The basic documents used in estate planning include: Wills, Health and Financial Powers of Attorney, Living Wills, and Medical Directives.
A will is a basic document that instructs how assets are supposed to pass to heirs at the time of death. Wills have no effect until a person dies and pass property that is excluded from passing by operation of law or by contract or trust.
- They direct assets that pass by will to beneficiaries.
- They have the ability to name guardians for minor children.
- They can be amended or revoked any time prior to death.
- They name a personal representative to settle estates.
- They can create a trust at death, to retain control of assets.
- They take effect at death, it offers no lifetime benefits.
- They offer No lifetime planning, No provisions for disability, No provision to name a guardian for you, and No system is available to manage assets during your lifetime.
- They are subject to probate and become public at death.
Assets typically pass by operation of law or contract giving wills little effect on how assets pass. In most cases wills are not sufficient to provide proper planning.
Powers of Attorney
People frequently need a trusted person to make decisions or sign papers for them regarding their property or health. A power of attorney is a document that authorizes a person to act as another person’s agent. Powers of attorney can be General or Limited dictating the amount of decision control someone has. Two documents every person should have include:
- Power of Attorney for Property- provides an agent with the power to manage a principal’s property and finances. It may be durable to provide for continuity in the management of property affairs in the event the principal is disabled or incapacitated.
- Power of Attorney for Health- appoints an agent to make health care decisions in the case of a principal who is unable to make those decisions for themselves.
Is not a will, but rather a legal document expressing an individual’s last wishes regarding sustainment of life under specific circumstances. This document establishes the medical situations and circumstances in which an individual no longer desires life-sustaining treatment in the event they are no longer capable of making those decisions. It is ussually limited to decisions concerning artificial life support. DNRs (Do Not Resuscitate Order) is a part of the living will and stipulates that the principal wishes to avoid cardiopulmonary resuscitation (CPR) performed in the event the heart stops beating. The purpose of the living will is to allow individuals who are terminally ill to die on their own terms.