4 Essential Documents You Need for Estate Planning
An estate plan benefits you and your loved ones because you plan for uncertainties such as incapacity, death, and disability. Estate plans involve many documents, but certain items are crucial in every basic plan. This article explores four such documents.
1. Financial Powers of Attorney
With a power of attorney, you can assign an agent to make legal or financial decisions on your behalf if you cannot do so. For instance, the agent can sell or buy real estate on your behalf, file taxes, or manage investments. A power of attorney can be a family member, spouse, or someone you trust to make wise decisions.
Financial powers of attorney can be durable or have a springing clause:
- Durable power of attorney. The powers become effective upon authorization and hold until you revoke the authority or die.
- Springing power of attorney. Your agent only acts in certain situations, such as if you are away or face a mental disability that renders you unable to manage your affairs.
A power of attorney only applies to the specific issues and transactions you indicate in the document.
2. Will
A will is a crucial estate planning document that outlines your final wishes. You express who you want to inherit your assets and how your affairs run. Also, you can determine the following factors in your will:
- Who will take custody of your children who will still be minors at the time of your death
- Who will take care of a child who needs special care
- Who the executor or person is who will ensure the wishes of the will hold
- What the powers and responsibilities of the executor are
- What funeral provisions you have
The above requirements allow you to decide your dependents' best interests after you are gone.
Without a will upon death, the court will distribute your possessions according to your state's laws. Unfortunately, the distribution may not be what you want for your loved ones. So, you are better off if you write a will early enough. Then, appoint a responsible party who is not easily overwhelmed as an executor.
3. Trusts
A trust allows you to transfer assets into a trust that a third party manages on behalf of your beneficiaries. Then, upon death, your estate will distribute the assets to your heirs without probate proceedings. As a result, less money and time are necessary, and your beneficiaries can get the possessions immediately. Also, a trust provides tax savings if you have enormous wealth.
With trusts, you appoint a trustee to distribute the assets to the beneficiaries based on your wishes once you die. However, a revocable trust allows you to adjust the properties and conditions of the document. For instance, you can use the money or dissolve the trust. Finally, trusts allow you to distribute your wealth while still alive.
4. Advanced Medical Directives
An advanced medical directive states your end-of-life and medical care wishes. You select a representative and indicate your preferences if an illness removes your communication ability. For example, if you want your loved ones to continue medication to prolong your life, you can state your wishes in a health directive.
Advanced medical directives fall into three main categories:
- Health care power of attorney. You state the party that makes your medical decisions in the event of incapacitation.
- Living will. The document outlines the types of care — e.g., CPR and life support — you want and those you do not want.
- Do-not-resuscitate order. The document guides your medical practitioners not to perform CPR if you stop breathing.
The directives above prevent future disputes regarding your healthcare.
If you plan to create an estate plan, hire an attorney with experience in the said documents. At Shepherd Law Firm LLC, you gain access to excellent attorneys who advise and help you draft all necessary documents. Contact us today to book your consultation for all your estate legal needs.
