There are certain estate planning documents that every person should have. These documents make life easier on you and your loved ones if you become unable to make decisions for yourself or pass away.
Durable Power of Attorney for Financial Affairs
In a Durable Power of Attorney, you appoint another person to manage your finances. The person you appoint can have all the powers you have with respect to your property (a “general” power) or powers limited in scope, duration, or to specified property (a “limited” power). The power is said to be “durable” because it remains effective even if you become unable to act for yourself, e.g., if you lose mental clarity in old age. The durability of the power is what makes it so valuable in an estate plan: the person you appoint can manage your finances without the intervention of a court.
Advance Medical Directive
An Advance Medical Directive has two major parts: a living will and a health care power of attorney. The living will portion declares your wishes about the provision, withholding, or withdrawing life-prolonging treatments in the event you are diagnosed with a terminal condition. The value of a living will is in that it makes your wishes known, potentially avoiding a dispute among your family members. The health care power of attorney appoints another person to make health care decisions for you if you’re incapable of making informed decisions about conditions and treatments yourself. The value of a health care power of attorney is that it ensures there’s someone you trust to make decisions and carry out your wishes regarding medical treatment, and it can prevent a court proceeding to have a guardian appointed.
A Will (possibly with a Revocable Trust)
Just a Will
A Will is a written legal declaration about how your property should be distributed after your death. In addition to disposing of property, a Will also names an executor (a person who will do the actual distributing of the property) and guardians for your minor children. A Will can actually be quite complex: for example, it can contain tax planning provisions and establish trusts that come into existence at your death.
Pour-Over Will & Revocable Trust
For some people, a Revocable Trust with a Will will be more appropriate than a Will alone. Like a Will, a Revocable Trust contains a declaration of how your property should be distributed. Unlike a Will, a Revocable Trust exists as soon as you sign it. Consequently, it can facilitate the management of your assets while you are living. Additionally, assets in a Revocable Trust do not have to pass through the probate process upon your death. Revocable trusts can be even more complex than wills: for example, they can contain tax planning provisions, establish other trusts that come into existence later, and give powers and benefits to other people while you’re still alive.
Almost all Revocable Trusts are accompanied by Pour-Over Wills. A Pour-Over Will “pours” any property that isn’t in your Revocable Trust at the time of your death into the trust. Like any other Will, a Pour-Over Will also names an executor and guardians for minor children.