Estate planning has been a hot topic over the last year or two, which is not that surprising considering the pervasive uncertainty within the economy. But, as our readers have seen in our posts on the subject, estate planning can become complicated, quickly. This is why many have wondered what are the truly essential documents.
The first document that most people draft (and rightly so) is a will. A will essentially, outlines what one wants to happen after they die. This includes what to do with their body, lists beneficiaries and outlines which beneficiaries receive assets. It also names an executor, who will carry out those wishes, and names a guardian (and back-up guardians) for minor children. However, this should not be the only document in an estate plan because it is only activated on death.
Health care power of attorney
What happens if one becomes incapacitated, like through an accident or some other debilitating injury or disease? Who would decide what medical care should be administered? How long should one be kept alive on a ventilator? These are all issues that can be addressed by a health care power of attorney. This document appoints a person to act on their behalf if they become incapacitated, and it can include the drafter’s health care preferences as well.
Property power of attorney and financial power of attorney
A property power of attorney and financial power of attorney operate like a health care power of attorney, except for one’s financial matters. For example, if the spouse that handles the bills becomes incapacitated, would the other spouse be able to pay bills? Could they keep the lights on, or even access bank accounts? A property power of attorney and financial power of attorney solve both of these issues, and elects someone to act as the drafter, should they be unable to do so themselves.
Living trust agreement
For many people, these three documents would be sufficient, but for those with more assets, a living trust may be needed. This is a trust that can be used to hold assets while one is alive, without the need for probate after death. It can be used to help avoid some taxes and, if one becomes incapacitated, those assets in the trust can be administered by a named trustee. Of course, for our Torrance, California, readers, their needs may be much more or less, but this, at least, gives a starting point for most readers.