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Why You Need a Living Trust and a Power of Attorney

A living trust and a power of attorney may seem similar but they are in fact two completely different things. They provide different functions and both are essential when preparing your estate. The power of attorney will appoint someone to handle your finances when you are no longer able to do so. You should understand that there are different powers of attorney that provide different functions. For instance, a power of attorney over finances appoints someone to pay your bills and basically handle your money. A power of attorney over healthcare will appoint someone to make decisions for you regarding your medical care.

Many estate attorneys recommend a living trust combined with a power of attorney. A trust appoints someone to take care of all of your assets when you can no longer do so. The reason you may need both a living trust and a power of attorney is because certain property is not included in a living trust. For instance, if you have an IRA and you want to place that in your trust, the IRS treats that as withdrawing your funds early. When you have a power of attorney, he or she can direct your investments and withdrawals without your having to pay penalties for early withdrawal.

Social security benefits cannot be placed in trust. They are only allowed to be held personally. Once you receive a social security payment, you can place that cash in the trust but the benefits themselves cannot be put into trust. The attorney-in-fact who is the person appointed by you for your power of attorney can transfer your social security payments into the trust and has the authority to access your records as well. He or she can also make Medicare benefit choices and enforce your Medicare rights. Your trustee cannot do this. If you forget to include an asset in your trust, only your attorney-in-fact can do so, besides you. If you are no longer able to add assets to your trust, you will need a power of attorney so that all of your properties and assets can be taken care of.

Planning for your estate includes both a trust and a power of attorney. While you can simply choose one of these, it makes for much easier estate planning when you have both. Without at least a power of attorney, your family will have to seek court ordered handling of your property upon your death. No matter which document you choose or if you select both, you will need to speak with an estate planning attorney to ensure that you are properly drafting the documents. An attorney can assist you with preparing your trust and power of attorney and ensure that all of your assets are taken care of if and when you are no longer able to do so yourself. Properly preparing the documents is essential in ensuring that they are legal and binding and an attorney can help you to plan your estate an ensure that the process is done legally.

18.02.2013. 07:58


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