Three important things to remember about wills:
1. A will is a “naming document.” A will can name who will receive assets when the owner dies. A will can name an executor (or personal representative)-the person who will handle assets subject to the will, the debts. And, a will can name a guardian (for minor children).
2. A will impacts assets included in the “probate estate.” It has no impact on an asset for which a “probate-avoider” such as a beneficiary designation is in effect.
3. A will does not result in avoiding probate. In fact, wills are a central document in many probate proceedings.
A person who dies without a valid will is “intestate.” The intestate person has failed to name who will receive assets in his or her probate estate.
A revocable trust, often called a "living" trust". The owner of an asset, during the owner’s lifetime, completes the paperwork and transfers the asset to a new ownership (the trustee under the living trust.)
For example, George and Barbara create a living trust and transfer their home to trust ownership. When George and Barbara die, the home (being owned by the trust) is not in the probate estate of either of them. Once both George and Barbara have died, the home is dealt with in the manner they directed in the trust document.
A living trust is also a “naming document”. It names who will receive assets owned by the trust. It also names a trustee (the person in charge of the assets) and successor trustees.
The primary reason to create a living trust is to avoid probate. Assets transferred before death to a living trust are removed from the probate estate.
Living trusts can also provide for lifetime asset management.
An ordinary power of attorney is a legal document, signed by a competent person, which gives another person the authority to handle some or all the first person’s affairs. The first person is called the “principal.” The individual acting on behalf of the principal is called the “agent” or “attorney-in-fact” (although he or she need not actually be an attorney). Lawyers usually prepare powers of attorney.
A power of attorney is only valid if the principal was mentally competent when he signed it, and powers of attorney generally end automatically when the principal dies or becomes incapacitated.
An ordinary power of attorney is good only as long as the principal is mentally alert. A durable power of attorney is a special kind of power of attorney that continues to operate even after the principal becomes incapacitated.
A Healthcare Power of Attorney allows for health care decisions to be made by an agent or proxy chosen in advance. Healthcare Power of Attorney are health-oriented variations of a general form for proxy decisionmaking known as a power of attorney.
Where a living will is only effective when you are incapacitated and either dying or permanently unconscious, a Healthcare Power of Attorney is in effect all the time. You may be ill or seriously injured but not dying. You may simply need someone to advocate for you and see that appropriate decisions are made concerning your health care.
A living will is a document in which you state that you do not wish to receive lifeprolonging treatment in the event you suffer a terminal illness or become permanently unconscious and become incompetent to make health care decisions.