Five Estate Planning Documents You Should Know
Plan with the end in mind.
Estate planning is the segment of financial planning that covers what you want to happen toward the end of your life and beyond. Who is going to make decisions for you when you no longer can? What is going to happen to all your stuff? The reality is that most of us are unprepared for these questions, and we really can find it uncomfortable to think about them. Learning more about the five key estate planning documents will hopefully awaken you to the need to think about your future.
Wills: The estate planning rockstar
Everyone has heard of a will. They are all over pop-culture (Knives Out anyone?) and the easiest estate planning tool to understand. A will is the document that guides the distribution of property through the probate process. Assets and beneficiaries can be named and distributed specifically (Ex: “my house goes to my son Joe”) or generally (Ex: “my property should be evenly split three ways and go to my three children”). For parents of minor children, wills should also include guardians for the children until they reach the age of majority. Wills can even be used to create and fund a testamentary trust for more control over the distribution of assets to beneficiaries. Wills only become operative at the death of the creator.
Pro Tip:
Property that transfers through the probate process is a matter of public record. For situations where this is undesirable, a living trust can be a valuable tool.
Financial Power of Attorney
A financial power of attorney puts in place an “agent” to make financial or property decisions on your behalf. These powers are generally intended to be used in the event that you become disabled or incapacitated. Durable POAs grants authority until it is revoked or until you die. Springing POAs only “spring” to life once certain conditions are met (Ex: you meet the definition of disabled). Because of this, many people may think that a springing POA is more desirable, but some states only recognize durable POAs.
Medical Power of Attorney
Medical Powers of Attorney are similar to financial powers of attorney except the agent is empowered to make healthcare decisions on your behalf. As with financial powers of attorney, the agent that you select should be someone that you trust to make the best decisions on your behalf and should be someone that you regularly discuss your wishes with. In the event of a medical emergency or chronic illness, you may not be able to or even feel like making medical decisions on your own.
HIPAA Release: Everyday estate planning
One of the provisions of the Health Insurance Portability and Accountability Act (HIPAA) provides federal standards to safeguard the privacy of personal health information. As a result, patients get to choose who their health information is shared with and who doctors can discuss their care with. One of the intake forms that most doctors have new patients fill out is a HIPAA release. This document allows a patient to designate individuals that the doctor is allowed to discuss their healthcare information with. More formal HIPAA Releases can be created by clients to apply across all healthcare providers.
Advance Directive: Planning for end of life care
Advance Directives set forth the care that patients receive at the end of their life. These documents often include the desire for or prohibition of feeding tubes, breathing machines, or particular procedures. Advance directives are only to be used in the event that you cannot make medical decisions for yourself and you have a terminal medical condition. Advance directives allow for the patient’s wishes to be carried out when loved ones and doctors may or may not agree with those decisions.
Have you considered these five key estate planning documents?
There is no need to wonder what decisions might be made on your behalf or worry that your property will be distributed to the wrong people. At Foresight Financial Planning we are well prepared to have these important conversations. We will even work with your lawyers to make sure that these documents are drafted with utmost attention to detail.
Featured Articles
