Depending on the size of your estate, a typical estate plan includes at least the following:
- Last Will and Testament
- Power of Attorney
- Health Care Proxy
- HIPAA Release
- Living Will*
Last Will and Testament: Most people are familiar with what a will is and what it does. It is a written instrument that disposes of your assets when you pass away. It is the document in charge of distributing all the things that you have acquired throughout your life. Your will is the document that is in charge of saying who gets what, who is going to care for your minor children, how your debts will be repaid, how taxes are to be paid, and how the probate expenses will be paid.
The person in charge of “administering” your estate is known as your “executor.” The executor is the person that you appoint in your will to carry out your final wishes. It is your duty to appoint someone who is honest, trustworthy, and competent enough to carry out your wishes. It ultimately comes down to the executor to carry out your final wishes.
Your will is a powerful document. It tells the world what you want to happen with all your things. Not only is it important, it is an essential document of your estate plan.
Power of Attorney: a power of attorney (POA) is another important document. This document, however, grants power on another to make financial decisions for you; decisions that they believe to be in your best interest. This document is the exact opposite of a will. As stated above, when you create a will, you appoint someone to carry out what you have instructed him/her to do. Your POA, on the other hand, makes the decisions that he/she thinks are in your best interest. This is why you have to pick someone who is both competent and trustworthy.
So, why would you want to give someone this much control over your finances? That answer is simple. As you age, you are much more likely to become incapacitated or unable to handle your affaires before your die. Sure, you have a will, but you might not have an estate to administer if you become unable to handle your financial affaires before you die.
Health Care Proxy: this is the document that appoints someone to make medical decisions for you, if you become unable to make those decisions for yourself. You want this person to be someone who is both familiar with how you would like to be medically treated and familiar with the world of healthcare.
HIPAA Release: this document instructs anyone holding your medical records to release those documents to your designated agent. This document makes perfect sense. Anyone holding your medical records is compelled, pursuant HIPAA, not to release your medical records to anyone who is not expressly authorized by you. This document allows your agent to gain access to those records without unnecessary obstacles. It is easy to create, cheap to prepare, and often overlooked.
Living Will: this document tells the world that you do not want your life to be artificially prolonged. For example, being kept alive by machines, such as a feeding tube or an artificial breathing machine. This is an important document to include in your estate plan. This document, however, come with a BIG issue. Although preparing this document tells the world that you do not want your life to be artificially prolonged, no one has to abide by those wishes.
So, why prepare it? The simple answer is that it tells your loved ones what your true beliefs are. Although not legally enforceable, it offers your family guidance that most are willing to abide by.
There you have it, those are the documents that most americans should have in their estate plan. Most americans, meaning those who have an estate that is less than $1,000,000.00. For those who have more than $1,000,000.00 in their estate, have disable family members, or want to avoid estate taxes or probate, you will need a more comprehensive estate plan. More to come.