A Guide to Basic Estate Planning Documents

We are often asked about estate planning when discussing investments, retirement, and financial planning.  While estate planning should always be done through an attorney that specializes in this field, we thought it might be beneficial to discuss a basic guide that might help give some structure to the discussion.  Making provisions for what happens after your passing is a task you may find unpleasant and wish to avoid. While this is understandable, such avoidance can cause a great deal of pain and confusion for your heirs.

With that in mind, here is a guide to the basic documents most people should have prepared. If your estate is large, or you wish to limit your bequests in various ways, you may also want to set up a living trust. In that event, you will definitely want to consult an attorney. Note that different states may combine some of these documents into one form or call them by different names, but the essential concepts are the same:

1. THE WILL
This document tells your heirs how you want your property distributed after your death. It not only names your heirs, but tells what should happen in the event your heirs predecease you. It appoints an executor to carry out your wishes. It may also contain burial or cremation instructions. Each state has its own will form, designed to correspond to its laws. Witnesses are required, and any evidence of tampering can invalidate the will or call it into question. Even something as innocuous as a removed staple can be a problem. If you have any doubt at all about your ability to prepare this document, have an attorney do it for you.

2. THE LIVING WILL
This is not a will per se but a document that tells loved ones what you want done in the event that you are no longer able to make decisions for yourself. Typically you can specify that you want all efforts made to sustain your life in all circumstances, that you want extraordinary efforts made only if there is a chance of a full recovery, or that you want no extraordinary measures taken to prolong your life. This document can save your family a great deal of hassle and heartache in the event that you suffer an irreversible decline.

3. THE POWER OF ATTORNEY FOR HEALTH CARE
This document appoints an agent to make health care decisions for you in the event that you are incapable of making them for yourself. This person might decide on nursing home care or home health care or might execute a “do not resuscitate” order in the event that heart failure is imminent. It is therefore important that you choose someone you trust completely.

4. THE POWER OF ATTORNEY FOR FINANCES
This document allows your agent to access your bank accounts in order to pay your bills. You can limit or expand his or her powers to allow your agent to make investments, move accounts, and make gifts. Once again, the agent has considerable power, so you must trust the person you choose. (In some states, a Durable General Power of Attorney is used to cover this same ground. Be sure you consult an attorney if you are unclear about what powers you are granting.).

Note that in the event you do not have the latter two documents, your heirs might be forced to obtain a court order having you declared incompetent. This is an extraordinary burden you can spare your loved ones by making your wishes clear in advance.

Some institutions may refuse to accept powers of attorney, which can limit their usefulness. Legislative efforts are underway to remedy this situation.

OTHER USEFUL DOCUMENTS:
The “transfer on death” form. This allows you to avoid having assets go through probate by instructing a bank or other financial institution to transfer assets to your heirs upon your death, according to the formula you specify. It is typically available for stocks, bonds, and bank accounts, but some states also allow a transfer on death for real estate and vehicles.

By doing a little simple planning, you can make sure your wishes are carried out after your death and your loved ones’ burdens are eased.  An attorney can give you further information that is specific to your state.

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