HomeHi, this is Marc Herbert, founder of Herbert Law Office with the Question of the Week, which is What documents do I need for a complete estate plan? Now, there are some attorneys out there who will create, you know, 10 to 15 documents for you, 150 to 200 pages of language. That’s often really confusing. And then people will sign them not fully understanding the plan and then just stick it up on the shelf and just hope that, you know, things don’t change too much in their lives.
Here at Herbert Law Office, though, I believe that your estate plan should be limited to four documents, what we call the four pillars. If they’re properly built, it should be easy to understand and it should be subject to update whenever you like. If there’s changes in your assets, changes in your family, changes in the tax law, your estate plan needs to have flexibility.
You need to be able to update your plan as life changes down the road. So the first pillar is what’s called an advanced health care directive. And this is simply a written set of directions to your doctors and hospitals where an agent that you trust enforces your written directions. Now, usually this document covers end of life decisions such as prolonging life, nutrition, hydration, medication, do not resuscitate orders, whatever you want or don’t want in terms of medical treatment is included in that document.
The second pillar, Financial power of attorney, is similar to the health care directive, but handles your finances. So if you get ill or injured, you can decide who’s in charge and what are they in charge of. So again, that’s an agent that you choose to handle your finances until you’re feeling better. Again, the importance of both documents is if you are the victim of a sudden illness or injury, your family might have to go to court and petition the judge for what’s called a conservatorship to get control over your health care, your finances, or both.
That is a long and expensive process that can easily be avoided by creating these two documents. The third pillar is a will which allows you to make immediate gifts. It allows you to name guardians for any minors in your care, and it allows you to make funeral arrangements or disposition arrangements such as burial or cremation. And some people have very specific ideas of what they want for a service or what they don’t want for a service.
Also, some folks want to be buried in a particular place. Some folks are entitled to military honors, you know, burial at a veteran’s cemetery, for example. So whatever it is that you want, we write it down. And then an executor that you choose is in charge of making that happen for you. The risk, though, with a simple will or a stand alone will is that if you’re trying to transfer land as a gift, that land usually is going to end up in probate court in California, which is a long and expensive process.
So the fourth pillar that we usually recommend is what’s called a trust. Now, trusts can be irrevocable or revocable. So what’s commonly called a living trust, and the living trust allows you to update your plan as time goes on. If there’s changes in your assets, your family or the law, it’s easy to update your trust at any point.
But you can also protect your assets and protect your family from probate court and unnecessary taxes. You can even do distributions over time, maybe three years out, five years out, seven years out, which can be really helpful for young heirs who are learning to manage money. Trust allows you to have full control, full access to your assets whenever you want.
And again, you choose the trustee and you decide the extent of their authority. So those are the four documents that comprise a full and complete estate plan, in my opinion. I hope this information has been helpful for you and we’ll talk to you again next week.
