David Lerner Associates: Important Documents You Need for Estate Planning

David Lerner Associates: Important Documents You Need for Estate Planning

Core Facts

 [ What is this? ]


Advantages of a will:

  • Disperses property according to your desires
  • Names an executor to settle your estate
  • Names a guardian for minor children

Other advantages of a living trust:

  • Gives somebody the power to manage your property if you  become incapacitated
  • Let’s a professional take care of your property for you
  • May circumvent state laws that limit your potential to give to charity, or force you to leave behind a particular percentage of your property to your spouse 

There are five estate planning documents you may need, despite your age, health, or wealth:

1. Durable power of attorney

2. Advanced medical directives

3. Will

4. Letter of instruction

5. Living trust

The last document, a living trust, isn't really always necessary, but it's featured here because it's a vital component of many estate plans.

Durable power of attorney

A durable power of attorney (DPOA) may help protect your property in case you become physically incapable or mentally incompetent to handle financial matters. If nobody prepares to look after your financial affairs when you can't, your property could be wasted, abused, or lost.

A DPOA enables you to allow someone else to act on your part, so he or she can do things like pay daily expenses, accumulate benefits, watch over your investments, and file taxes.

There are two types of DPOAs: (1) an immediate DPOA, which is effective immediately (this may be appropriate, for instance, if you face a serious operation or illness), and (2) a springing DPOA, which is ineffective unless you have become incapacitated.

Caution: A springing DPOA is not permitted in some states, so you'll want to check with an attorney.

Advanced medical directives

Advanced medical directives let others know what medical treatment you might want, or enables someone to make medical decisions for you, in case you can't express your wishes yourself. If you don't have an advanced medical directive, medical care providers must prolong your life using artificial means, if necessary. With today's technology, physicians can sustain you for days and weeks (if not months or perhaps years).

There are three types of advanced medical directives. Each state enables only a certain type (or types). You may find that one, two, or all three kinds are necessary to carry out all of your wishes for medical treatment. (Just ensure all documents are consistent.).

First, a living will enables you to approve or decline certain types of medical care, even though you will die as a result of that choice. In many states, living wills take effect only under certain circumstances, like terminal injury or illness. Generally, one may be used only to decline medical treatment that "serves only to postpone the moment of death." In those states that do not enable living wills, you might still want to have one to serve as evidence of your wishes.

Second, a durable power of attorney for health care (referred to as a health-care proxy in some states) allows you to appoint a representative to make medical decisions for you. You decide how much power your representative will or won't have.

Finally, a Do Not Resuscitate order (DNR) is a doctor's order that tells medical personnel not to perform CPR if you go into cardiac arrest. There are two kinds of DNRs. One is effective only while you are hospitalized. The other is used while you are outside the hospital.


A will is often said to be the foundation of any estate plan. The main purpose of a will is to disburse property to heirs after your death. If you don't leave a will, disbursements will be made according to state law, which may not be what you would want.

There are two other equally important aspects of a will:

1. You can name the person (executor) who will manage and settle your estate. If you do not name someone, the court will select an administrator, who might not be someone you would choose.

2. You can name a legal guardian for minor children or dependents with special needs. If you don't appoint a guardian, the state will select one for you.

Keep in mind that a will is a legal document, and the courts are quite hesitant to overturn any provisions within it. Therefore, it's essential that your will be well composed and articulated, and properly executed under your state's laws. It's also important to keep your will updated.

Letter of instruction

A letter of instruction (also called a testamentary letter or side letter) is a non-legal document that typically accompanies your will and is used to express your personal thoughts and directions concerning what is in the will (or regarding other things, like your burial wishes or where to locate other documents). This can be the most helpful document you leave behind for your family members and your executor.

As opposed to your will, a letter of instruction remains private. Therefore, it is an opportunity to say the things you prefer to not make public.

A letter of instruction is not a replacement for a will. Any instructions you include in the letter are only suggestions and are not binding. The people to whom you address the letter may follow or disregard any instructions.  

Living trust

A living trust (also called a revocable or inter vivos trust) is a separate legal entity you create to own property, such as your home or investments. The trust is called a living trust because it's meant to function while you're alive. You control the property in the trust, and, whenever you wish, you can change the trust terms, transfer property in and out of the trust, or end the trust altogether.

Not everyone needs a living trust, but it can be used to accomplish various purposes. The primary function is typically to avoid probate. This is possible because property in a living trust is not included in the probate estate.

Depending on your situation and your state's laws, the probate process can be simple, easy, and inexpensive, or it can be relatively complex, resulting in delay and expense. This may be the case, for instance, if you own property in more than one state or in a foreign country, or have heirs that live overseas.

Further, probate takes time, and your property generally won't be distributed until the process is completed. A small family allowance is sometimes paid, but it may be insufficient to provide for a family's ongoing needs. Transferring property through a living trust provides for a quicker, almost immediate transfer of property to those who need it.

Probate can also interfere with the management of property like a closely held business or stock portfolio. Although your executor is responsible for managing the property until probate is completed, he or she may not have the expertise or authority to make significant management decisions, and the property may lose value. Transferring the property with a living trust can result in a smoother transition in management.

Finally, avoiding probate may be desirable if you're concerned about privacy. Probated documents (e.g., will, inventory) become a matter of public record. Generally, a trust document does not.

Caution: Although a living trust transfers property like a will, you should still also have a will because the trust will be unable to accomplish certain things that only a will can, such as naming an executor or a guardian for minor children.

Tip: There are other ways to avoid the probate process besides creating a living trust, such as titling property jointly.

Caution: Living trusts do not generally minimize estate taxes or protect property from future creditors or ex-spouses.



Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. 

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Some of this material has been provided by Broadridge Investor Communications Solutions, Inc.



^ Top


Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates Cal 516-921-4200 Visit our website: http://www.davidlerner.com

^ Top