When it comes to estate planning, having a last will and testament is probably the first thing that comes to mind. But a comprehensive estate plan includes four essential documents. These documents include a will, financial power of attorney, advance care directive, and living trust. In the absence of a last will and testament, a probate court will appoint an executor, usually a spouse or adult child to his estate.
Probate proceedings are in the public domain. So keep passwords for private information, for example, out of your will, as that information could be part of a public document. A permanent power of attorney allows you to choose someone to act on your behalf, financially and legally, should you no longer be able to make decisions. To ensure that someone can make medical decisions for you if you become incapacitated, establish a power of attorney for health care, also called a permanent power of attorney for health care.
This is different from the permanent power of attorney mentioned above for financial and legal matters. Did you know that if you don't name someone as your guardian, the court could appoint someone you don't know or have never met to make medical and financial decisions on your behalf? A pre-need guardian designation appoints someone to act on your behalf if your durable power of attorney and health care substitute designations fail Your estate planning documents will be essential for the liquidation of your estate, including the processing of probate. By organizing these important documents, you can help your family more easily go through the probate process and distribute your assets appropriately. After you set out on your estate planning journey, your lawyer will recommend a will-based estate plan or a trust-based estate plan. These are just a few documents you should familiarize yourself with when you start thinking about estate planning. That's why it's important to have other estate planning documents, discussed below, that come into effect in case you become incapacitated. This document and a living will (see below) can be invaluable in avoiding family conflicts and potential court intervention if you are unable to make your own health care decisions.
You can also specify who should receive the assets of your estate and appoint a guardian for minor children. Not everyone needs an estate plan, but everyone should have a will, which is a key component of an estate plan. If you die without a will, your estate will end up in probate court and the courts will decide who will inherit your possessions and assets. In today's digital world, it's important to include a provision for your digital assets when planning your wealth. As you begin the estate planning process, it's helpful to gather information about your finances and your family members.
To start thinking about what you might need to include in your estate plan, here are five documents you should familiarize yourself with:
- Last Will and Testament: This document outlines how you want your assets distributed after death.
- Financial Power of Attorney: This document allows someone else to manage financial affairs on your behalf.
- Advance Health Care Directive: This document allows someone else to make medical decisions on your behalf if you become incapacitated.
- Living Trust: This document allows someone else to manage assets on your behalf.
- Pre-Need Guardian Designation: This document appoints someone to act on your behalf if durable power of attorney and health care substitute designations fail.