhere to your “Advanced Medical Directive” to fulfill your healthcare wishes as closely as possible.
Personal Representative to Release Medical Information
This person will have the authority to inquire about your medical situation. Due to HIPAA rules, most medical matters are subject to strict privacy policies. Designating someone as your representative allows your loved ones to access vital information about your care.
Trusts (During your lifetime)
If you establish a trust while you’re alive, it’s called an “inter vivos” trust. Typically, this is referred to as a Revocable Trust, meaning you can modify the trust and move funds in or out as desired.
The Grantor
This is the individual or individuals funding the trust.
Trustee
This is the person responsible for implementing or managing the trust. In the case of Revocable Living Trusts, typically, you serve as the trustee.
Co-Trustee
Somewhat like a joint bank account, you can appoint another individual as a “Co-Trustee” to a trust. Each of you can have a say over the use of the funds.
Successor Trustee
This is the individual or individuals (successor co-trustees) who will manage the trust upon the original trustee’s passing. As outlined in the trust document, the trust can either continue, or typically, the trust assets are distributed by the successor trustee according to the trust’s terms.
Summary:
Understanding these terms will assist you and your family in developing an effective estate plan for your lifetime. You’ll need to collaborate with an attorney or an online trust/will service to draft these documents. Each state has its unique rules, so ensure you seek appropriate legal counsel.
Disclosures:
This communication is for informational purposes only and is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This communication should not be relied upon as the sole factor in an investment making decision.