One legal document is not necessarily “better” than another, in much the same way that one golf club is not better than another. One club would be appropriate under certain circumstances, and you would use another club when different circumstances exist. The same thing is true of estate planning documents.
With this in mind, let’s take a look at the value of living trusts and powers of attorney.
Empowering a Representative
When you create a power of attorney, you are giving someone else the power to act on your behalf in a legally binding manner. The individual who is being given the power is called the agent or attorney-in-fact.
If you were to execute a general power of attorney, you would be giving the agent the power to act on your behalf under a wide range of circumstances. It is also possible to execute a limited power of attorney to give the agent the power to act on your behalf on a limited basis.
In the field of estate planning, durable powers of attorney are used to account for incapacitation. People often become unable to handle their own decision-making late in their lives, and you could use durable powers of attorney to name agents to act on your behalf in the event of your incapacitation.
We should point out the fact that a power of attorney of any kind would terminate upon the death of the grantor. Therefore, if an agent was empowered to act on your behalf at the end of your life, this individual would not be empowered to administer your estate.
Living Trusts
A durable power of attorney is strictly used for incapacity planning purposes. A revocable living trust is a vehicle of asset transfer. You would use a revocable living trust to get assets into the hands of your loved ones after you pass away.
These distributions would not be subject to the probate process. If you use a will instead of a trust, the probate process would come into play, and it is time-consuming and potentially expensive.
The reason why someone may say that a living trust is better than a durable power of attorney is because of the fact that you can empower a disability trustee to administer a living trust if you were to become incapacitated. In essence, it would serve the same purpose as a durable financial power of attorney.
Plus, the trustee would be able to continue to administer the trust after your passing. In a nutshell, the living trust can serve dual purposes.
Schedule a Free Consultation
If you would like to discuss your estate planning objectives with a licensed professional, our firm can help. We offer free consultations, and you can send us a message through our contact page to set up an appointment: Grand Forks ND Estate Planning Attorneys.
- Can a Party Refuse to Honor a Power of Attorney? - September 17, 2020
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- Building Flexibility into Your Plan - September 10, 2020
