What Is Estate Planning and What Documents Should Be Included in Yours?
Creating an estate plan in the event of your death is a preparation for one of the scariest life events we face. Check out this week’s episode of rich & REGULAR, and then use our tips on the necessary estate planning documents below to get started with yours.
Planning for end-of-life care and who will inherit your possessions after your death is not a fun task, but it is vitally important to make sure your wishes are honored, and your grieving family isn’t left wondering what you would have wanted.
Talk to your family and friends.
The documents below give your family and friends the legal standing they need to honor your final wishes, but remember that you have to discuss your wishes first.
Talk about your wishes.
Schedule a time to talk about your advanced directives and with anyone you plan to name in your will. Make sure they know your wishes and what exactly they will be responsible for.
Don’t surprise someone by naming them as your agent in a power of attorney or as executors of a will without first confirming they can fulfill that role.
Research estate planning in your state.
Once you’ve spoken about your wishes with the people around you, research your state’s laws for estate planning. Each state’s legal requirements vary, especially if you are naming a minor child’s guardian or have a complicated estate.
Do you need an estate-planning lawyer?
Consulting a lawyer can be beneficial, especially if you need to make a plan for your child, an adult dependent, or have a detailed list of bequests.
You don’t have to consult a lawyer to make your wishes legally binding, but if you don’t, it is imperative that you thoroughly research all of your state’s specifics on what does (and does not) constitute a legally binding document.
Many websites offer free templates that provide boilerplate language for most of the documents below and may even offer the services of an attorney to review the forms for an additional fee.
Estate Planning Documents
You will generally need two sets of documents: one for financial decisions and one for medical decisions.
Will: A will designates who you want to inherit your property and belongings, appoints a guardian for your child, and becomes active only after your death. A will must go through probate, which varies from state to state, but generally takes about three to six months to complete. Wills are the most common estate planning document, but you can also create a trust, which can replace a will in some cases.
Trust: Trusts are similar to wills in that they allow you to designate who inherits your belongings and makes plans for your children. Trusts become effective the day you sign it, and having one usually enables you to avoid probate.
A trust will name a trustee who has access to your estate on behalf of the trust beneficiary (usually a minor child). Trusts are generally more expensive and complicated to set up than a will but can offer you more control of your assets.
Financial power of attorney: A financial power of attorney names a person of your choosing as an agent who can legally make financial decisions for you if you become incapacitated due to injury or illness.
You, as the principal, can dictate precisely how much control you give your agent and in what capacity they may act.
Your agent may be able to:
- Make all financial decisions on your behalf.
- Manage your property and financial accounts.
- Make autonomous decisions for you until revoked by your death or in court.
Check the laws in your state about the durability of a power of attorney once the principal becomes incapacitated. Powers of attorney become null when the principal dies.
Medical durable power of attorney: If you can’t make decisions due to illness or injury, a medical power of attorney appoints a person to make those decisions for you. It is essential to choose someone who will honor your wishes and make sure that you discuss those wishes with them in-depth.
Depending on how you construct your medical power of attorney, your agent may be able to:
- Direct hospital staff on medical care and treatments.
- Direct personal care management like bathing, eating and grooming.
- Hiring a medical care assistant for at-home care.
- Decide on end-of-life action if no other directions are provided.
Like the financial power of attorney, you get to choose what decisions your agent can make for you. The medical power of attorney is also revoked upon the principal’s death.
You can choose to name the same agent in both your medical and financial powers of attorney, but having one kind of POA does not automatically translate to the other, so be sure to create both.
A living will: A living will is a document that provides guidelines for your family, friends and health care team for the specific medical treatment you want to receive if you’re incapacitated. Unlike a power of attorney, there is no named agent to make decisions for you, and a family member cannot override your living will (at least, not without a potential court case), so it’s essential to be explicit in your directions.
CPR directive: A CPR directive tells paramedics or other medical providers your wishes if your heart stops or you stop breathing. CPR can include rescue breathing (mouth-to-mouth), chest compressions and sometimes electrical shock or medications.
Talking about death isn’t easy, but having a solid plan in place can remove a significant burden from your grieving family and friends with all the legal documents needed.
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