When I first began getting involved in Estate Plan Organizing, I realized that I needed to learn a whole new language. Sure, I knew what a will was, but what did the word probate mean? I knew that my definition of trust had little to do with the legal term “trust.” Also, I wondered, is there a difference between a health care directive, living will and advance directive? I decided that it was time to find out.
Happily, I learned of an estate planning attorney in Idaho, Justin Jeppesen, who published a blog post called Super Easy Ways to Understand Basic Estate Planning Terms.
With proper thanks and attribution to Justin and the caveat that this is not intended to act as legal advice or an attorney/client contract, and that you should check with you attorney or financial advisor, I offer a brief overview of basic estate planning terms.
Probate. Generally, this is a court proceeding where one person is asking the Court to determine how your property should be distributed after you die. The goal of probate is to get a court order to allow for distribution of your estate.
Last Will and Testament. This is a document prepared by you that allows you to tell the Court exactly what you would like to happen with your children and property. It is an invaluable document to have. It allows you to have a say in what happens to everything once you have died, rather than the Court guessing what you would have wanted or family members fighting (this is called dying intestate).
Power of Attorney (or Durable Power of Attorney). A power of attorney is a document where one person is given power to act on your behalf (called an Attorney-in-Fact), when you cannot act for yourself. It is important to note that a power of attorney cannot be signed by an individual that is determined to be mentally incapacitated. A power of attorney can be active as soon as it is signed or it can spring into action with a physician’s determination of incapacity, but it is invalid once an individual has died. Another important note is that some banks do not accept a power of attorney for access to your funds. Instead, it might require its own document OR inclusion of particular language in the power of attorney; additionally, such bank documents might expire after a set period of time, so it is important to check with your particular bank(s).
Trust. A trust is a document that contains all of your assets and provisions for distribution of your assets. A trust goes into effect as soon as you sign it and allows you to manage property while you are alive; it also allows for distributions while you are alive as well when you pass away. An additional benefit of a trust is that if all of your assets are held in trust, there is no need for probate. This provides access to assets immediately after you die.
Health Care Directive, Living Will or Advance Directive. These terms are often used interchangeably. With this document, you nominate someone to act on your behalf for healthcare purposes. It allows you to make your own end-of-life decisions (i.e., life support, nutrition and hydration) if you are unable to communicate those wishes yourself.
If you are ready to explore your thoughts and feelings about end-of-life decisions and want more information about how to plan for organizing your estate, please contact me by email or phone/text me at 215.435.5609.