Most people know that having some sort of estate plan in place makes good sense, regardless of your net worth, so that your financial and family goals are met when you die. And having these documents in place can make the end of life a little less painful for those left behind.
But which documents should you have?
A WILL OR A LIVING TRUST
A will distributes your assets to your beneficiaries after you die. With a living trust, the assets you have transferred to the trust – such as your home, your bank accounts, and your investment accounts – are available for your benefit during your lifetime, and then transferred to your beneficiaries when you die.
One potential benefit of a living trust over a will is that your assets won’t need to go through probate after you die. Probate, simply stated, is the court process that inventories and distributes a person’s property after death. But a living trust is not always the best solution, because the benefits of having a trust need to be compared to the added cost and complexity of administering one. When in doubt, it’s best to consult a qualified estate planning attorney to determine the best course.
HEALTH CARE POWERS
Both a living will (also known as an Advance Health Care Directive in some states) and a durable health care power of attorney concern medical decisions, but there are some important differences.
A living will or AHCD is usually limited to deathbed concerns. It enables you to declare your desire to forego life-prolonging measures used if there is no hope of recovery. A durable power of attorney for health care, on the other hand, covers all health care decisions, and lasts only as long as you are incapable of making decisions for yourself. You can, however, set out specific provisions in the power of attorney telling your agent how you would like them to act on your behalf.
POWER OF ATTORNEY
A power of attorney is granted to someone you trust who can take care of your finances when you are incapable of doing so. Unlike a regular power of attorney, a “durable power” means that the person can act even if you become incapacitated.
In addition to these standard legal documents, estate planning experts also recommend the following:
– List online log-ins and passwords for everything.
– Keep old tax documents for several years after someone has died.
– Consider keeping a detailed medical history, so that your children and grandchildren will know if there is a history of certain illnesses in the family.
– List which companies automatically deduct payments from your bank and credit card accounts, so the payments don’t continue after death, or after the accounts are closed.