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Estate Planning Documents Working Together

It’s been said many times that an estate plan is just that… a PLAN. Yes, it’s a group of form derived documents but, as I always say, it’s knowing WHICH FORMS to use. However, it’s more than that.  One of the fundamental keys to an estate plan is for the client to understand how the documents work together. Yesterday a client asked me to explain the durable power of attorney document to them. To merely explain that one document by itself was made easier by showing how to fit into the PLAN. Here is an overview of the estate planning documents most commonly used in California.

The revocable living trust is the main document. It is the hub of the plan. The revocable trust holds most assets for most of our clients. It will hold the house, other real estate, bank accounts, stock accounts, and other investments. It will basically hold everything except the retirement accounts. In some cases even the retirement accounts will fund into the trust after death. The trust is effective while you are alive, and after death, for all assets that are in the trust.

The will, or pour over will, is next. It is only effective AFTER DEATH and only effective as to assets that are not in the trust and that do not have beneficiary designations. Typically this would be personal property only. A will is necessary as the pour-over action acts as a back up to get assets into the trust. However, it’s of limited application in most cases.

The durable power of attorney for financial affairs is next. It is only effective BEFORE death and only effective as to assets that are NOT in the trust. It also is often helpful for quasi-financial matters like dealing with the DMV and the post-office. Again, this ends at death.

The last main document is the advanced health care directive. It is totally separate from the other 3 documents. It deals with medical only. It generally is only applicable before death. However, there is carry over action, after death, for dealing with final disposition issues.

There are many ancillary documents which we will talk about it in the coming days. Those are: quitclaim deeds, general transfers, certified extracts, hippa releases and bank letters. Stay tuned!

-John

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