073: What does estate planning include

What does estate planning include

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What does estate planning include? In our last video, we talked about why estate planning is so important during your lifetime and after you pass away, what is actually included in that estate plan is your revocable living trust, your financial power of attorney, your health care power of attorney, your advance directive, sometimes called a living will and your HIPA authorization. All of these documents together kind of provide an umbrella of protection over you during your lifetime and after you pass away. So the first one is your revocable living trust. And you've heard me talk about this a lot in other videos on why I think it's so important to have a revocable living, trust centered estate plan. For most people out there and basically what the trust does is it becomes an entity of its own. It's revocable, which means it can be amended and changed at any time and even completely revoked as long as you are living and you have capacity. And in that trust, it allows you to title all of your assets in the name of the trust. Why that is so important is because everything that is titled in the name of your trust after you pass away or even during your lifetime, will be administered by your successor trustee. And that means that if you have nothing left outside of your trust, in other words, all of your assets are in your trust. There is a highly, highly high probability that your estate will not have to go through probate because there's nothing to probate. Everything is in the name of your trust. And that means everything is administered by your successor trustee after you pass away, leaving nothing to be probated. And that's why I like revocable living trust so much, because it provides privacy nobody needs to know what's in that revocable living trust except the people that are benefiting or are required to know what's in the trust. It doesn't have to go to the courts, which means a probate is not going to be required, which means, three, your estate is going to save thousands of dollars on probates depending on your jurisdiction. Probates can cost for a very simple one, four to seven to $10,000. We've had probates recently in the 15,000 to $20,000 range. It just depends on your jurisdiction and how much everybody is fighting, which is another key for why revocable living trusts are so nice because the successor trustee just does what's in your trust. If it's going to probate, it provides an open forum at the courthouse for your family to fight over your assets, even though that may not be what you wanted to happen. The next document is your last will and testament, and if you have a revocable living trust, then your last will and testament is usually called a pour over a will. And you call it a pour over will because it literally pours any assets kind of like a pitcher. It pours over any assets that are not titled in your trust, back into your trust so that they get distributed according to the terms of your trust. Now, where we see that happen a lot is when people come to our office and they'll do irrevocable living trust will put all of their real estate into their trust, into their trust bucket, and then they go out and they buy a rental property or maybe they downsize to a smaller house. And when they do that, they don't tell the title company or the real estate agent that they have a trust. And so unfortunately, that property gets put into their personal name instead of the name of their trust. It gets titled in their personal name. And when that happens and they pass away, then we do have to unfortunately probate that one asset, that one house, so that it gets put into the trust for distribution. According to the terms of the trust, you don't want to make that mistake because it doesn't matter whether it's just one item or a bunch of items that were probate. The cost is usually the same because you left that house out of your trust. You're going to have to spend four to 10,000 to $20,000 to probate that one asset into your trust for distribution. If it had just been in the name of your trust, your estate would have saved all of that money because it would not have been necessary to go to the probate court for that one asset. But it's important to have that pour over Will just in case something like that happens that way, you can make absolutely certain that your assets are going to be distributed exactly how you want them to be distributed. In your trust bucket, in your trust. So the next thing is your financial power of attorney. And we get this question a lot Why do I need a financial power of attorney if I have a revocable living trust that has a successor trustee, just like you've heard me say, how important a trust is to have in case you become incapacitated during our lifetime, that is why the power of attorney is so important. So we just talked about somebody passing away with a rental property or a house that not that did not get titled correctly into their trust. It was in their personal name. That is where financial power of attorney can be so powerful, because if you become incapacitated and your successor trustee takes over, their first job is obviously to take care of you. But their second job is to gather up all of your assets, all of your debts, figure out what's in your estate. Right. So if your successor trustee is doing their job correctly, they're going to find that you have this rental house or the house that you're living in and that it's not titled in the name of your trust. Your successor trustee only has control over the assets that are in your revocable living trust, not over any assets that are not in your trust. So as long as you're still living, you might be incapacitated, but as long as you're still living your financial power of attorney can execute the proper documents to transfer that rental house or that real estate that's titled incorrectly into the name of your trust while you are still living. And the reason this is so important is because if they make that transfer during your lifetime, and then you pass away, then that particular asset that they moved over into your trust is administered according to the terms of your trust, which is what you wanted and no probate is required. So your estate does not have to spend thousands of dollars to move that one piece of property into your trust. Instead, your power of attorney probably went to their estate, to your estate planning attorney and had them draft up a deed, or they went to a title company and they spent probably $20 to actually get it filed, all in probably two or $300 to transfer that property from your name to the name of your trust versus having to probate it. And it cost tens of thousands of dollars. You see the advantage of having that financial power of attorney now, and that can be for bank accounts too. I just gave the example of real estate, but it can also be for bank accounts or other types of financial instruments where you need to make sure that the designations are correct and everything is in the name of your trust. So the financial power of attorney is extremely important, has a very important role in a properly crafted estate plan. The next document is your health care power of attorney, and that's the person who has charge of your mind, body and soul, I like to say. But again, a very important person who is the one who is going to be in control over what happens to you physically and mentally and where maybe you're going to be getting treatment from doctors who is going to be able to visit you all extremely important things. Now, if you've done your plan correctly, you have outlined exactly what you want to happen and your health care power of attorney will follow those directions. The next document, along with the health care power attorney, is your advance directive or living will and this document basically just says if you are in a persistent vegetative state, in other words, you have zero brain activity and doctors don't believe that brain activity is ever going to reignite. Then you just want to have food, water and pain medication. Maybe you just want pain medication, maybe you just want water and pain medication. It's your decision. Basically, what we're talking about here is end of life. What do you want to happen if you are in a persistent, persistent vegetative state? This is a huge gift to your family because you have made that decision ahead of time. And this document works in conjunction with your health care power of attorney because they're the ones that are actually going to execute the documents to follow the wishes that are in your living will and along with those two documents, you also have your HIPAA authorization. So you've heard about HIPAA. Every time you go to the doctor, you have to fill out usually some type of HIPAA form while your HIPAA authorization says who has access to your medical records. And usually always we state that whoever your health care power of attorney also has access to all of your medical records. Extremely important document. So those are the documents that you need for a properly executed revocable living trust estate plan. And that's what's included in an estate plan.