The Five Most Important Estate Planning Documents


It may be the subject matter - death, incapacity and taxes - that causes us to avoid estate planning, However, the fact is that no matter what your age or how much wealth you’ve accumulated, you need an estate plan to protect yourself, your loved ones and your assets --- both now while you’re still active as well as after your death. Understand the Essentials Before You Plan.

THE 5 KEY DOCUMENTS:

  • Will       
  • Durable Power of Attorney
  • Health Care Power of Attorney
  • Living Will
  • Revocable Living Trust

 
WILL- A will simply provides instruction for distributing your assets to your family and other beneficiaries upon your death. Your attorney can customize its provisions to meet your needs. You appoint a personal representative (also known as an executor) to distribute your assets. If you have minor children, you can designate a guardian for them. 

To be effective, however a will must be filed in probate court. Probate is a judicial process for transferring your assets in an orderly fashion when you die. The court oversees payment of liabilities and the distribution of assets.

Generally, your representative will need to employ an attorney.

Because a will does not take effect until you die, it cannot provide for management of your assets if you become incapacitated. Other estate planning documents, discussed below, become effective if you should become incapacitated.
 
DURABLE POWER OF ATTORNEY - A power of attorney is a legal document in which you name another person to act on your behalf. You can give your appointed agent broad or limited management powers. You should choose this person carefully because he or she will generally be able to sell, invest and spend your assets.

A traditional power of attorney terminates upon your disability or death. However, a durable power of attorney will continue during incapacity to provide a financial management safety net. A durable power of attorney terminates upon your death.


HEALTH CARE POWER OF ATTORNEY-  A durable power of attorney for health care authorizes someone to make medical decisions for you in the event you are unable to do so yourself. This document and a living will (see below) can be invaluable for avoiding family conflicts and possible court intervention if you should become unable to make your own health care decisions.


​LIVING WILL -  A living will expresses your intentions regarding the use of life-sustaining measures in the event of a terminal illness.

REVOCABLE LIVING TRUST - There are many different types of trusts with different purposes, each accomplishing a variety of goals. A revocable living trust is a popular type of trust often used in an estate plan. By transferring assets into a revocable living trust, you can provide for the continued management of your financial affairs during your lifetime (when you’re incapacitated, for example), at your death and even for generations to come. Your revocable living trust lets trust assets avoid probate and reduces the chance that personal information will become part of public records.

Every revocable trust has three important components. The grantor (or settlor) – generally you –creates the trust and transfers assets to it. The beneficiary (ies) – often you and then your family – receives the income and/or principal according to your trust’s terms. The third component, a trustee – who could be a family member or a corporate trustee – manages the trust assets.

You can change a revocable trust’s provisions at any time during your life. If you act as your own trustee, you continue to manage your investment and financial affairs. In this case, your account might be titled “(Your Name), Trustee of the (Your Name) Revocable Living Trust Dated (date).” Because this legal entity exists beyond your death, property titled in the trust does not need to pass through probate.