Estate Planning Sub Topics


Welcome to the Estate Planning section of FreeAdvice, where you’ll find a wealth of reliable and well-informed advice regarding wills, trusts, elder law, probate, power of attorney, living wills, and much more. For answers to your everyday legal questions about estate planning, look here for articles, answers and other many useful resources.

An estate plan is a series of documents declaring how a person’s assets will be distributed at their death. A person’s estate is all the property they own, which might include real estate, bank accounts, investments and other assets, plus property of a more personal nature like clothing, furniture, jewelry or other household items.

Having an estate plan allows a person to determine ahead of time how their assets will be distributed at their death. However, a thorough estate plan can also provide instructions in the case of a person’s mental incapacitation, using financial powers of attorney and advance directives like durable powers of attorney for healthcare and living wills. In addition, a good estate plan can minimize taxes imposed on an estate in order to leave as much as possible to beneficiaries. It is also beneficial during the estate planning process to address the growth, preservation, and availability of assets during a person’s life.

There are two basic types of estate plans: will-based and trust-based plans; a well-thought-out estate plan often consists of both. Smaller, less complex estates will generally require simpler plans.

The Use of a Will in an Estate Plan

A will is a document that gives clear instructions to a personal representative, or executor, about how to distribute assets when a person dies. A will is created during life, but takes effect upon the death of the person who created it, known as the testator. At the testator’s death, the will goes through probate. This means it enters into a process wherein a court determines whether the will is valid by reviewing the document and confirming that the testator followed all legal formalities. If the court is satisfied that the will is what it purports to be, an executor distributes the estate to beneficiaries and addresses the payment of debts owed by the estate, among other pre-determined administrative tasks.

There are a number of benefits to establishing a will in addition to a trust. One reason is that a will allows the testator to designate a guardian for minor children. Further, while a person must consciously move assets into a trust, a properly-worded will addresses any property the testator may own at death that was not contemplated when the will was created. A will may also be beneficial when an estate is small enough to qualify for a simplified probate process, which is available in some states under certain circumstances and is generally less costly and quicker than regular probate.

Trusts in Estate Planning

A trust, like a will, is an instrument used to distribute a person’s property according to their wishes. A trust works by transferring property into the care and management of a trustee, who can be either a person or an institution. The assets or income derived from the assets of the trust are then passed on to the trust’s beneficiaries, according to the instructions of the creator of the trust (called the settlor).

Although there are many different types of trust with many different purposes, there are two main categories of estate planning trusts: living trusts, which are sometimes called inter-vivos trusts, and testamentary trusts. Trusts may also be revocable or irrevocable. Revocable living trusts are popular as a way to avoid probate, because property in a trust at the settlor’s death is not part of the deceased’s estate and therefore is not subject to probate. Instead, the successor trustee, who is generally named in the trust instrument, may take immediate control of the trust and begin distribution of the trust property according to the wishes of the settlor.

The successor trustee is called the successor because in a revocable living trust, the settlor is usually the trustee until the settlor’s death. A revocable living trust allows the settlor to retain control of the assets in the trust and to change, add, or revoke the trust at will. Sometimes when a revocable living trust is used, a pour-over will is added, which provides that all assets remaining in the estate on the death of the testator are transferred to the trust.

Testamentary trusts transfer property into a trust upon the death of the settlor through a will that provides for such a transfer. Since the trust wasn’t created until the settlor’s death, the property is still subject to probate, but a testamentary trust may serve many other useful purposes. For instance, a trust can be used to control how and when a beneficiary will receive funds. This is often a strategy to protect property in the trust from a beneficiary’s creditors, while still providing for the support and care of the beneficiary. This can also provide a means to support one beneficiary until death with the income from the trust, while preserving the trust assets for another beneficiary. These are just a few of the ways a trust can be utilized in estate planning.

Living Wills and Power of Attorney

Including a plan for incapacitation or inability to care for oneself when drafting an estate plan is a common and wise measure. There are several types of documents that are used for this purpose. A financial power of attorney, sometimes called a durable power of attorney for finances, designates a person called the agent who will control an incapacitated person’s finances on their behalf. A financial power of attorney ends on the death of its creator, who is called the principal.

Another common planning tool is an advance health care directive, which is a document that deals with medical plans and decisions. Advance directives should include a durable power of attorney for healthcare, which gives another person called a proxy or health care agent the power to make medical decisions in the event a person is unable to do so themselves.

A living will, another type of advance directive, provides medical instructions in the case a party is incapable of making their wishes known. Some individuals also choose to include a DNR, or Do Not Resuscitate order, which is a request that healthcare personnel do not attempt CPR in the event a person’s heart stops or if they stop breathing. Living wills and power of attorney orders are among the many estate planning tools that can offer peace-of-mind to loved ones during difficult times, and allow a person have control over the complex matters of planning for the future.

Learn More About Estate Plans

For more information and advice regarding wills, trusts, power of attorney, the probate process, and much more, refer to the articles, answers and other useful resources using the links at the top of this page.