When you think of estate planning, a couple of things come to mind. Chances are you know the benefits of having a last will and testament. Similarly, you likely understand the importance of having some form of life insurance to help your loved ones cover the costs of your funeral, burial and any other debts or expenses that may arise.
While both of those are necessary aspects of your estate planning, they’re not the only documents you’ll want to include. Your estate plan is intended to make the process of finalizing your estate simpler. To ensure your family and friends have the most complete plan, consider including these additional documents with your last will and testament and your insurance policies.
A Living Trust
Your last will and testament typically controls the distribution of your assets, and your family will likely need to go through probate. However, a living trust can limit the number of assets going through probate. When my father passed away, we managed to take the estate below $25,000. As a result, my mom was able to go through a shortened probate process known as “simple probate.” This isn’t always possible, but a living trust could help.
Let’s assume you have set up a living trust. You then hold title to all assets you wish to be denoted in that trust. If you own a vacation property in Florida, you could title it under the “Joe Someone Living Trust.” This expedites the process because the trust details who the trustee is, what happens to the trust once you’ve passed and how to manage property held within the trust.
Oftentimes, the living trust provides faster access to certain assets than going through probate to sort out a last will and testament. However, your will is still a necessary part of your estate planning.
Living Will Or Advance Directive
The living will or advance medical directive is often required by healthcare providers for certain procedures. However, this document should also be included within your estate plans. Basically, your living will or advance medical directive informs your loved ones and medical staff of your wishes regarding life-saving or life-prolonging medical procedures in the event you become unable to communicate them. You don’t want to put your loved ones in a position to have to choose whether you live or die.
Although you will need to choose who carries out your wishes, a living will takes the burden off their shoulders, providing certain criteria in which you wish to be kept alive or allowed to pass. I suggest speaking with your primary physician before signing an advance directive.
Power Of Attorney
Another important piece, power of attorney often consists of two documents. First is the healthcare power of attorney. This allows you to select someone to make healthcare decisions on your behalf. Oftentimes, this is your spouse or significant other, but you could designate anyone you’d like. Power of attorney differs from the living will in that your living will is only valid if you’re unable to communicate your wishes.
So, what happens if there’s an accident that involves you and your designated power of attorney? The person who is supposed to make decisions if you become ill or seriously injured is also injured. This is why I suggest creating a “three-deep roster.” This means you’ve chosen three people for each role (I also advise doing this for your last will and testament) that needs to be filled. Be sure to choose someone who’s capable of separating emotion from reality.
The other power of attorney is a financial power of attorney or durable power of attorney. Similar to the healthcare variety, you’re choosing someone to make financial decisions for you if you’re unable to. This doesn’t necessarily mean that you must be incapacitated. For example, my wife is my immediate financial power of attorney, allowing her to make financial decisions for me even when I can make decisions. She can sign my name with POA, and it’s just as legally binding as if I had signed it myself.
Statement Of Desires
Finally, consider including a statement of desires with the rest of your estate planning documents. Although this isn’t a legally binding document, it provides the executor a bit of last-minute guidance. This could include where to find various financial accounts, passwords, outstanding debts, insurance coverages, etc.
Leaving a short summary of where to locate everything they will need to address and how to access it can really unburden them during an otherwise difficult time. Take some time to write down everything about your financial life.
You only have so many opportunities to really show the people you love how you feel about them. One of those opportunities is to handle all of the heavy lifting that will come from your passing before you’ve gone. When my uncle found out he had terminal cancer, he told me that he trusted me and wanted me to take care of his wife. We took care of everything we could while he was still living. When he passed, his wife was able to navigate his passing much more easily because of his statement of desires.
Estate planning documents aren’t really for you. They’re for the loved ones you’ll leave behind, and there is no greater “I love you” than to say, “I took care of everything,” from the grave. Take some time to speak with your advisors. Put these documents in place, and make a difficult inevitability a little easier on those you hold most dear.
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