Knowing these basic estate-planning definitions may be helpful in any conversation you may have with an estate planning professional:
A Last Will and Testament (usually just called a “will” for short), is a document that gives your directions on what to do with your property when you die. It takes effect only after you have actually died, and it must be signed by you before a notary public in the presence of two disinterested witnesses (i.e., not someone who is related to you by blood or marriage and not an heir to your estate). Your Last Will and Testament should not include instructions for a funeral or burial – this should be in a separate document (i.e., Burial and Funeral Directive). Please beware of the Internet Do-It-Yourself programs for Last Will and Testaments.
A trust is a legal entity, created by the terms of a document drafted on behalf of a person, the grantor or settlor, who transfers assets into the trust to be held or used for the benefit of named people – i.e., the beneficiary(ies). A trustee(s), selected by the grantor, is placed in charge of the trust. A big advantage to trusts is that they pass by “operation of law” and avoid probate. This is helpful for farms that participate in federal farm programs. Trusts also help family maintain privacy avoiding probate, which is public record.
A Power of Attorney is a document that designates another person to act in your stead for business and financial decisions when you are unable to do so — a “pinch hitter” of sorts. It gives the agent the ability to care for the principal’s property (e.g., real estate, bank accounts, bonds, stocks, safety deposit boxes, taxes, retirement plans, social security, insurance, pets and service animals) and conduct business transactions on behalf of the principal. Typically, power of attorneys are drafted so that they are only effective upon the incapacitation of the principal; however, they can be utilized in any circumstance. In New York, a power of attorney for medical decisions is called a Health Care Proxy. A Power of Attorney can be revoked by you at any time, and it has no further effect after you die. If the principal lacks capacity to sign a Power of Attorney then an expensive guardianship proceeding may be required. In the words of Veronica Escobar, Esq., a New York City elder lawyer, with estate planning “it can never be too early but it can always be too late.”
A Living Will (a.k.a. Advance Directive for Health Care or Health Care Declaration complements the Health Care Proxy allowing you to memorialize religious and/or moral beliefs as it applies to medical care (e.g., artificial nutrition, hydration, cardiac resuscitation, mechanical respiration, antibiotics, pain medicine).
This is an excerpt from my book that I co-authored with Pat Dillon, an Iowa food and agriculture lawyer and author of this Iowa agriculture law book. You can purchase a copy of the book “Field Guide: Legal Guide for New York Farmers and Food Entrepreneurs” on Amazon.com. A new (more user-friendly) Kindle version of my book has been recently uploaded (only $9.99 or $2.99, if you own the hard copy of the book).