There are really only four parts to an estate plan. The first two parts only work while you’re alive. The next two parts only work after you die. So what are they?
Those four parts are:
1. Power of Attorney for Health Care
2. Power of Attorney for Finances
3. Will for Personal Property and naming Executor
4. Revocable Trust – only if you own Real Property
The first two only work while you’re alive, the second two only work after you’re dead.
These are your signed written authorizations showing that another person can legally act (or speak) on your behalf and control your assets.
What do each of these documents do?
Health Care Power of Attorney
A health care power of attorney names someone to speak on your behalf to your doctors, (only if you can’t speak for yourself). Doctors will always talk to you first about your medical treatment and your wishes. The importance of having a health care power of attorney was shown in court cases. [Terri Schiavo case – Wikipedia] Here’s an example of a Health Care Power of Attorney form in California. You are welcome to use this form for yourself and your loved ones.
You can include a terminal condition addendum to your Health Care Power of Attorney, such as this one, where you direct your agent to withhold certain treatments you don’t want. (For example, CPR performed on anyone older than 75 year old will likely break most of their ribs.)
Financial Power of Attorney
A Financial Power of Attorney is required for sales of real estate, selling or transferring stocks, changing on-line financial accounts and in-person transactions at your bank such as changing beneficiaries.
[Note, we do not draft financial powers of attorney to third parties due to the high potential for abuse. Elder Financial abuse (anyone over 65 years old) is a felony under California Law.]
These Powers Expire with You. After the person’s death, the Powers of Attorney are no longer valid.
After you die, next two documents you need are:
...a Will and (maybe) … a Trust
If you have stuff, you need a Will. A Will lists all your personal possessions and tells us what to do with them. List your wishes and names someone to take charge of your assets and pay your bills.
A Will handles all your things that transfer by possession, like your wedding ring, car, photos, clothing, etc. Everyone needs a Will, and here’s a free PDF fillable version.
A Will must have two non-beneficiary witnesses,
Trust – only if you own real estate
A Trust only holds title to real estate and stock portfolios.
If you don’t own real estate, you don’t need a trust, it’s that simple.
A Trust is simply a legal way to hold title to real property through a deed, so that the real estate does not go through Probate Court to transfer to your beneficiaries. The Trustees are the owners of the property, and the sole controllers of the Trust. Beneficiaries have no rights to the property until after the Trustees die. A Trust can also hold other assets such as stocks and brokerage accounts.
That’s it. That’s all you really need to know about estate planning.