Managing Assets: Essential Estate Planning Documents
Our legal system is upheld by a seemingly endless supply of “important documents.” Bank account information, life insurance policies, titles, deeds— all of these essential documents are how we prove what belongs to whom. They also are the foundation of knowing how to disburse your assets even after you pass away.
In estate planning, there is not one legal document that is more important than the rest. Instead, you must understand your assets, your needs, and the needs of your family before putting together several documents that ensure your final wishes go according to plan.
While estate planning is a large area of law that can also include revocable living trusts, healthcare powers of attorney, and other advance directives, this article will just explain the most basic asset management documents that can help most individuals.
Trusts and Wills
There is a common error in thinking that trusts are only for the wealthy and a will is a better overall option for average Americans. This viewpoint is untrue. Almost everyone can benefit from having both, as they serve different purposes in the larger scheme of estate planning.
Trusts are useful to anyone looking to avoid probate court. Trusts make this possible by transferring assets into a trust, which is administered by a successor trustee. Upon your death, the trustee makes disbursements from the trust according to your direction without going through court.
Because you can tailor the disbursement method extensively, you can leave instructions for disbursement of assets in lump sums or in increments. Additionally, the ability to fine-tune your trust gives you added flexibility if one of your family members has special needs, a topic we look at more in-depth later.
Wills are most adept at managing the disbursement of smaller items and serving as a safety net for any assets not explicitly moved into your trust. Wills are also documents in which you will appoint legal guardians for your minor children.
Finally, there are advance directives. This tends to be a miscellaneous category encompassing many different kinds of estate planning documents, all used for more limited purposes. Generally, these documents allow for another person to act on your behalf if you are unable. Of these, common directives to draft are:
- Durable Health Care Power of Attorney allows you to select an individual to handle your medical decisions, including end-of-life and palliative care if you are unable to do so.
- Durable Financial Power of Attorney allows you to select an individual to handle your finances if you are unable to do so.
As you can see, the common criteria between these documents is the inability of a person to make their own decisions. This loss of capacity, be it due to illness, aging, mental illness, or even substance abuse, triggers a durable power of attorney to go into effect. At that point, the individual selected will be allowed to make decisions on your behalf and have them carried out accordingly.
Caring for Disabled Dependents
Many estate planning attorneys and estate planning websites fail to mention information about caring for disabled adult children who are dependents.
If you have an adult disabled child, special needs estate planning is helpful— this is a process that combines special needs trusts with legal guardianship documents after a child reaches the age of 18. Together, these documents can help minor children transition into adulthood while still having the same care and security as they move into the next phase of their lives.
Special needs trusts act similarly to regular trusts, though their terms secure the financial well being of a disabled individual. As such, instead of outlining general asset disbursement, you will be able to finely tune a disbursement schedule that pays for therapies, ongoing medical care, housing, and any other-care related costs needed by the disabled individual.
Putting all of this into a trust is important for two main reasons: (1) it gives you the security that legally, your disabled child will have their needs met after you pass; (2) A trust serves as a financial workaround to the asset and income limits imposed by specific government assistance programs. For disabled individuals who rely on these programs to live happy, healthy, and productive lives, ensuring an inheritance won’t put their benefits at risk is imperative for their long-term care.
Arizona Estate Planning Attorney
Sue is an Arizona Estate Planning Attorney with over 30 years of experience. Spending the first 11 years of her practice representing families involved with the Department of Child Safety, she then transitioned into helping families with estate planning for the past 20 years.
Through this work, Sue has helped countless individuals, especially those in the special needs community, through crafting special needs trusts and guardianships for disabled individuals approaching the age of 18.