Incapacity planning is an important estate planning component that many people fail to include in their comprehensive estate plan. If you have recognized the need for an incapacity plan you are ahead of many people. The next step is to decide what estate planning tools and strategies to include in your incapacity plan. Consulting with an experienced Illinois estate planning attorney is always the best option; however, considering some of your options ahead of time always helps. For example, you may be wondering “ Is a living trust better than a power of attorney? ”
Both a power of attorney and a living trust can be used within an incapacity plan as a mechanism to shift power or control to someone in the event of your sudden incapacity. As this is a primary goal of an incapacity plan, both a POA and a living trust can play an important role in your plan. Overall, however, a living trust is generally considered a better option for several reasons.
A power of attorney is a legal agreement that allows you to appoint an Agent who will be authorized to act on your behalf in legal matters. The extent of the power conferred to your Agent is decided by you. Making a POA durable means it will survive your incapacity. A living trust is also a legal agreement that allows you to appoint a Trustee who will oversee and protect assets transferred into the trust for the benefit of a beneficiary. Both allow you to give someone power and control over asset owned by you, making them popular for incapacity planning purposes.
Ultimately, a living trust is typically favored because of the flexibility it offers as well as the benefits a trust can offer that a POA cannot. The way a living trust is used as an incapacity planning tool is as follows:
You create a living trust and name yourself as the trustee. You then transfer most, or all, of your assets into the trust. You also name your spouse, adult child, or someone else as the successor trustee. You can name several successor trustees. As the trustee of the trust you continue to manage and control all trust assets as long as you are able to do so. If you suddenly become incapacitated, your successor trustee automatically takes over, effectively shifting control of your assets easily and without the need for court interference.
A few of the reasons why a living trust is usually preferred over a POA as an incapacity planning tool include:
More formal arrangement
Easier to add or remove assets
Option to name several successor trustee and even include a method to name a trustee should none of your choices be available.
Easier to identify assets included in the trust
Possible tax and probate benefits not offered by a POA
If you are trying to decide whether a power of attorney or a living trust is best for your incapacity plan, sit down with your Illinois estate planning attorney and discuss your options.
- My Parent/Spouse Shows Early Signs of Dementia. Can We Still Do Medicaid Planning? - July 20, 2015
- What Happens to a Living Trust When One Spouse Dies? - July 13, 2015
- Medicaid Spousal Impoverishment Rules - July 7, 2015