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A Living Will is a healthcare directive--known in various states as a Right to Die Form, a Do Not Resuscitate Form, a Directive to Physicians or a Health Care Declaration. No matter what it is called, a person making the document can identify his or her wishes about what life-prolonging treatment should be withheld or provided if he or she becomes unable to communicate those wishes to physicians and other health care providers. Doctors and other health care providers who receives a properly signed and witnessed and/or notarized directive is under the legal duty either to honor its instructions or to make sure the patient is transferred to the care of another doctor who will honor its instructions.
Because Living Wills sprung from the “Right To Die” movement in which the focus was dying without medical intervention, many people tend to think of Living Wills simply as documents appropriate only for directing that life-prolonging procedures be withdrawn or withheld. However, these documents should more correctly be viewed as a way to direct doctors to provide you with whatever type of medical care you want, within reason. For example, some people want to reinforce that they would like to receive all medical treatment that is available, while other people may want artificial nutrition and hydration, but no life support, while other people may just want procedures for comfort alone and medication for pain. A Living Will is the proper place to specify any of these wishes.
What is a Power of Attorney?
A Power of Attorney is a legal document you can use to give someone else the authority to take specific actions on your behalf, such as signing your checks to pay your bills or selling a particular piece of real estate for you. If a Power of Attorney is durable, it remains valid and in effect even if you become incapacitated and unable to make decisions for yourself. If a Power of Attorney document does not explicitly say that the power is durable, it ends if you become incapacitated. All Powers of Attorney automatically end upon the death of the person who made the Power of Attorney.
There are two kinds of Durable Powers of Attorney: a Durable Power of Attorney for Finances lets you name someone to manage your financial affairs if you become incapacitated, and a Durable Power of Attorney for Healthcare lets you name someone to make medical decisions for you if you are no longer able to speak for yourself. Preparing these two documents, along with a Living Will that sets out your wishes for medical care, ensures that your medical and financial matters will stay in the hands of trusted people you choose.
Do I need a Durable Power of Attorney for Finances if I Own Little Property?
Almost everyone with property or an income can benefit from a Durable Power of Attorney for Finances. It is particularly important, however, to have a Durable Power of Attorney for Finances if you fear that health problems in the future may make it impossible for you to handle your financial matters.
Making a Durable Power of Attorney ensures that someone you trust will be able to manage the many practical, financial tasks that may arise if you become incapacitated. For example, bills must be paid, bank deposits must be made and insurance and benefits paperwork must be handled. Many other matters may need attention as well, from property repairs to managing investments or a small business. In most cases, a Durable Power of Attorney for Finances is the best way to handle tasks like these.
Can a Durable Power of Attorney Help Me Avoiding Court Proceedings?
The main reason to make a Durable Power of Attorney for finances is to avoid court proceedings if you become incapacitated. If you do not have a Durable Power of Attorney, your relatives or other loved ones will have to ask a judge to name someone to manage your financial affairs. These proceedings are commonly known as Conservatorship proceedings. In the State of Utah, the person the court appoints to manage your finances is called a Conservator.
Conservatorship proceedings can be complicated, expensive and even embarrassing. Your loved ones must ask the court in a public hearing to rule that you cannot take care of your own financial affairs. Conservatorship proceedings are matters of public record; in some places, a notice may even be published in a local newspaper. If relatives fight over who is to be the Conservator, the proceedings will surely become even more disagreeable, sometimes creating disputes that permanently injure family relationships. In addition, Conservatorship proceedings can become very expensive and may take a significant period of time.
What if I Don’t Have Anyone I Want or Trust to Manage My Financial Affairs?
The expense and intrusion of a Conservatorship are rarely desirable. In a few situations, however, special concerns justify the process. If you can't think of someone you trust enough to have authority pursuant to a Power of Attorney for Finances, with broad authority over your property and finances, don't create a Durable Power of Attorney for Finances. A Conservatorship, with the built-in safeguard of court supervision, may be worth the extra cost and trouble.
A Durable Power of Attorney is an accepted and powerful legal document in the State of Utah, as well as most other states. Once you've finalized yours, anyone who wants to challenge your plans for financial management will face an uphill battle in court. However, if you expect that family members will challenge your document or make continual trouble for your attorney-in-fact, a Conservatorship may be preferable. Your relatives may still fight, but at least the court will be there to keep an eye on your welfare and your property.
If you expect family disputes and feel uncomfortable making a Durable Power of Attorney for finances, you should to talk with a knowledgeable attorney at Larreau & Lythgoe, who can help you weigh your concerns and options, and decide whether a Durable Power of Attorney for Finances is the best option for you.
What is a Living Trust?
A Trust is a contractual arrangement under which one person, called a Trustee, holds legal title to property for the benefit of another person or persons, called Beneficiaries. The person creating the Trust is called the Grantor. Different kinds of Trusts can help you avoid Probate, reduce or eliminate estate taxes, or set up long-term property management and provide for the care of minor children or other dependents. A Trust may be revocable and amendable or may be irrevocable and not amendable. A Trust is the foundation of a good Estate Plan for almost everyone.
A Living Trust (also called an "Inter Vivos Trust”) is simply a Trust you create while you're alive, rather than a Trust that is created at your death under the terms of your will. Typically, Living Trusts are revocable and amendable. You would typically be both the Trustee and the Beneficiary of your own Living Trust, keeping full control over your assets while still enjoying the complete benefit of all property held in the Living Trust.
The two primary purposes of a Living Trust are to avoid the expense and time of Probate and to protect your privacy. Probate is the court-supervised process necessary when a deceased person leaves a Will or dies with no Estate Planning at all. The purpose of a Probate is to allow a survivor of the deceased person to have legal authority to pay the deceased person’s debts and then distributing remaining property to the people who inherit it. The average Probate drags on for months before the inheritors receive anything. By that time, there is less for them to receive. In many cases more than 5% of the property has been consumed by attorney and court fees and other Probate costs. The reality is that drafting an entire Living Trust Estate Plan for a husband and wife, including a Living Trust, Living Wills, Durable Powers of Attorney for Health Care and Durable Powers of Attorney for Finances, would typically costs less than doing a Probate for a single individual.
How Does a Living Trust Avoid Probate?
Because a Living Trust is a contract between the Grantor of the Trust and the Trustee, all property you transfer into a Living Trust before your death does not go through Probate. The reason that these assets are not subject to Probate is because these assets are owned by the Trust – not by you as an individual. However, because you are both the Trustee and Beneficiary of the Trust, you still have complete control of the assets while you are alive.
If you have a Living Trust at the time of your death the Successor Trustee - the person you appoint to handle the Living Trust after your death - simply transfers ownership of the Living Trust assets to the Beneficiaries you named in the Living Trust, in the manner you identified in the trust, at the time you identified in the Trust. In many cases the entire process takes only a few weeks and there are no attorney or court fees to pay. In other cases you may want to direct the Successor Trustee to distribute your property or money to certain Beneficiaries a portion at a time and only upon certain events. For example, you could direct the Successor Trustee to distribute one-third of a Beneficiary’s share upon the Beneficiary turning 21 years old, one-third upon the Beneficiary turning 25 years old and the remainder upon the Beneficiary turning 30 years old. When all of the property has been transferred to the Beneficiaries, the Living Trust is closed.
How Does a Living Trust Protect My Privacy?
A Will becomes a matter of public record when it is submitted to a probate court, as do of all the other documents associated with the Probate, including inventories of the deceased person's assets and debts and a list of which persons received what assets. The terms of a Living Trust, however, will typically not be made public because the probate court is not involved. Typically the only time the terms of a Living Trust will be made public is if it is challenged by a beneficiary or a creditor, which rarely occurs.
Is It a Hassle to Own Property In a Trust?
Making a Living Trust work for you does require some crucial paperwork. First, there is the Trust Agreement which identifies the Trustee, Successor Trustees, your Beneficiaries and contains instructions to the Successor Trustee regarding to whom and at what time you want the Beneficiaries to receive the Trust assets.
Second, your property must be properly transferred into the Trust for the Successor Trustee to be able to distribute the property to your Beneficiaries. For example, in order for your house to be transferred through your Living Trust, you must sign a new deed showing that you now own the house as Trustee of your Living Trust. It is important to transfer all of your property to your Living Trust in order for your Beneficiaries to receive your assets, upon your death, through your Living Trust.
Once an asset has been transferred to your Living Trust, you simply need to remember two words: “Trust” and “Trustee”. All assets with a title (such as an automobile) or a deed (in the case of real estate) should be purchased and sold in the name of your Living Trust and you should write the title of “Trustee” after your name to indicate that you were acting on behalf of the Living Trust. By remembering these two words, “Trust” and “Trustee”, you can easily manage your own Living Trust and do not need the assistance of an attorney each time you buy or sell an asset.
Does a Living Trust Protect Property From Creditors?
Holding assets in a revocable Living Trust does not shelter your assets from legitimate creditors. A creditor who wins a lawsuit against you can go after your Living Trust property just as if you still owned it in your own name. This is the trade off for maintaining complete control over your assets by being both the Trustee and Beneficiary.
After your death, however, property in a Living Trust can be quickly and quietly distributed to the Beneficiaries (unlike property that must go through Probate). By the time creditors find out about your death, your property may already be dispersed, and the creditors may not know exactly what you owned (except for real estate, which is always a matter of public record). It may not be worth the creditor's time and effort to try to track down the property and demand that the new owners use it to pay your debts.
On the other hand, Probate can offer a limited kind of protection from creditors. During Probate, known creditors must be notified of the death and given a chance to file claims. If creditors miss the deadline to file, they will not be able to collect on the debts.
If I Make a Living Trust, Do I Still Need a Will?
Yes, you need a special type of will called a Pourover Will. A Pourover Will is an essential back-up device for property that you may forget to transfer to yourself as Trustee. For example, if you acquire property shortly before you die, you may not think to transfer ownership of it to your Living Trust - which means that it won't pass under the terms of the Trust Agreement. However, in your Pourover Will you would include a clause that directs that all property subject to the Pourover Will be given to your Successor Trustee to be distributed according to your Living Trust provisions.
If you have a Living Trust, but do not have a Pourover Will, any property that is not transferred through your Living Trust or other probate-avoidance device will be distributed in an order determined by state laws called Intestacy laws. These Intestacy laws may not distribute property in the way you would have chosen, so a simple Pourover Will is an essential “safety net” for your Living Trust.
Can a Living Trust Reduce Estate Taxes?
A simple revocable, amendable Living Trust has no effect on taxes. More complicated Living Trusts, however, can greatly reduce or even eliminate the Federal Estate Tax bill for people who own valuable assets.
One tax-saving Living Trust is designed primarily for married couples with children. It is commonly called an AB Trust, although it goes by many other names, including "Credit Shelter Trust," "Exemption Trust," "Marital Life Estate Trust," and "Marital Bypass Trust." Each spouse leaves property in trust to the other for life, and then to the children. This type of Trust can save thousands of dollars in estate taxes. Other types of Living Trusts can be utilized by single or widowed people to minimize or eliminate Federal Estate Taxes.
How Can a Living Trust Help if I Become Disabled or Incompetent?
If you have properly set up and funded your Living Trust (or have given someone in whom you have confidence Power of Attorney to fund the Living Trust in the event of your incapacity), then your Successor Trustees will be able to manage the Living Trust assets for your benefit should you become incompetent or disabled.
It is possible in a Living Trust to identify a procedure to be used to determine your competency should the issue arise. This procedure allows you to identify which doctors you want to examine you to determine whether you are competent in the future. According to this procedure, if a person who is listed as a Beneficiary of the Living Trust after you have passed away seeks to have you declared incompetent for an improper reason, your doctors will be the ones to examine you and determine your competency. If your doctors determine that you are competent, then you have the ability to amend your Living Trust to remove that Beneficiary if you so choose. If your doctors determine that you are incompetent, then your Successor Trustee will be able to manage the Living Trust assets for your benefit until you pass away. This avoids the delay and red tape of an expensive, court-ordered guardianship and conservatorship.
Whom Should I Pick as Successor Trustees?
The biggest decision to make in designating a Successor Trustee is whether to use a family member, a professional trustee, or both. Many creators of a Living Trust choose a family member as a Successor Trustee. A family member usually will not charge a fee and generally has a personal stake in the Living Trust's success. If the family member is competent to handle the financial matters involved, has the time and interest to do so and if you are not afraid of family conflicts, naming a family member as Successor Trustee may be a good move, particularly for a small or medium sized estate.
A Professional Trustee, such as a trust company or attorney, will charge a management fee. Professional Trustees also have been criticized for being impersonal in their dealings with Beneficiaries who require, or at least desire, more personal attention. On the other hand, a Professional Trustee typically can serve indefinitely, is unlikely to take sides in family conflicts, and commands the kind of investment and money-management expertise that a lay Trustee may not possess.
The end of your life is something you probably do not want to dwell on, but thinking about what will happen to your loved ones, your assets and your personal possessions is important. Making sure you have done all you can to make their lives easier will give you peace of mind, and once your Living Trust is drafted you will know that you are doing the best thing for both your loved ones and yourself. You should also consider having a Living Will, a Durable Power of Attorney for Health Care and a Durable Power of Attorney for Finances drafted at the time you create your Living Trust.
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