Estate Planning

Estate planning is the process of accumulating and disposing of an estate to maximize the goals of the estate owner. The various goals of estate planning include making sure the greatest amount of the estate passes to the estate owner’s intended beneficiaries, often including paying the least amount of taxes and avoiding or minimizing probate court involvement. Additional goals typically include providing for and designating guardians for minor children and planning for incapacity.

The tools involved in estate planning include the will, various types of trusts, beneficiary designations, powers of appointment, memorial plans, gifting, and powers of attorney, specifically the durable financial power of attorney and the durable medical power of attorney. After widespread litigation and media coverage surrounding the Terri Schiavo case, virtually all estate-planning attorneys now advise their clients to also create a living will. Note that many people (and even some attorneys) confuse a living will with a durable medical power of attorney.

A living will controls solely those decisions that must be made at the end of the patient’s life, while a durable power of attorney is used to give decision-making authority to someone else (usually a family member or close friend). This person, the attorney-in-fact, then makes all medical decisions leading up to the person’s death, but has no such power to make end-of-life decisions for the patient. Those decisions are made by the patient in the living will. In the absence of a living will, and where the patient is incapable of making end-of-life decisions for him or herself, such choices are left to family members.

A will or testament is a document by which a person (the testator) regulates the rights of others over his property or family after death. In the strictest sense, “will” is a general term, while “testament” applies only to dispositions of personal property (this distinction is seldom observed). A will is also used as the instrument in a trust.

A trust is an arrangement whereby money or property is owned and managed by one person for the benefit of another. A trust is created by a settlor, who entrusts some or all of his property to people of his choice (the trustees). The trustees are the legal owners of the trust property (or trust corpus), but they are obliged to hold the property for the benefit of one or more individuals or organizations (the beneficiary) specified by the settlor. The trustees owe a fiduciary duty to the beneficiaries, who are the “beneficial” owners of the trust property.