Too often, the need for the most basic estate-planning documents is overlooked or misunderstood. While many people would admit they should have a will, 50 percent of Americans with children and 41 percent of baby boomers age 55 to 64 don't have one, according to a survey from online legal services company RocketLawyer.com. If you want to stay in control of your money and medical decisions until the end, here are the five most important estate-planning documents you need to have.
A recentCNBC article, titled "Stay in control with 5 estate-planning documents," talks about basic estate planning documents that everyone should have.
A will. It does not get any more basic in estate planning than drafting a will. A will states who will receive your estate assets and care for your minor children upon your death. As you may recall from previous posts, without a will, the state where you live gets to decide who gets your assets. The court will typically disburse shares based on their degree of family relationship to the decedent (you). Commonly, this degree moves from your spouse, then to children, then to your parents, and next to your brothers and sisters. If you do not have anyone in this line-up, other relatives you may never have known will make their claims. If there is still no one to claim the money as a relative, then the state will just keep it!
Why give gifts to people you hardly know or forfeit your estate to the state when you can avoid it simply by creating a will to tell everyone in writing who gets what?
Beneficiary designations. This seems like a pretty insignificant little form, but it can be huge when it comes time to disbursing your life insurance policy or any retirement account. Chances are you probably completed and sent in a beneficiary designation form when you took out the policy or opened the account. That form identifies who gets this money when you die. This form—not your will—says who gets the money. The original article suggests that you check your list of beneficiaries when there were any life changes, like getting married or divorced, having a child, or having more children.
Financial power of attorney. A financial power of attorney (financial POA) is another very critical piece of paper. It gives a trusted individual the authority to resolve your financial issues on your behalf if you become incapacitated or unable to make those decisions for yourself. A financial POA provides you with more control over your financial affairs and a better chance that your wishes will be followed. If you do not have a financial POA, the court selects someone to take care of these decisions—this can be a very lengthy and expensive process. The court usually appoints a close family member, but that person might not be the one you would have chosen. The original article also stresses that a financial POA is critical if you have a non-spouse partner: if you designate your financial POA, you have control over the scope of powers to grant your "agent," which can encompass accessing your financial accounts and managing all your financial affairs.
Medical power of attorney. A Medical power of attorney allows you to select who will make medical decisions on your behalf if you are unable to do so for yourself. Your chosen designee will be able to access to your medical records, speak with your medical caregivers, and deal with other important issues. Your designee will also make sure that your "advanced medical directive" is carried out.
Advanced medical directive. Deciding if you want tube feeding or to be put on a ventilator can be a really hard decision for loved ones to make if you have not put your wishes in writing. An advanced medical directive should clearly define what you want and what you do not want. This takes the decisions out of the hands of your family and improves the odds that your final instructions are followed.
Once you get these documents set up, the original suggests that you review and update them from time to time, especially if you have had any changes in your life. These are just the basics. You should talk to an experienced estate planning attorney and get sound advice for all of your estate planning issues.
You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.
Reference: CNBC (October 6, 2014) "Stay in control with 5 estate-planning documents"