Estate planning can be relatively simple if you’re single with few belongings, but it grows more complicated once spouses, children and significant assets come into play. To cover just the basics, three documents are essential: a will, a durable power of attorney and a health care directive.
While these documents may not be all that your situation requires, they can help you be financially awesome by ensuring loved ones are taken care of. Plus, loved ones will be comforted knowing your last wishes will be fulfilled.
Writing a Will
A will is a legal document that spells out how you want to allocate your property. Laws vary by state, but when there is no will, assets typically pass to a spouse and children or, for those who are single, the nearest blood relatives.
So, if you know your brother will break up your prized vinyl collection, you can leave it in your will to a good friend who will appreciate it whole. Or, if you want your life’s work to benefit a cause you’ve championed, instead of relatives you don’t even know, you can leave your estate to charity.
Things may not be so straightforward when other lives are involved, such as those of a spouse, children or even pets. Minor dependents will need to be placed in the care of guardians. Without naming a guardian in your will, you run the risk of leaving the decision up to the courts and having children placed in a situation of which you wouldn’t approve. When naming guardians, be sure to have a conversation with the individuals you’ve selected to ensure they are equipped and willing to be part of your contingency plans.
Additionally, you’ll need to name an executor of your will, an individual you can entrust to follow through on its contents.
Appointing power of attorney
Power of attorney involves naming someone who can act on your behalf in financial and other issues while you’re alive, such as someone to handle any financial issues at home if you should decide to spend a year working abroad.
With a durable power of attorney, you appoint an individual who can make decisions for you if you become incapacitated and can’t make decisions for yourself. A serious accident or health issue, for example, could require prolonged care that you might not be able to arrange or manage on your own. It is critical to select an individual you know will make the best decisions on your behalf and be a good steward of all your resources.
Establishing a health care directive
Sometimes known as a living will, a health care directive does what its name implies: it provides direction for your health care providers. If you’re in a position where you can’t make decisions about treatment, this document gives caregivers instructions on the lengths you want them to take, especially in instances that may require drastic measures to prolong life. Usually, the health care directive takes effect under specific circumstances.
Certainly, no one wants to think of their own demise, but an even worse thought may be putting loved ones through agonizing decisions when they are at their most vulnerable.