Estate planning isn’t just about planning for who inherits your assets when you die – it’s about making it as easy as possible for your loved ones to honor your wishes when you’re no longer able to speak for yourself. A thoughtful plan can ensure that your preferences about medical care, funeral arrangements, and inheritances are clearly communicated, reducing confusion, conflict and stress for the loved ones who must continue on without your input. Importantly, estate planning is something you should do now – no matter what life stage or financial situation you are in.
Concepts we’ll cover: Will, Health Care Proxy, Durable Power of Attorney.
Planning for Care: It’s Critical to Ensuring You Decide What Will Happen
Having a plan in place to carry out your wishes if the worst happens – your death or disability – is essential. Otherwise, you may not have a say in how your own care is managed or what happens to your assets.
So, how can you prepare? The first and most important step is to set up the essential documents that will ensure your plan can be legally enforced. The essential documents include: (1) a will that identifies your beneficiaries and appoints a guardian for minor children; (2) A health care proxy that specifies your wishes and appoints someone to make healthcare decisions on your behalf, and (3) a durable power of attorney that appoints someone to handle your finances and pay for your care.
Creating A Will
A will is the most common estate planning instrument. It offers a great deal of control over how your assets will be distributed, who your beneficiaries will be, and who will be appointed to care for your dependents. The drawback of using a will for passing on assets is that they are subject to probate, which can be lengthy, expensive, and public.
It’s always advisable to see an attorney about creating a will, particularly if you are using it to name a guardian for your children. An attorney may recommend that you also create a living trust, which is a legal document that allows you to distribute your assets without going through the process of probate. The selection of an attorney is very personal, so it may make sense to start by asking someone you know and trust. An important consideration is that wills and estates are very specialized areas of law; the attorney must be one who specializes in that area. A generalist may not have the expertise you need. Your financial advisor may be able to provide a referral to a local firm they’ve worked with.
Determining Your Health Care Proxy
A health care proxy is a document that appoints someone to make healthcare decisions on your behalf, and it can also express your wishes for what type of care you will receive. You can be as specific as you like – from treatments, to doctors and hospitals, to when you choose to stop receiving care – and anything else you choose to include. States vary on how they address these two issues. In some states, you will need to combine the health care proxy with a living will that sets out your preferences for the medical care you will receive. Together, these are sometimes called an “advance directive”.
Other states have developed simple documents that combine both and do not require a lawyer. Massachusetts, for example, has created a Health Care Proxy form that is easily available online and when executed and witnessed is a legal document. When setting up your health care proxy, check to understand what’s available in your state. Your doctor’s office is a great place to start as they will be most familiar with your health situation and they have a stake in ensuring you have a treatment plan and someone to carry out the plan in place. If your state has created a Health Care Proxy, they may have the forms available. If your state does not offer this, you’ll need to speak with a lawyer.
Creating A Durable Power of Attorney
The third essential document is a durable power of attorney. It’s called “durable” because it does not end if you become incapacitated, like a regular power of attorney does. Once you have appointed a healthcare proxy and specified your preferences for care and/or created a living will, you will need a durable power of attorney for finances. The durable power of attorney will need to be drafted by a lawyer.
This document empowers someone to make financial decisions on your behalf, including paying your bills and paying for your care. The person you select does not have to be an attorney but will be referred to as your “attorney-in-fact” or “agent”. If necessary, this person can hire appropriate professionals that will be paid from your assets.
You’ve worked hard to build a life for yourself and the people you share it with. To make sure your wishes – both for yourself and everyone you care for – are carried out, it’s important to put some thought to your estate planning. Having the basic legal instruments in place, and updating them as needed, is the beginning of your estate plan.
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