If you think locating and organizing your estate planning information is hard for you, imagine how difficult it would be for someone else who is asked to fill your shoes in an emergency!
THE FOUR MOST IMPORTANT ESTATE PLANNING DOCUMENTS
Regardless of your age or financial status, you should have an estate plan to protect yourself, your family and your assets while you are still alive and after your death.
You need a will to direct the transfer of your assets after your death, nor matter how “poor” you are. Seven out of ten people don’t have a will, but don’t take comfort in numbers. Six of the seven won’t read this article, and the other three families have finally made a priority of getting a will. Go do your will. The larger your estate, the more complicated the will may be. But it’s time and money well spent. Advance planning can save your loved ones time, frustration and money.
The document will name an Executor (also known in some states as a Personal Representative) to gather your assets together, pay any debts or taxes and distribute your assets. In appropriate cases, your Will may also name a Guardian, who will take care of your children after your death, and a Trustee, who will hold money or property on behalf of your child or children under circumstances which you will set forth in your Will.
A Will does not take effect until you die and the Will is admitted to probate. It does not provide for management of your assets or control of your affairs if you become incapacitated. This situation is usually addressed by means of a Durable Power of Attorney.
2. DURABLE POWER OF ATTORNEY.
The Power of Attorney names an Agent (also known as an attorney-in-fact)
to act on your behalf. You can give your agent very broad powers or you can limit
them to certain circumstances or certain assets. You should choose your agent with great care, since he or she will have the same authority as you would to sell, invest or spend your assets.
A Durable Power of Attorney continues in full force and effect even if the Principal becomes incapacitated. A Power of Attorney terminates upon death.
3. MEDICAL POWER OF ATTORNEY.
Under a Medical Power of Attorney, you appoint an agent to make medical decisions on your behalf in the event you are unable to do so. It also allows the agent to communicate with your heath care providers and receive information about your medical condition.
4. LIVING WILL.
You need a living will so that someone else can make decisions about your life if you can’t. It also states your preferences for life-prolonging procedures in the event of permanent illness or unconsciousness where your death is imminent. It is sometimes called a “durable medical power of attorney.” A living will ensures your wishes are followed without making your family guess.
A Living Will contains two parts. In the first, you create an
Advance Directive for Health Care setting forth your wishes regarding the use of lifesustaining treatment (surgery, drugs, therapy, machines which provide life support functions, etc.) and the circumstances under which life-sustaining treatment would be withheld or withdrawn.
In the second part, (sometimes referred to as a Health Care Proxy), you name a person to carry out your wishes set forth in the first part. It is important to note that a Living Will does not become effective unless and until you become unconscious or mentally incapacitated and unable to make health care decisions
For help organizing your most important documents for estate planning see our Just in Case Binder.