Is "estate planning" only for the wealthy or for those who are leaving large inheritances or have tax shelters? No. the Wall Street Journal recently had an article on this very topic. The WSJ article emphasized, as we estate and probate lawyers know, that this is not just about planning to avoid taxes, but is about what happens if you pass away or if you get very sick and live. Here's are the four estate-planning documents everyone needs regardless of your wealth. Planning also helps prevent litigation and saves what money there is in the estate and helps preseve family relationships.
Many people think they don't need a will. But sitting down with a lawyer and completing a will is the best way to ensure your wishes will be fulfilled—and to avoid leaving anything up to the courts. This is important if there are minor children who need guardians or multiple adult children who are heirs.
An important part of the will is naming the executor who is in charge of managing an estate, including paying bills. While you don't need to tell anyone what is in your will, it's important to let your designated executor know he or she has been chosen to do that job, and it might be a good idea to inform other family members, too. You should also have have discussions with family members about how personal effects or family heirlooms are handled.
There may be a temptation to do a will on the cheap, using online resources. As the WSJ advised, "Tread warily." "Small details can end up invalidating wills or leaving your wishes unfulfilled."
2. Durable power of attorney.
A power of attorney can give someone else the authority to act as your "agent" and make legal and financial decisions should you become incapacitated.
Don't take this decision lightly. Unlike an executor, this could be a continuing role. Give a serious thought about to whom you are giving power of attorney. It's important to consider that this person will be managing your finances. Does this person have the skill sets for managing money?
In addition, always name a backup. Many people will name their spouse, but what happens if both are injured in a car wreck or both develop signs of dementia?
3. Medical power of attorney.
This document—also known as a health-care proxy—enables any adult you designate to make medical decisions on your behalf should you be unable to make them yourself. One idea is to pick the person who you think is going to stay calm in a crisis. Who can handle making medical decisions in a difficult situation without being overcome by emotion or grief?
4. A living will.
A living will—sometimes known as an advanced health-care directive—specifies in writing your wishes for end-of-life care. That includes such things as whether you want to be resuscitated if your breathing or heartbeat stops, or whether you want to be kept alive through artificial respiration or feeding.
When it comes both to the medical power of attorney and living will, sit down and have a conversation with loved ones about your wishes. It may not be easy, but will help later in what will be a difficult time for your family.
5. Be organized. Make things easier for everyone by keeping your important documents, financial records and even information about doctors and medication updated and in one place. (Just not in a safe-deposit box, which will require a power of attorney to access.)
Once a year, provide your estate and probate attorney with an updated list of your bank and investment accounts, and any other important information, which they can hold in your file.
Posted by Henry J. Moravec, III You can reach him at email@example.com or 626-793-3210.