If you are like most people, when you hear the words “estate planning,” you probably think of writing a will, to explain who will get what you own when you die. The problem is, a will has little or nothing to do with you. It’s all about planning for someone else. In reality, estate planning is about much more than writing a will; it’s also about taking care of you while you are alive, should you become incapacitated and unable to make your own decisions.
What follows is a rundown of the key disability documents to complete
as part of your estate planning, even before writing a will. Although
their names vary from state-to-state, the following are essential “me first” documents.
An Advanced Health Care Directive, sometimes called a Medical Power of Attorney This
document lets you choose who will make decisions about your health care
if you become too ill or injured to make them yourself. This person is
referred to as your health care agent.
A Living Will
A living will spells out the kinds of medical care and treatment you
do and don’t want to receive if you are close to death and there is no
hope of your recovery. Your health care agent will have the power to
make sure your wishes are complied with. In some states, a living will
is part of an Advanced Health Care Directive; in others, they are two
A living will also spares your family members from having to second
guess your desires and can help avoid emotionally difficult fights among
your loved ones over what to do (or not do). Worst case scenario:
Without a living will (and a Medical Power of Attorney), decisions about
your end-of-life care could end up in the hands of a judge who knows
nothing about you, and your loved ones could be completely shut out of
the judge’s deliberations.
A Durable Power of Attorney If you become
incapacitated, your bills still must be paid, your investments managed
and so on. A Durable Power of Attorney helps ensure that during your
incapacitation there will be someone to manage your finances. This
individual, your agent, will be able to write checks, deposit and
withdraw money from your accounts on your behalf and speak with your
financial advisers, among other things. Be sure to pick as your
financial agent someone you trust and who will act in your best
Don’t confuse a Durable Power of Attorney with a Power of Attorney. The latter ceases to be legally valid as soon as you become incapacitated. You need a Durable Power of Attorney
A caveat: Despite the importance of a Durable Power of Attorney, many
financial institutions and real estate title companies don’t like them.
They worry the document may have been revoked by its creator and
replaced with a different one and that the individual claiming to be
your financial agent may be trying to steal money from you. So it may be
difficult for your financial agent to use your Durable Power of
The more recent the power of attorney, the more likely it will be
honored, but this varies from state-to-state. Also, financial
institutions and title companies have their own criteria for when they
will accept a Power of Attorney document.
Before you prepare yours, find out the criteria of your financial
institutions and real estate title companies. Also, check with the
companies that hold your retirement accounts to see if they have their
own Power of Attorney forms; aif they do, use theirs.
A Revocable Living Trust To avoid problems with Powers of Attorney, some people set up a revocable living trust, which essentially acts like a super
power of attorney. Financial institutions are legally obligated to
comply with their terms. Generally,a revocable living trust is most
appropriate for estates worth more than $1 million.
When you set up a revocable living trust, you transfer your assets to
the trust and designate yourself as trustee. This way, you can continue
to manage and benefit from those assets as you did before they were in
the trust. If you can no longer act as the trustee because you become
incapacitated, the individual you designated as your successor trustee
manages the trust. Most people choose their spouse or partner, a close
relative or a trusted friend.
A living trust doesn’t eliminate the need for a Durable Power of
Attorney, however. You’ll still need that document to identify the
person you want to manage your retirement accounts, like your 401(k) and
your IRAs, because these kinds of accounts cannot be transferred into a
A HIPAA Release
HIPAA is the acronym for the federal Health Insurance Portability and
Accountability Act. Among other things, this law prohibits your doctors
from discussing your medical condition and treatment with anyone —
including family members and close friends — other than those
individuals you specifically list on your HIPAA form. Only those people
will have full access to your medical team.
An Organ Donation Authorization You
may want to donate your organs when you die so someone can benefit from
them. If so, make your wishes known on your driver’s license or
register with an organ bank or with your hospital. Be sure to make your
family and your health care agent aware of your wishes.
Full Article & Source:
The Biggest Estate Planning Mistake People Make