Estate planning does not need to be difficult. Having just a few documents in order can make a huge difference.
It is critically important to make sure you have a set of specific estate planning documents in order. Doing so is one of the best and simplest ways to protect your assets and reduce any potential stress on your family after you pass on. Proper planning ensures that your wishes will be respected and your loved ones will have less to worry about after you are gone, as highlighted in a great article published by ElderLawAnswers.
Here are five estate planning documents that everyone should have in place:
- Las Will and Testament – Your will says who will get your property after your death. However, it’s increasingly irrelevant for this purpose as most property passes outside of probate through joint ownership, beneficiary designations, and trusts. Yet your will is still important for two other reasons. First, if you have minor children, it permits you to name their guardians in the event you are not there to continue your parental role. Second, it allows you to pick your personal representative (also called an executor or executrix) to take care of everything having to do with your estate, including distributing your possessions, paying your final bills, filing your final tax return, and closing out your accounts. It’s best that you choose who serves in this role
- Revocable Trust – A revocable trust is icing on the proverbial cake and becomes more important the older you get. It permits the person or people you name to manage your financial affairs for you as well as to avoid probate. You can name one or more people to serve as co-trustee with you so that you can work together on your finances. This allows them to seamlessly take over in the event of your incapacity. Revocable trusts are not as simple as the prior four documents because there are many options for how they can be structured and what happens with your property after your death. Drafting a trust is more complicated, but also more nuanced, giving you more say about what happens to your assets.
- Durable Power of Attorney – This appoints one or more people to act for you on financial and legal matters in the event of your incapacity. Without it, if you become disabled or even unable to manage your affairs for a period of time, your finances could become disordered and your bills not paid, and this would create a greater burden on your family. They might have to go to court to seek the appointment of a conservator, which takes time and money, all of which can be avoided through a simple document.
- Health Care Proxy and Medical Directive – Similar to a durable power of attorney, a health care proxy enables you to appoint an agent to make health care decisions for you if you are unable to do so, whether permanently or temporarily. Again, without this document in place, your family members might be forced to go to court to be appointed guardian. Include a medical directive to guide your agent in making decisions that best match your wishes.
- HIPAA Release – While the health care proxy authorizes your agent to act for you on health care matters, you may only appoint one person at a time. It may be important for all of your family members to be able to communicate with health care providers. A broad HIPAA release permits medical personnel to share information with anyone and everyone you name, not limiting this function to your health care agent.
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Unless your situation is complicated, these documents are straightforward and the process to create them is not difficult. By drafting an estate plan, you can save your family a great deal of strife, difficulty, and expense at a difficult time.