Friday, November 2, 2007

Living Trust Creation

We met with our lawyer today to sign and officially create the following documents:

Revocable Living Trust
Power of Attorney
Medical Power of Attorney

The whole experience has been very educational. These documents are useful for protecting your estate and for making life easier for the survivors.

The Living Trust is helpful for avoiding probate costs and to avoid delays. So one needs to transfer assets into the trust (house, retirement accounts, etc) There are also some cases where you can use this to shelter more assets from taxes and pass assets to your child(ren). The living trust also allows you to specify who will be the guardian in case you have minor children.

The Will is used to handle your "smaller assets". You may not want to transfer all your assets into the living trust, or it may be not such a valuable asset that needs to be added to the LT, so just handle this in the will. Stuff like cars, or checking account if you dont' have much there.

Power of attorney identifies who will be handling your financial decisions in case you are incapacitated, or "sick in the head"... So normally, it will be your spouse, if not available, then 2 more alternates

Medical power of attorney, of course for the medical decisions. The big decisions are "pull the plug" and organ donation.

Many people do not like to think of their deaths, so they avoid the task of setting these documents up.

1. You can't avoid it anyway. Everyone dies. So if you don't have anything written down, then the government will either take it in taxes, or probate will delay and add costs.

2. Another thing people say is they think it's expensive to talk to a lawyer and set these things up. Well, maybe so, but there are also high costs associated with probate. And if you don't want to see a lawyer, then just do the minimum and create a will, there are many books and software that do this now.

3. It's the responsible thing to do. We want to make it as easy for our daughter. So having these issues written down is our gift to her.

4. Family relationships. If you have many children and grandchildren, I think you will be helping the survivors by just selling everything, and distribute equal portions to them all. This will help to prevent sibling quarrels and misunderstanding. However, if you want the opposite effect, then just do nothing, and don't write anything down.

No comments: