Five Basic Documents You Should Consider In Your Estate Plan
Let me start off this post by saying that death is not the most exciting topic to be writing about! However, it is a part of life, and I believe that if you have loved ones and you consider yourself a responsible person, then you should consider having these documents in your life.
A will is a legal document that gives the maker the chance to control the distribution of his or her property. Generally, a will is valid if the maker is at least 18 years old and is of “sound mind,” which basically means that you’re mentally capable of making a will.
If you were to die without a will, your state will direct how your property will be distributed using what is known as its intestacy laws. Intestacy is just a fancy word that refers to the state of dying without a will. The problem with intestacy laws are that they are not likely to distribute property the way you wish. For instance, in a family with a spouse and four children, the surviving spouse’s share may only be one-fifth of the estate.
Intestacy may also require the selection of an administrator to handle the affairs of the estate. This administrator would need to provide a surety bond, which would cover any financial losses to the estate due to any improper acts by the administrator. Since this bond is not free, it increases the cost of settling the estate. It is the court, and not the decedent (the person who died), who will select the administrator. The potential problem with this is that the administrator who is selected may not be the person that the decedent wanted to handle the estate.
Power Of Attorney
Under certain circumstances, you may need a trusted person to make decisions for you regarding your property. This may be because you’re traveling, or because you’re physically or mentally unable to do so yourself. A power of attorney is the document that will allow that trusted person to act in your place. Examples of situations in which a power of attorney is used are to handle your banking transactions, buying and selling property for you, or filing your tax returns. An important point to remember in selecting a power of attorney is to make sure he or she is a trusted person.
A power of attorney can be broad or specific. The broadest power you can give to another is a general power of appointment. This grants the holder of the power the right to do anything that you could’ve done, including making gifts to the him or herself or paying his or her creditors. A limited power of appointment may be as narrow as giving the holder the power to pay your bills. It can also be as broad as giving the holder the power to do anything except appoint assets to themselves, their creditors, or their heirs.
You can revoke these powers, and they cease at your death. One thing to keep in mind is that if a person holds a general power of appointment, those assets over which the holder has power may be included in his or her gross estate, if the holder dies before the giver.
Durable Power Of Attorney For Health Care
This specific power of attorney eliminates the need to petition a court to appoint a guardian to make health care decisions for you in the event you become incapacitated, such as if you become unconscious, mentally incompetent, or otherwise are unable to make medical decisions for yourself. This provides continuity in the management of your affairs. The durable feature means the power survives your disability of incapacity. This type of power may be granted as springing upon a disability or incapacity, or granted effective immediately. You can also revoke this power.
A living will states your last wishes regarding sustainment of life. It establishes medical situations in which you no longer want life-sustaining treatment. A living will only covers a small range of situations, and applies usually only to terminal patients.
Personal Instruction Letter
This letter details your wishes regarding the disposition of tangible possessions such as household goods, the disposition of your body, and funeral arrangements. It may also contain information regarding the location of important personal documents, safe deposit boxes, outstanding loans, and other financial information. Since it exists separately from a will, it avoids cluttering the will with small details.
Do you have any of these documents now? If not, will you consider creating them?