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A full estate plan includes numerous documents to be used both during your life and after. A standard plan created by Parker Legal will include a will, financial power of attorney (POA), healthcare POA, HIPAA release authorization, and living will. Trusts — revocable or irrevocable — can also be created for clients who wish to avoid expensive estate taxes when passing large or expensive assets to their heirs.
A will allows your family to speed up the probate process after you pass and ensures your assets pass to individuals of your choosing. Without a will, you are deemed to have died intestate. When this occurs, the State of Maryland applies the Maryland Probate Code to distribute your assets. These rules can be confusing and cumbersome.
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Will
A Will is a legal document that communicates a person’s final wishes pertaining to their assets and who should receive them. A valid will must be signed by the Testator and two witnesses and notarized. It can also be fully handwritten and signed by the Testator.
HIPAA Release Authority
A HIPAA Release allows hospitals and government agencies to release your Protected Health Information (PHI) to your agent, so they can make informed decisions for you.
Financial Power of Attorney
A Financial Power of Attorney (POA) is a legal document giving someone else the power to make financial decisions on your behalf. This document is used while you are alive if you are deemed incapacitated or unable to act on your own.
Living Will
A Living Will is a written statement detailing your desires and advanced directives regarding medical treatment when you are no longer able to express your wishes.
Healthcare Power of Attorney
The Healthcare Power of Attorney (POA) designates an agent, granting them the power to make healthcare decisions on your behalf if you cannot do so due to incapacity.
Trusts
A Trust is traditionally used to minimize estate taxes by creating an entity to hold assets for the benefit of a beneficiary or beneficiaries and is managed by a trustee.
Types of Trusts
If all assets are placed in a trust during your lifetime, your estate may avoid the probate process. Revocable and irrevocable trusts are also known as living trusts as they are created and funded during your life.
Revocable Trust
Revocable trusts can be changed, amended, or dissolved after they are created. Additionally, you can take back property in the trust at any time, for any reason, without having to get permission from anyone else as you continue to own the assets in the trust. At your death, a revocable trust may be dissolved and the assets transferred to your beneficiaries, or it may continue for the benefit of your beneficiaries. If the trust continues after your death, it will transform into an irrevocable trust. Additional details about revocable living trusts can be found here.
Irrevocable Trust
Irrevocable trusts typically can’t be changed or amended after they are created, giving you the most asset protection and tax benefits. Your assets move out of your estate after creation and the trust acts as a separate entity, paying its own income taxes, and filing its own tax return. There are numerous types of irrevocable trusts available based on your desired goals. The drawbacks to an irrevocable trust are that it cannot be modified or dissolved after it is created, you may not act as the trustee of your trust, and you are no longer considered the owner of the assets in the trust.
Testamentary Trust
A testamentary trust is an irrevocable trust created through instructions included in your will. This type of trust does not avoid the probate process as the trust is not set up during lifetime, but upon your death.