Trusts

The most common type of trust is the revocable living trust. This is a trust that you set up now [while you are alive]. You can put all of your property into the trust, or just some of it. The biggest advantage of the revocable living trust for most people is that it avoids probate of the assets placed into the trust when the person or persons setting up the trust die. For married couples with larger estates there can also be estate tax savings in some situations.

Other kinds of trusts include special needs trusts, used for persons with incapacities or disabilities where there is a desire to keep them eligible for state or federal assistance programs. For wealthy individuals there are irrevocable life insurance trusts, used to get life insurance proceeds out of the estate, thus resulting in lower estate tax. There are charitable trusts, used to convey assets to charitable organizations while obtaining favorable tax treatment. There are many other kinds of trusts.

Powers of Attorney

Powers of attorney can be used to designate an agent to make financial decisions for you. You can determine whether the authority granted to your agent takes effect immediately, or whether it takes effect later on, such as in the event of your incapacity. [Usually people select the latter.] Authority granted in a power of attorney can include the power to sign your checks, the power to sign your tax returns, the power to operate your businesses, the power to manage your real estate, the power to handle your litigation cases, etc. Powers of attorney are an excellent idea because if you become incapacitated you have already selected your agent at a time when you were alert and competent. If you have no power of attorney and suffer a serious impairment, you may lose the capacity to make a valid power of attorney, and the only solution may be the very expensive and cumbersome conservatorship process.

Advance Health Care Directives

These are a special type of power of attorney designed for health/medical purposes. You authorize an agent to make medical decisions for you in situations where you are not able to make the decisions yourself. Obviously you want to select someone you know and trust. Typical persons designated as agents include spouses or children aged 18 or over.