ESTATE PLANNING DEVICES
An estate planning device is tools that estate planning attorney or individuals use when making an estate plan. There are various devices in estate planning and I will discuss the basics of some of them here. Some of these devices include wills, trusts, powers of appointment, and powers of attorney.
Wills: A Will, also known as testament or last Will, is a legal device where the testator names the person or persons who will manage his or her estate and states how his or her estate will be distributed at death. At the testator’s death, the Will may be challenged in probate court. If the court finds that the will is invalid, then the distribution of the estate will proceed under the laws of intestacy.
Trusts: A trust is an entity created to hold property. The trustee holds the property for the beneficiaries’ benefit. By transferring property to a trust, an individual is able to avoid having that property go through probate. Trusts are commonly used for many purposes. The terms of the trust are kept private unlike the terms of the Will which are may be made public in probate. A trust can also provide more control as to how and when property is to be distributed at death. Another purpose is if the individual wants to create a charity at death and use the accumulated wealth to benefit others through that charity. The charity would then take the form of a trust.
Powers of Appointment: Powers of appointment allow the testator to grant authority to a person to dispose of certain property under the will. There are two types of powers of appointment, general and specific. General power of appointment allows the holder of the power of appointment to appoint himself or his or her creditors to have the beneficial use and enjoyment of the specific property under the power of appointment. A specific power of appointment on the other hand, allows the holder of the power of appointment to distribute the property among a specified group of people. Depending on whether it is a general or specific power of appointment, the tax consequences may differ.
Powers of Attorney: A power of attorney grants another person to act on your behalf, whether in private affairs, business, or legal matters. Powers of attorney come in many variations such as the durable, healthcare or springing powers of attorney.