Having the right legal documents in place to protect your family, property, and wishes if you become incapacitated or die is critically important. Without them, things can end up far off course and have dramatically negative effects on the people you care about most. However, according to a USA Today, 64% of Americans don’t even have a will, leaving a breeding ground for conflict that can tear families apart. So today, we’re going to focus on the documents you need to have at minimum to help ensure things go smoothly should something unforeseen befall you.
1. A Will
You’ve heard it time and again and I’m going to say it too… you need to have a will. Whether written on the back of a napkin, done through an online service, or created by an attorney (our preferred route), having a will is important because it’s the first step in protecting your family and having your wishes carried out the way you desire.
A will does three vital things that everyone needs to consider when planning for the inevitable. First, if you have children, a will is the way to specify who will care for them when you’re gone. Without one specifying who will be there to step in, you leave the decision of what happens to them up to the courts, a process that can lead to unintended consequences and lots of unnecessary stress for them.
Second, a will gives you the opportunity to choose how your property will be distributed. Dying without a will to direct where money and property should go means you die “intestate.” I like to jokingly tell people about intestacy, “don’t worry about it. if you don’t have a plan for your property, the state has one for you!” Which is true, but just because they have one doesn’t mean it’s any good or works in a way that makes sense for you and your family.
Third, a will allows you to choose who will administer your estate. This person is called your “Executor” and is a critical part of the process when people pass away, and it’s important to have someone you can trust and who can handle the responsibility in place. If not, the probate court will appoint someone, but again, just because they put someone in place doesn’t mean that person will know what to do and not make a mess of things.
So remember, before we go any further, because of these three vital priorities, if you only get one document on this list put in place, it should be a will.
2. A Living Will
Living wills are a commonly misunderstood document because people tend to think they’re the same as “a will.” A living will is actually a repository for your medical do’s and don’ts while you’re still living, but unable to communicate them. It can be as general or specific as you like, but typically always addresses your preferences on end of life medical care and life sustaining medical treatment.
It’s important to have because without it, there’s no way to know how to proceed should something happen to you and you’re unable to communicate. Many physicians and medical facilities will take the reins and do what they need to do to keep you alive. That’s typically a good thing. Unless it’s a situation where you’d expressly prefer them not to act, like if they could save your life but the most likely prognosis is you’d survive in a vegetative state.
A living will gives you the place to spell out exactly how you’d like to be medically treated in a variety of situations. It can also serve to provide clarity and support to an agent who isn’t sure how to proceed when making medical decisions on your behalf.
3. A Healthcare Power of Attorney
A healthcare power of attorney is a document that gives someone (an agent) the right to make medical decisions on your behalf, should you become incapacitated. It’s important to have so there’s someone you trust and who has knowledge of your wishes in place to evaluate options and make decisions on treatments when you’re unable to do so.
Without a healthcare power of attorney in place, many times these decisions are left up to family members, who may not be in the best position to act or who may not be able to agree on what to do. A medical crisis is not the time for important decisions to be delayed and a healthcare power of attorney in place is designed to allow things to run smoothly.
4. A Durable Financial Power of Attorney
This power of attorney gives someone (an agent) the ability to manage your financial affairs if you become incapacitated. It can be as limited as the authority to continue paying bills to as broad as the authority to manage investments, make distributions, or manage other areas of your finances.
Anyone can be appointed to serve as your agent, but it’s typically advisable to name someone with an aptitude for managing money and above all else who you trust implicitly trust. Before appointing an agent to be your financial power of attorney, carefully consider the circumstances to ensure there’s no competing conflict of interest that could affect his or her ability to faithfully fulfill the duties that come with the position.
To learn more about the documents and strategies to consider for your family, contact us at 317-941-6492 or Info@AnExceptionalLifeFinancial.com. We’d love to get to know you and discuss how estate planning can fit into your finances.
Mychal Eagleson, CFP®, AAMS® is the President of An Exceptional Life Financial, a firm that specializes in financial planning for teachers and families with special needs. He frequently writes and speaks on personal finance topics relating to these clients. Mychal also serves on the board of the Financial Planning Association of Greater Indiana as the Director of Public Relations & Social Media. To read more of his articles or learn about An Exceptional Life Financial please visit: www.anexceptionallifefinancial.com.