Four Legal Documents That Everyone Should Have
-These documents are designed to provide direction when you cannot.
AT THE VERY LEAST, EVERY ADULT should have four estate planning documents: a durable power of attorney for finances, a health care proxy, a living will, and a last will and testament. With them, you can help ensure that your directions are followed if you become incapacitated or die. Without them, the courts may need to appoint someone to handle your financial and medical affairs and the laws of your state may dictate how your estate is distributed - situations that most people would prefer to avoid.
If you do not already have these four essential documents, the time to put them in place is now because you never know when you may need them.
Creating the documents can be relatively simple and straightforward. To give you an idea of what’s involved, here’s an overview of the four documents.
Last will and testatment. A will is a key part of every estate plan. In it, you name the beneficiaries that you want to receive your assets after your death. Your beneficiaries might include family, friends, and charities. You also name a guardian for your young children on the chance that you and the other parent die while the children are young. And you name someone to oversee the administration of your estate and see that it is distributed according to the terms of your will. This person is typically known as an executor or a personal representative.
A will is used to distribute assets that are not being transferred by other means. For example, the assets in your IRA will transfer to the beneficiary named on the account regardless of directions that you leave in your will. For another example, if you own property jointly with another person and both of you are titled as joint tenants with right of survivorship; your interest in the property automatically passes to the other owner after your death regardless of directions in your will.
As you create your will, keep in mind that you can change it in the future if you change your mind about any aspect of it. In fact, it is a good idea to review your will periodically to ensure that it reflects your current wishes.
Durable power of attorney for finances. The following three essential documents are designed to provide direction in the even you are ever mentally incapacitated and unable to manage your affairs or make decisions on your own.
The durable power of attorney for finances gives the person you choose the legal authority to manage all or part of your business and personal affairs if you become incapacitated. This person is known as your agent or attorney-in-fact.
If you become incapacitated, your agent can step in and pay your bills, deposit your income, file your tax returns, and oversee your investments, and so on. You choose the activities that your agent will have the authority to oversee. Your estate planning professional can provide guidance in this area.
It is important to note that some financial institutions have their own power-of-attorney forms and may not readily honor one created elsewhere. It is a good idea to plan for this possibility with your estate planning professional.
Health care proxy. A health care proxy, also known as a durable power of attorney for health care, is the legal document you use to name someone to make medical decisions on your behalf in the event you are unable to do so. This person can be whomever you choose, for example, your spouse, another family member, or a friend. Naming a health care proxy can help avoid conflict among your loved ones regarding your medical are.
Living will. Have you ever considered the type of care you want to receive if you are in an end-of-life or permanently unconscious situation? If so, conveying your choices regarding hydration, feeding and resuscitation in a living will can help ensure that your wishes are carried out and remove the burden of making such tough decisions from your loved ones.
If you do not have these four essential documents in place, please consult an estate planning professional for help in creating them.
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