The 4 major ingredients of most estate plans

When it comes to most estate plans, there are four major components. Think of the estate plan like a tool box that has several tools inside it. For example, most tool boxes would have a hammer, a flathead screwdriver, a Phillips screwdriver, a wrench, etc. The legal toolbox (the estate plan) also contains several legal several tools.

The "hammer" of this legal toolbox is the living trust. The living trust is created by someone called the "Settlor" or "Settlors" if there is more than one person  You might be more familiar with older terms like "trustor" and "grantor." All these terms refer to the same thing - the person who created the trust. You can die 100 times, but you will always be the creator (Settlor) of your own living trust.

The second major player in the living trust is someone called the "trustee." This is the person who handles all of the assets that are in the name of the living trust. When I say "in the name of the living trust," I mean that title to the asset has been changed to reflect the name of the living trust. Your personal property is no longer owned by "John Smith," but by "John Smith's Living Trust" instead. Bank accounts that used to be in the name of John Smith are now in the name of his living trust. I changing title, you are "funding" the living trust with assets. Failure to "fund" a living trust is one of the biggest reasons most living trusts fail.  Think of the trust like a bucket.  The problem is some people have this bucket, but they don't put anything IN the bucket.  An empty trust might be a useless trust. Generally, you will be the initial "Trustee" of your own trust.

The final cast member of this living trust is the "beneficiaries." In the very beginning, you will be the initial beneficiary of your living trust. After you pass away, other people will serve as "successor Trustees" of your trust and ultimate beneficiaries of your trust. Those persons might be your children or other people that you might designate.

The next component in most estate plans is the the "Will." Unlike traditional wills which simply distribute assets to certain people, this type of will serves as a backup to your living trust. It works in concert with your living trust. In the event some assets are not properly titled or don't have the proper beneficiary, such assets are "caught" by the will and ultimately directed to your living trust. Think of it like a big "safety net" that sits under your living trust and catches stray assets that are not properly titled. If all of your assets are properly titled or have the proper beneficiary (depending on the nature of the asset), the will might be unnecessary upon your death.  However, if you need it, it's good to have one in your toolbox.

The next legal tool in the toolbox is something called a durable power of attorney. The durable power of attorney allows those named as your agents to act on your behalf in the event you cannot handle your own affairs. Generally speaking, there are many things in our lives that need to be handled which don't directly involve our living trust. For example, let's say John Smith needs to speak with his wife's credit card company. He needs to demonstrate he has the legal authority to act on his wife's behalf. That's where a durable power of attorney comes into play. Make sure you name people that you trust to handle this very powerful legal tool.  You can imagine that in the wrong hands, this power can be abused.

The final set of documents in the legal toolbox are the health care documents. Generally speaking that includes of the Advance Health Care Directive here in California. In the past, this was known as a durable power of attorney for health care. The more modern term since 2001 has been Advance Health Care Directive. You also want to make sure that your health care documents have all the requisite language regarding the release of medical records to your designated agents. In many cases, it is also helpful to have a separate authorization for the release of your medical records. Some facilities and institutions are insisting on a stand-alone authorization for the release of medical records.

While there are many other tools that go into your estate plan, these are the major tools that most people should consider.  In some cases, one or more of these tools may be unnecessary.  One size doesn't fit all.  Please feel free to contact my office if you have any questions or if you'd like to schedule an initial consultation.