I talk a LOT about living trusts. They are one of the most powerful and versatile legal tools available. Trusts enable us to avoid taxes, probate court, legal battles, and if set up correctly they can also shield our family from creditors, lawsuits, and even future potential ex-spouses – and it’s all perfectly legal.
What’s not to love about trusts? But even though they are such an important aspect of fully protecting and providing for your family, they are not the only important legal tool you should be utilizing. There are several separate, and complimentary, devices you absolutely MUST have in place. These include:
Advance Medical Directive — this document details your wishes about your medical care in case of incapacity, as well as names a person to make health care decisions on your behalf and spells out who can be given access to your medical records. This should protect your family from having to go to court in order to make medical decisions for you and saves them the cost in time, energy, and money of a guardianship application, which can run into several thousands of dollars.
Financial Power of Attorney – this documents names the person who will be given the power to act as your agent and handle your financial affairs in case you are no longer able to do so yourself. A financial power of attorney will save your family the cost of having to go to court to get access to your financial accounts and to pay your bills if you are not able to do it yourself. This unnecessary court process could cost your family $10,000 or more. Plus, we are hearing reports of adult children applying for financial conservatorship of their parents, not being able to qualify, and having to sit by and watch their parents’ assets dwindle to nothing when a professional conservator is appointed.
Last Will and Testament – this document won’t keep your family out of probate court like a trust does, but it can provide guidance to the judge as to how you want your assets distributed. Without a trust or a will in place, a judge will determine who gets what. This often causes personal heartache and family feuds. If you have more than $150,000 in assets, you really should be considering a trust. But even if you have less than that amount you still need a will to spare your family from having a stranger divvy up and distribute your assets.
Kids Protection Plan – this is a set of documents parents of minor children must have in place to ensure their children are never placed in the custody and care of strangers. Thankfully, most of our children will never have to worry about legal guardianship issues. But the sad truth is that thousands of children are orphaned each year in just this country alone. As parents, if we don’t choose – and legally document – who we would want to raise our children if we cannot, we lose the right to make that decision. A judge, who doesn’t know us or love our children, will make that critical, life-altering choice instead. A Kids Protection Plan keeps that decision in the hands of parents, no matter what.
So while trusts are a key element in protecting families like yours, they are not the only tool available. You really should be taking full advantage of all available legal instruments to ensure there are no holes or gaps for your family.
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