Five Documents … Form Voltron?
Excerpts from an article titled "Five Estate Planning Documents" with original author credited at end of post. Original post heavily edited.
There are five estate planning documents that every couple needs to protect their money and ensure their heirs are taken care of.
The process of distributing your assets to beneficiaries and paying off debts by the court is called “probate.” The court charges for handling an estate and may also require the estate to pay for an attorney.
Keep in mind that a will is a public document that is read by the county and handled by the court. If you value your privacy, you'll want to take a step further and create a living trust for your estate.
2. Living Trust And Pour-Over Will
A living trust is a document that allows the deceased to control how their estate is distributed. It is more advanced than a will and allows for more specialized instructions. For example, you can say that your children get specific amounts at certain ages or upon passing certain milestones, like graduating from college, getting married, or having children.
When there is a living trust, the estate will bypass the courts and probate process. This can save valuable time and money that should be going to your family, friends, and charity instead of the court system.
With a living trust, you will name specific assets and how they should be distributed. A “pour-over will” is used to catch any of your assets that were not transferred to your living trust and ensure that they are distributed according to the rules within your trust.
Some people include a rule that, if the living trust is contested, the people arguing against it will receive a reduced amount. The best way to avoid arguing is to communicate your wishes to your family ahead of time. This will allow you to explain your reasons and allow them to ask questions.
3. Durable Power Of Attorney
Estate planning isn't just about death. It is also about protecting your family in case you get sick, injured, or otherwise incapacitated. This is where a durable power of attorney comes into play.
The durable power of attorney document designates someone who will make decisions on your behalf when you cannot. There are two types of durable power of attorney documents that you should have – health care and finances.
You should have separate documents for health care and finances for a couple of reasons. First, the health care document will contain more personal information about your health history. And, second, you may choose to have different people handle those decisions on your behalf.
4. Advance Health Care Directive
Another important medical document is the advance health care directive. Yes, you've already designated someone to make decisions on your behalf with the durable power of attorney, but they may not share your same opinions on everything.
An advance health care directive spells out the medical care that you do, or do not, want in the event that you are incapacitated.
For example, your family and friends love you and may have difficulty giving the approval to take you off life support when that time comes. And even if they are willing, this removes the burden and guilt of being “the one who pulled the plug” on someone that they love.
5. Updated Beneficiary Documents
For retirement plans, life insurance policies, and annuities & pensions, it is very important to designate a beneficiary.
You've probably seen or heard stories about current spouses or children losing out on expected benefits because the deceased didn't update beneficiary documents after getting remarried or having additional children.
Do You Need An Estate Planning Attorney?HINT: YES YOU DO!
There are many tools available for people to create their own estate documents. Nolo.com is another online resource that is popular with the DIY crowd. Just because options are available does not mean that they are workable or proper for your situation!
Because of the complicated nature of this subject, many people choose to involve an attorney in drafting these documents. This is especially true if you have specific conditions that you want to happen before beneficiaries receive money. Every state has different laws dictating what is and is not acceptable. You don't want one sentence in your living trust to invalidate your entire estate plan.
Additional Steps To Take
Beyond having these documents, do everyone a favor a have a list of all of your accounts readily available. Along those same lines, keep all of your other important financial documents together in one place. Property deeds, vehicle titles, and life insurance policies are good examples of important documents that need to be easily found.
Plan Now To Avoid Headaches Later
What steps are you taking to preserve your estate? Will you do them yourself or hire an attorney?
Lee is a former financial planner and corporate finance manager.
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Jeff Sodoma, MPA, Esq. is a lawyer based in Virginia Beach, Virginia
Hello, there! Welcome to my blog. I will use this blog as a platform for my writing. I will write about topics in the legal world, certainly, as well as everything else under the sun, because I have many interests (and viewpoints). All views expressed in this blog, unless otherwise noted, are mine alone. One of my interests is music--my wife believes that I should go on "Beat Shazam" because I know so many songs--and I will be, from time to time, analyzing song lyrics and how they relate to the legal world.