Everyone should consider estate planning. A good estate plan should discuss the financial well-being of your family and what you want to happen to your property upon your death. It should also address guardianship of any minor children, medical treatment guidelines, and provisions for if you become disabled.
These goals can be tailored to your wishes through different strategies. These include properly setting up ownership of assets, designating beneficiaries where possible, and executing one or more estate planning documents. In this article, I’m going to cover three essential estate planning documents.
A Last Will and Testament (often referred to as a will) is a legal document which states your intentions for the distribution of your possessions after your death. If you have minor children, a valid will also allows you to designate who will care for them.
An executor of an estate is an individual or entity appointed in the will to administer the will of a deceased person. The executor’s main duty is to carry out the instructions to manage the affairs and wishes of the deceased person. The executor is responsible for making sure all assets in the will are accounted for, along with transferring these assets to the beneficiaries. The executor also needs to ensure that all the debts of the deceased are paid off, including any taxes. The executor is legally obligated to meet the wishes of the deceased and act in the interest of the deceased.
An Advance Care Directive, also known as a living will, is a document that states what your wishes are for medical and end-of-life care should you be unable to make those decisions for yourself. You can spell out exactly what treatments you do or do not want. In some states, you can include in this document the person you select to make the decisions for you if you are unable to. In other states, there is a separate document for that, called a Health Care Power of Attorney.
A Power of Attorney (POA) document authorizes the person you choose to handle financial matters on your behalf if you are not able to. A POA can be set up to become active only if you are incapacitated, or you can create it so that it is active upon execution of the document if you want the person to have the powers granted in the document immediately. The POA only applies to the specific types of matters and transactions you specify in the document. At your death, the POA becomes null.
These three documents are the building blocks to a solid estate plan. It’s easy to put off estate planning because, let’s face it, no one wants to think about death or incapacity. However, we encourage you to not postpone it. Leaving guidance to your loved ones through estate planning can alleviate the feeling of uncertainty during an emotional time.