There are many different types of estate planning documents, which people may find somewhat confusing. Some people put off planning or keep things as simple as possible by drafting a will and nothing else.
Most estate planning documents fall into one of two main categories. There are testamentary instruments, including wills and trusts. There are also various living documents, including health care directives and powers of attorney. The most effective estate plans generally include both types of documents.
What is the main difference between these two categories of estate planning documents?
The difference is when they take effect
A testamentary instrument serves to provide guidance when handling the affairs of a deceased individual. As such, they have no legal authority until after a person’s death.
A will, for example, can identify beneficiaries to inherit a person’s property and the personal representative who administers their estate. However, beneficiaries do not have access to property while someone is alive and incapacitated. Their personal representative cannot act on their behalf until after their passing.
Living documents take effect during emergencies that leave people incapacitated. They empower selected individuals to handle financial matters or make medical decisions on behalf of another person. They help protect the incapacitated party and their dependents from the devastation that can follow when a person cannot pay their own bills or communicate with health care professionals.
Creating an effective estate plan often requires an assortment of different legal instruments that include terms based on an individual’s unique needs and wishes. Most people benefit from drafting both living documents and testamentary instruments for optimal protection and peace of mind.