A 60-year-old executive has a massive stroke on Tuesday. By Wednesday, his wife cannot access his brokerage account, cannot make ventilator decisions, and cannot get his medical records. She has been married to him for 35 years. None of that matters without a durable power of attorney.
HIGH-FREQUENCY: Matching the right document to the right incapacity scenario is the most commonly tested skill in this area. Map each scenario: financial decisions = DPOA or successor trustee, medical decisions = healthcare proxy, medical records = HIPAA, treatment preferences = living will.
A will directs how probate assets are distributed at death. It names an executor and can name a guardian for minor children. It has no effect during the testator's lifetime, zero authority during incapacity.
A will controls only assets titled solely in the testator's name without a beneficiary designation or survivorship feature. These bypass the will entirely: revocable trust assets, JTWROS assets, TOD/POD accounts, life insurance with named beneficiaries, and retirement accounts with named beneficiaries.
Common mistakes
- RLT as tax reduction tool. The revocable living trust does not reduce estate taxes. Everything in it is included in the grantor's gross estate. The correct answer for estate tax reduction is an irrevocable trust.
- DPOA covers all financial assets. It does not. IRA custodians, banks, and brokers may refuse a general DPOA and require their own forms. Digital assets and safe deposit boxes may need specific DPOA provisions.
- Living will versus healthcare proxy. A living will states preferences. A healthcare proxy names a person. "Who makes the medical decision?" tests the proxy, not the living will.
Bottom line
- A will controls only probate assets and has zero effect during the testator's lifetime.
- A revocable living trust avoids probate and manages incapacity but does not reduce estate taxes (an irrevocable trust does that).
- An RLT must be funded by retitling assets into it; unfunded, it is useless for probate avoidance.
- A durable power of attorney grants financial authority during incapacity, though IRA custodians and banks may require their own forms.
Exam shortcut
Financial decisions during incapacity = DPOA (non-trust assets) or successor trustee (trust assets). Medical decisions = healthcare proxy. Medical records = HIPAA authorization. Treatment preferences = living will. No documents executed = guardianship. Real property in multiple states = RLT eliminates ancillary probate.
The full lesson (about 2,160 words, 14 min read) adds 2 worked examples, all 7 common mistakes, a self-check, free in the app.
Learning objectives
- G.56
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