What Is the Difference Between A Power Of Attorney And A Living Trust?

A power of attorney document enables what is known as an attorney in fact to do very specific things on behalf of the principal while the principal is alive. A living trust also enables the person appointed to do certain things for the maker of the trust during that person’s lifetime. This appointed party is known as a trustee. However, these powers also extend beyond death.

A power of attorney is like a living trust, in that both allow another person to manage someone else’s assets. A trustee, much like an attorney in fact agent, can manage another person’s assets like doing investments, banking transactions, and many other actions. However, the trustee only has control over those assets that are titled in the name of the living trust. There could be a potential conflict between someone’s actions as an attorney in fact and a trustee’s actions.

This typically comes up if the principle of your power of attorney also has a trust and the powers for both of you overlap. Your attorney may have to prepare a document notifying the trustee about the power of attorney. For example, maybe the home of the principal is owned by a trust, but you have been empowered by a power of attorney to sell that home.

This can create a conflict and potential problems which can be easily avoided. If you would like to learn more about establishing a living trust or a power of attorney document, set aside time to meet with an experienced and knowledgeable estate planning lawyer.

How to Include Amendment Language in Your Living Trust

By its very nature, the structure of a living trust is revocable, meaning that you can make changes to it or terminate the trust entirely during your lifetime with no consequences. It is important that you go the extra mile to include instructions in the trust document itself about how the trust can be amended.

A formal amendment should always be prepared and signed by both the trustee and the creator of the trust, known as the creator or the trustor.
When a person passes away, however, the revocable living trust then becomes irrevocable at their death. At this point the trust cannot be updated so even a surviving spouse does not have the authority to make changes to the trust itself.

Including instructions in the trust document can decrease confusion in the future over when and how the trust can be amended. Making alterations to a trust is something that is a leading reason why many people choose a living trust document to begin with.

The circumstances you have in your life now might not apply in the future and the flexibility and control afforded by a living trust gives you the ability to evolve this document and strategy as needed.

A lawyer can help you draft or make amendments to your living trust. As part of your bigger estate plan, a living trust allows you to start making distributions and actions now rather than waiting to transfer assets after you pass away.

Does the Law Require Certain People to Serve as Your Trustee?

The laws are generally not very strict about who can serve in the important role of a trustee or administrator of your established trust. However, some careful thought and consideration should go into this process. The legal requirements for a person to serve as a trustee require that he or she be over 18 years of age, is capable of managing their own affairs, and are legally competent.

As a factor in selecting your own trustee, the primary consideration should be choosing a person who is trustworthy. The trustee has a responsibility to act in the best interests of the beneficiary.

While your trustee does not have to have specific financial or legal expertise, you must be sure that this person has relatively good judgment and understands the terms of the trust. Federal benefit program knowledge should also be a factor to look for when selecting a person who will help to administer a special needs trust.

Furthermore, you must be aware of the possibility that a trustee might have to manage the trust for a long period of time. This means your selection of trustee should be a person who will likely be around for quite a while and has the time and ability to devote to trustee duties.

This individual has to be of sound mind and body. An independent trustee might be a better selection for you because this is an institution or individual who has no direct interest in the trust.

Common examples of independent trustees include investment bankers, professional trustees, a bank or a trust company, an investment advisor, a lawyer or an accountant. This individual will be independent but will also likely have the benefit of being familiar with trust administration.


Tips for Ensuring You Get the Maximum Benefit Out of a Living Trust

Many people who generate revocable living trusts don’t truly reap all of the advantages available to them. They might understand the basic benefits associated with putting together a revocable living trust, but you need to ensure that you are heirs are able to enjoy the benefits of this trust down the road. 

In a typical living trust, you and your spouse might transfer the title of the majority of your assets to the trust and then serve as co-trustees. This empowers you to maintain control over the assets and manage them as you did before, except you are serving as a trustee rather than the individual owner.

There are numerous different benefits associated with a living trust, the first one is that your assets inside the trust avoid probate and a successor trustee will step in to manage on your behalf after you pass away. If the original one becomes disabled, a living trust can also be very beneficial. The most common mistake made with living trusts has to do with failing to transfer legal title of assets to the trust. This is referred to officially funding the trust and it can be done by sitting down in a meeting with an experienced estate planning attorney.


Living Trusts: The Importance of Proper Funding

If you have decided to use a trust to pass on your assets, this can be an exciting decision that gives you peace of mind about the firmness of your plans. If you don’t ensure that the trust is properly funded, however, it’s unlikely that your trust is going to carry out the plans that you intended.

If you already have assets inside the trust, make sure that you set up reminders to continuously review your materials and always have unfunded or new assets titled into the trust’s name. Don’t ever assume that these changes have been made, since the ownership of verification falls squarely on your shoulders. Keep copies of documents that confirm your changes so that you are always clear on what’s been taken care of already. If values have also changed, ensure that is updated as well.2014-10-20_1448

If an asset that you used to own has now passed onto someone else through a sale or closure, make sure it’s removed from your funding portfolio. This makes it easier on your family members in the future and the trust executor so that they are not searching for assets that are no longer present. To review your funding in your living trusts, get in touch with us through email at info@lawesq.net or over the phone 732-521-9455