More than thirty years ago, it was acceptable for an estate plan to consist of a Last Will and Testament, and this was the principal document in an estate plan. Roughly thirty years ago, this trend changed to use a trust as the main vehicle for maintaining an estate plan. A trust is a fiduciary relationship between the grantor and a trustee to hold property in trust for the benefit of a named beneficiary and triggered by a specific event. A revocable trust is one in which the grantor has the ability to alter the terms or even cancel the trust at any time. An irrevocable trust is a trust that becomes fixed the moment it is executed, and cannot be altered or canceled by the grantor.
The revocable living trust became the principal estate planning document because people were living longer, and the grantor wished to save beneficiaries the hassle of having to probate the items that have been transferred to the trust. But, the grantor would still be able to transfer property into and out of the trust until the trust became irrevocable at the time of their death.
Prior to modern medicine, when a person became sick or had an accident in their later years, they simply died as a result of the disease or injury. With advances in medicine, people are no longer dying from their injuries and when they have become sick, new drugs are able to cure or combat the disease to a manageable level. Because of this, an individual has a greater chance at becoming disabled instead of dying. People are relying on estate planning for a future disability as much as they are preparing for their eventual death.
If an estate plan consists of a will, the will is not enforceable until the subject of the will has died. If they are disabled, there is nothing that can be done for them while they are in the disabled state. As a result, regardless of the wishes of the family or even what the individual may have wanted for their care, the court will appoint a guardian to manage the on-going care and financial responsibilities of the disabled person.
A modern estate plan addresses the needs of the disabled by putting specific documents in place prior to any accident or injury. An Advance Health Care Directive will outline the specific wishes of the injured in the event that they become incapacitated and are no longer able to make or communicate such wishes on their own. A Medical Release will allow physicians to release medical information in the event of an emergency and a treating physician must know the injured individual’s medical history or allergies. A Durable Power of Attorney for Finances grants a third-party access to banks and any other financial information for the purpose of paying bills or making other financial decisions on behalf of the injured person.
Finally, a trust allows property to be transferred to the trust so that it will bypass the probate process, thus streamlining the transfer of large assets to the beneficiaries. In addition to this, the trust eliminates the need for the court appointed guardianship by granting those specific powers to the trustee. Best of all, the grantor has the ability to transfer property into or out of the revocable trust throughout the duration of the grantor’s life. This means that as homes are bought and sold, the properties can be managed in the trust with relative ease (just filing a deed and change of ownership with the county clerk, and updating the trust schedule to reflect the property change).
With these documents in place, if a person becomes injured or incapacitated, the documents required to give them the best care, as well as be able to make decisions for their benefit and for the benefit of their beneficiaries will be made much easier. With the baby boomer generation and advances in medicine, our country will have hundreds of thousands of elderly individuals that are living longer and most likely incurring some injury or disease that will require a comprehensive estate plan.