Estate Planning; Key Estate Planning Documents You Need

This article is contributed by LegacyShare.  We are the leading service helping you share your legacy with the ones you love and trust so you can confidently know your legacy will transition smoothly.  Please visit our website at legacyshares.com to review our services and to set up your legacy transition today.

There are five estate planning documents you may need regardless of your age, health or net worth:

1. Durable power of attorney
2. Advanced medial directives or health care proxy
3. Will
4. Letter of instruction
5. Living trust (not always necessary but can be a very important part of an estate plan)

Durable Power of Attorney (DPOA)

This can help protect your assets in the event you become physically unable or mentally incapable of handling your financial affairs.  If you are unable to look over your assets, there is the risk your property may be wasted, abused or even lost.

A DPOA allows you to authorize someone else to act on your behalf, so that that person can pay everyday bills, collect income streams, watch over your investments and file taxes.

There are 2 types of DPOAs: (1) an immediate DPOA, this becomes effective immediately and can make sense if you are facing a serious operation or illness, and (2) a “springing” DPOA, which is not effective until you become incapacitated.  Some states do not allow a springing DPOA.

Advanced Medical Directive

This lets others know what medical treatment you would want and will allow others to make medical decisions for you in the event you are unable to.  Without one of these, doctors must prolong your life if possible.  With this day and age (modern medicine, technology…etc.) doctors could do so for weeks, months or even years.  There are 3 types of medical directives, each state allows a certain kind, and some allow a more than one type.  In some states you may require a combination of types to be able to carry out your full wishes.

First, a living will allow you to choose or decline certain types of treatment even if you would die by refusing this care.  A living will typically goes into effect if you are terminally ill or have a terminal injury.  A living will is only effective around the period of your “moment of death” and allows you to postpone treatment to not prolong your life.

Second, a durable power of attorney for health (or a health care proxy) allows you to appoint someone to make medical decisions for you.  You can decide how much power this person can have when making medical decisions.

Finally, a Do Not Resuscitate order (DNR) is a doctor’s order that tells medical personnel not to perform CPR in the event you go into cardiac arrest.  There are 2 types, one that is effective while in the hospital and another while you are out of the hospital.

Will

Most consider this the cornerstone of your estate plan.  The main purpose of a will is to clarify how property should be disbursed after your death.  If you don’t have a will, disbursements will be made based on your states law which may not be what you want.

There are 2 important aspects of your will:

1. You can name a person (executor) to manage and help settle your estate. If you do not choose someone the state will appoint someone and it might not be ideal.
2. You can name a legal guardian for minor children. If you don’t appoint a guardian, the state will appoint one for you.

A will is a legal document, whatever is represented in the document will be enacted by the courts.  It is important to have all your wishes written out in this manner.  Also, it is important to keep your will up-to-date.

Letter of Instruction (also called a testamentary letter or side letter)

This is nonlegal document that usually accompanies your will and is used to portray your personal thoughts and directions regarding what is in your will or other things (i.e. burial wishes or where documents are located).  This can be the most helpful document to leave your loved ones.  Also, this document remains private unlike your will.  It can give many an opportunity to leave their loved ones there most personal thoughts.

Living Trust (also known as a revocable trust)

This is a separate legal entity created to hold assets, such as your home or investments. It is meant to function while you are alive.  It is necessary to still have a will as the trust does not cover some topics a will does not (i.e. choosing an executor).  You control the property in the trust, and you can change the the terms, property being held or cancel altogether at any time.

Not everyone needs a living trust, it’s most important function to aid in avoiding probate.  This is accomplished because the property held in the trust is not part of your probate estate.  This is very attractive for many due to the amount of time probate can take and if you have a complicated estate (i.e. property in various states, property internationally or have heirs that live outside the United States).  Transferring property through a trust is a much quicker process and sometimes is immediate.  Avoiding probate has many benefits, including keeping your affairs private and making sure the executor of your estate has full access to your assets to insure proper asset management. Key points to remember, a living trust does not minimize taxes, and some might not find it necessary if they have property that is jointly held.

It is important to have basic estate planning in place and to seek the proper legal counsel to ensure you have the correct documents to represent you in your respected state.  LegacyShare is a perfect place to store these documents and to keep your “keyholder” notified of your wishes and any updates with your estate plan.

Legacies are meant to be shared.

-LegacyShare