No Will or Trust: If you die without a Will or Living Trust the state will decide what happens to your property through a process called Probate. Your property will be distributed to your spouse and/or children or your closest relative or it may be given to the state. The court will also decide who will care for minor children if the other parent is unavailable. Without a will, the surviving partner of an unmarried same-sex couple will receive nothing unless it is in one of the few states that allow registered domestic partners to inherit like spouses.
Probate: Probate is a court supervised process paying debts and distributing property after death. This process is costly and time consuming for the beneficiaries. It can take months and costs thousands of dollars. This process can be avoided by obtaining a Living Trust.
Just a Will: Having a Will is a good start but a Will still must go through the probate process in the state where the person died. The court will decide if it is a valid Will and how to distribute the property. In a Will you can leave property, possessions and investments to whomever you would like and you can also name a guardian for your minor children and designate a person to manage property that is left for the children.
Living Trust: A Living Trust is a legal document which you create during your lifetime to transfer your assets into the ownership of the trust. This is a way to avoid probate after your death. As the trustee of the trust you maintain control over the assets. Upon your death the successor trustee distributes the assets to the beneficiaries so there are no lawyer or court fees to pay thus avoiding probate.
Other important documents:
1) Pour-over Will
2) Health Care Directive
3) Springing Durable Power of Attorney
Pour-over Will: Property that is not properly titled in a trust can avoid probate through a pour over Will. This ensures that if something was left out like a newly bought car it will be put into the trust through the pour-over Will. This is also where you designate a guardian for minor children.
Health Care Directive: This is a legal instruction regarding your preferences for medical care if you are unable to make medical decisions for yourself. It is important to have a Health Care Directive so that if you are incapacitated upon entering the hospital you are able to receive the care and treatment that you want and are not stuck in an undesirable situation because you are unable to make a decision. You need the HIPAA waiver in your health care document so that your loved ones can not only make life and death decisions if you are incapacitated, but also see medical information and talk to the health care professionals about you. Without the waiver, they can’t.
Springing Durable Power of Attorney: This document allows you to choose someone to make decisions regarding property, investments and finances for you if you become incapacitated.