Estate Planning FAQ
What is the difference between Probate and Non-Probate assets?
Probate assets are assets that are controlled by a person’s will after they die. In contrast, non-probate assets are not controlled by a person’s will. Common examples of non-probate assets would be when an annuity or life insurance policy has a beneficiary or when a house or bank account is owned in joint tenancy between two or more people. It is important to recognize this difference because it can affect how much of your estate is distributed to your heirs upon your death.
What is the difference between Joint Tenancy and Tenants in Common?
Joint tenancy with right of survivorship means that whoever outlives the other gets full title to that asset. Tenants in common means that when one of the owners dies, his or her share of the asset goes to his heirs. For example, if two individuals are tenants in common on a house and one of them dies, the deceased individual’s share in the property goes to his heirs and the living owner keeps his own share in the house.
What is the difference between a Medical Power of Attorney and a Living Will?
A Medical Power of Attorney, also known as a Power of Attorney for Health Care Decisions, is a document that nominates another person (your “agent”) to make health care decisions on your behalf when you are not able to. This is commonly used after a person has become incapacitated. Medical Powers of Attorney are generally very broad documents because it is impossible to anticipate every single situation that might occur in the future.
In contrast, a Living Will, also known as an Advanced Directive for Medical and Surgical Treatment or a Last Illness Declaration, is a much narrower document. It comes into play just prior to death. A living will states what your wishes are for two specific circumstances and directs that your doctors and/or your agent under a Medical Power of Attorney follow those wishes. A Living Will states that if two doctors certify in writing that you either: 1) are in a persistent vegetative state, or 2) you have a “terminal condition,” for which further treatment would only prolong the ultimate moment of your death, you wish that the administration of artificial nutrition and hydration or life-sustaining procedures be either: a) withdrawn, b) continued for a specific period of time, or c) continued indefinitely.
What is a Revocable Living Trust?
A trust is an arrangement where assets are held by one person (the “Trustee”) for the benefit of another person (the “Beneficiary”). A revocable living trust is often used as an alternative to creating a will. A revocable living trust is created by a person (the “Settlor”) while he or she is living. To “fund” the trust, the Settlor titles his or her assets in the name of the trust during his lifetime. The trust document usually directs that the Settlor is also the Trustee and the Beneficiary during his lifetime, which allows him to manage the property in the Trust and receive the income and principal from the trust’s assets without interruption during his life. A revocable living trust remains “revocable” during the Settlor’s life because the Settlor can change or cancel it at any time.
Upon the Settlor’s death, a revocable living trust becomes “irrevocable.” At that point, the trust document directs who should be the new Trustee and who are the new Beneficiaries of the trust’s assets. A trust usually avoids administration of the Settlor’s estate in Probate Court. A trust also makes it possible for Beneficiaries to receive regular income from the trust’s assets for a predetermined period of time. Usually under a will, all of the deceased’s property is distributed outright to the heirs and beneficiaries within a year or so after an estate is opened with the Probate Court.
Should I create a Trust?
There are many benefits to creating a trust. It “avoids probate” because the property of the person who has passed away (the “Decedent”) is usually not administered through the Probate Court. It also allows the information of the Decedent and his assets to remain private because his estate is not being administered through the public setting of the Probate Court. Lastly, it can lend tax saving benefits. However, you should also be aware that Colorado has streamlined its probate process, and the time and expense to administer an estate in Colorado is generally less than in states like New York and California. Also, a trust does not magically administer itself after a person’s death, and as with a will, you will need a trusted individual or bank to carry out all the details of the document. It is a good idea to speak with an estate planning attorney to determine if a trust is appropriate for your specific situation.
What does it mean when a Power of Attorney is “durable?”
A durable power of attorney has specific language stating that your power of attorney document remains valid after you become incapacitated. Sometimes a financial power of attorney will be titled as a General Durable Power of Attorney. However, both medical and financial powers of attorney can be – and should be – durable.
Do I need an attorney to create a Will?
No. However, we recommend you use one. An estate planning attorney talks with you about your assets, your goals, and your wishes. Software cannot do that. An estate planning attorney can tailor your estate plan to your specific situation and make sure that all of the beneficiary designations on your assets comply with the goals of your estate plan. Additionally, an estate planning attorney can help you avoid costly problems and family discord in the future.
I just need a “simple will.”
Unfortunately, there is no such thing as a “simple will.” Each person’s situation is different because each person’s family and financial situation are different. One person might need to ensure that all of her children from two separate marriages receive property upon her death. Another person might need to decide who should be the guardian for his minor or disabled children. The important thing to remember is that an estate planning attorney makes your documents fit your own needs and situation, whether that requires less complexity or more.
When should I change my estate planning documents?
It is a good idea to review your current estate planning documents at least once a year to make sure they still express what you want and nominate the individuals that you want as your personal representative or trustee and agents under power of attorney. Generally, you should consider getting new documents or getting your current documents amended when you encounter major life events: when you move to another state, when you marry or divorce, when you have children or grandchildren or want to change your beneficiaries, when your financial situation changes, or when the people you’ve chosen as your personal representative, trustee or agent are no longer appropriate for those roles.
I had estate planning documents done in another state and just moved to Colorado. Are my estate planning documents from the other state still valid?
Yes. Estate planning documents are meant to be valid in all states. However, we generally recommend that if you move to a new state you consider getting new documents. This is especially important for powers of attorney, as banks, hospitals and other institutions in Colorado are used to seeing specific language in Colorado documents and would be more likely to honor them.
What documents are included in an estate plan?
A comprehensive estate plan generally includes a disposing document, such as a will or a trust, a power of attorney for health care decisions, a power of attorney for financial decisions, a “living will,” and a declaration of last remains. Based on your situation, you may need fewer or more documents than the ones listed here. An estate planning attorney will tailor your estate plan to your specific needs and situation.