When modifying your estate plan, it is important to address what will happen with your affairs in the event that you become incapacitated. Living trusts are an excellent tool for taking care of this concern. Even if you already have a trust as part of your plan, it is important to have it reviewed to determine whether an update is needed.
Are you wondering why you need to update your trust if you already have a durable power of attorney that gives someone the ability to handle your financial affairs?
Five Reasons to Update Your Trust
- A durable power of attorney may not give your attorney-in-fact all of the powers needed to handle your affairs. Generally, these powers are spelled out within the instrument itself. In some cases, the document does not contemplate all of the possible situations where power over your finances and personal affairs may be needed.
- Financial institutions are sometimes difficult to work with when operating under a durable power of attorney. This is true even if the document was properly prepared and executed—the bank may be concerned about potential liability. This can result in an unnecessary and potentially harmful delay to your ability to access these accounts. Living trusts are more widely accepted within the financial community.
- A durable power of attorney expires when you pass away. The powers granted to a trustee under a living trust, however, remain in effect.
- Conversely, a durable power of attorney becomes effective immediately, with no bearing on your incapacity. This can impose some potential risk if the attorney-in-fact abuses the powers afforded in the document.
Despite the disadvantages of a durable power of attorney as compared to a living trust during incapacity, these documents are still a valuable part of an estate plan. Your attorney can assist you in preparing an estate plan update that accommodates a potential incapacity while also incorporating the use of a durable power of attorney. To learn more about how we can help you with your Orange County estate plan modification, view the testimonials from our many satisfied clients.