Estate planning is not something that many people want to think about, but it can generate peace of mind and prevent messy legal entanglements. In a recent episode of “Your Future, Your Finances,” I sat down with Eleanor Hunt, estate planning attorney and senior counsel at Joseph, Greenwald & Laake. Hunt specializes in trusts and estates. She also practices family law, which includes divorce, alimony, and child support cases. She is licensed to practice law in Maryland and Washington, D.C.
According to Hunt, a sound estate plan includes a will, a financial power of attorney, and an advanced medical directive.
According to a 2012 study, 41 percent of baby boomers do not have a will. A will is an important document to have because it controls the disposition of your assets upon your death and keeps the state from distributing assets in a manner that runs contrary to your wishes. Your will should name a personal representative who will administer the estate. Some of the representative’s duties include:
- Filing the will with the probate court
- Taking possession of the estate’s assets and distributing them pursuant to the terms of the will
- Settling matters with creditors and paying them accordingly
Powers of Attorney
A financial power of attorney gives an appointed agent or representative the power to handle financial matters on your behalf. For example, you may want to authorize a power of attorney if you become incapacitated due to an illness. Pursuant to a financial power of attorney, your agent could open or close bank accounts, withdraw money, sell your property, or apply for a mortgage on your property. In light of these expansive powers, Hunt stresses that choosing a trustworthy representative is imperative.
Advanced Medical Directives
An advanced medical directive authorizes your appointed agent to make healthcare decisions on your behalf if you are unable to do so. The agent would communicate to medical professionals what type of medical treatment, if any, you would prefer to receive. Other instructions contained in an advanced directive pertain to organ donation, removal from life support, or funeral arrangements.
Trusts vs. Wills
During part 2 of our interview, Hunt explained estate planning in greater depth, including the issue of whether you should create a trust instead of, or in addition to, a will. A trust is a legal directive that appoints a representative (trustee) who transfers property or assets to a beneficiary on your behalf. Drafting a trust instead of a will can be advantageous in certain respects, but one of the most important factors is privacy. A trust does not need to be filed in a court in the same manner as a will, and it is not a matter of public record. A trust also avoids the probate process and the bureaucracy entailed. Also, a trust is a better option for people who own property both in- and out-of-state because it avoids a duplicate probate process that would be required under a will.
This does not mean that a trust and a will are mutually exclusive. A trust can be enacted through a will upon death. Other types of trusts include living trusts, revocable trusts, and irrevocable trusts.
The process of creating a trust or a will can be complicated, but the right consultant can provide immeasurable help. To learn the best estate planning measures, check out parts 1 and 2 of my interview with Hunt: