Understanding Terminology
What do all these legal terms mean?
A conservatorship is a court proceeding where the court makes a determination that a person is incapacitated and can no longer manage his or her financial affairs. Once the Court makes this determination, the person lacking capacity is referred to as the Protected Person, and the Court will appoint a person or entity called a Conservator to manage the financial affairs of the Protected Person. A court-appointed Conservator typically must present an accounting to the court annually.
A conservatorship of an adult may be necessary in the following situations:
(1) When a disabled minor turns 18 years old;
(2) If an adult loses capacity to manage financial affairs due to dementia or Alzheimer’s or any other reason and does not have a Durable Power of Attorney;
(3) If an adult loses capacity to manage financial affairs and has a Durable Power of Attorney, but the Power of Attorney is contested by other interested parties.
A conservatorship over a minor can may be necessary if the minor child is left money or assets necessary for management (i.e., the beneficiary of a life insurance policy is a minor child).
A guardianship is a court proceeding where the Court makes a determination that a person is incapacitated and can no longer manager his or her own personal affairs. Once the Court makes this determination, the person lacking capacity is referred to as the Protected Person, and the Court will appoint a person or entity called a Guardian to manage the personal affairs of the Protected Person. A court-appointed Guardian typically must present a report to the court annually.
A guardianship of an adult may be necessary in the following situations:
(1) When a disabled minor turns 18 years old;
(2) If an adult loses capacity to manage his personal affairs due to dementia or Alzheimer’s or any other reason and does not have an Advanced Health Care Directive or Durable Power of Attorney;
(3) If an adult loses capacity to manage his personal affairs and has an Advanced Health Care Director or Durable Power of Attorney, but those are contested by other interested parties.
A guardianship of a minor can be necessary for a minor whose parents are no longer caring for the minor child for a prolonged period of time, either due to death or other reasons.
An Advanced Heath Care Directive, sometimes known as a Living Will, is a document that includes a healthcare power of attorney and provides instructions regarding the medical treatment that you desire in the event that you are unable to communicate your wishes. This document encompasses end-of-life decisions, such as life-sustaining or life-prolonging treatments. A health care power of attorney allows another person to make health care-related decisions for you in the event that you are unable to make them yourself. An Advanced Health Care Directive is used for medical issues and terminates upon your death or its revocation.
A Power of Attorney (“POA”) is a legal instrument that appoints an agent (also called an attorney-in-fact) to act on your behalf. A Power of Attorney can be drafted for a very specific purpose (e.g., signing closing documents for a real estate sale) or a Durable Power of Attorney may grant your agent broad power to act on your behalf in a variety of situations. However, your agent does not have the authority to manage assets that have been placed in your Trust.
The primary objective of a Power of Attorney is to allow your agent to handle non-trust assets or issues while you are alive. The Power of Attorney terminates upon your death or its revocation.
A Durable Power of Attorney can avoid the need for a court-appointed Conservator, so long as you have the capacity to create a Power of Attorney.
Probate is the court-supervised process of authenticating a Will, if the deceased made one. It includes locating and determining the value of the decedent’s assets, paying any final bills and taxes, and then distributing the remainder of the estate to the rightful heirs or beneficiaries.
The term “Trust” refers to a form of transfer of property whereby a party (known as the “Grantor,” “Settlor” or “Trustor”) transfers property to a person or company (the “Trustee”) to hold said property in accordance with the provisions of a written instrument (the Trust document) for the benefit of one or more persons or entities (the “Beneficiaries”).
A Trust is a versatile legal vehicle that can be used to accomplish different objectives such as avoiding probate, providing asset management, effectuating testamentary wishes and minimizing state and federal transfer taxes.
A popular form of Trust is a Revocable Living Trust, whereby the Grantor retains the authority to make changes to the terms of the Trust document during the Grantor’s lifetime. For example, this can be designed to benefit you during your lifetime and your loved ones after you have passed.
In the event that you become incapacitated, the Trust can also provide a succession blueprint that will allow for a seamless transition to managing your assets. A Trust can avoid Probate and the need for a Conservatorship, and can be administered privately.
Several different types of Trusts include:
– Revocable Living Trust
– Irrevocable Living Trust
– Special Needs Trust – First Party
– Special Needs Trust – Third Party
A Will is a testamentary instrument that provides instructions on how you would like your assets to be distributed upon your death. Wills are generally subject to the probate process, which, depending on the procedures and complexity of the estate, can be time-consuming and costly. Probate is also a public process, whereas a Trust may afford you more privacy. The probate process can take about 2-3 years to administer and wrap up. In your Will, you can name a Personal Representative, who is responsible for administering your Will. You can also name a Successor Personal Representative, who is responsible for administering your Will in the event that the first named Personal Representative is not available, unable to serve, or declines to serve.
If you pass away without a Trust or a Will, your property will be distributed via intestate succession, which means that your property will be distributed pursuant to Hawaii law and statutes.
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