by Cathy Pareto, CFP®, AIF®

Estate planning is not just about money and taxes. You may find yourself in end-of-life situations that require careful thought and planning to ensure your well-being and financial security. While unpleasant to contemplate, incompetency at some stage in your life is a distinct possibility. Who will take care of you if you cannot take care of yourself? These questions are effectively handled with proper planning, and there are many estate planning tools that can help you to execute your wishes. (Read Three Documents You Shouldn't Do Without for more information.)

Durable Power Of Attorney For Healthcare
A durable power of attorney for healthcare (HCPA), also known as a healthcare proxy document, allows you to name a specific person to make medical decisions for you in the event that you are unable to make those decisions on your own. The person you name will have the legal authority to make decisions about care, but this power does not authorize them to make decisions about life-sustaining treatments.

This form allows the person you elect as your healthcare agent to use your living will as a guide to making healthcare decisions and judgment calls for unexpected circumstances that are not addressed by your living will. If you do not appoint a medical power of attorney, the decision about your care defaults to your spouse. If you aren't legally married, decisions fall to your adult children or your parents.

Advance Medical Directives
An advance medical directive, which is sometimes called a healthcare directive, is a document that names a proxy and provides guidance about one's wishes for healthcare. This document will specify the individual or individuals who can make healthcare decisions for you if you can't make them for yourself.

Financial Power Of Attorney
A financial power of attorney (POA) is important so that your spouse, partner or another person can make financial decisions on your behalf. This document will dictate how the person should make decisions when managing your financial affairs.

When it comes to POAs, just because you have one does not mean that it covers both healthcare and financial decisions, unless it specifically says so. This is not a concern for married couples since they automatically have the right to make decisions for each other.

Living Wills
A living will lets you specify decisions about artificial life support in advance. It not only ensures your wishes will be considered, but also protects your loved ones from having to make these difficult personal choices for you. This document will detail your feelings on certain medical treatments and interventions but it does not cover every possible scenario.

Do not Resuscitate Order (DNR)
This is a request to not have cardiopulmonary resuscitation (CPR) if your heart stops or if you stop breathing. A DNR order can be put in your medical chart by your doctor.

Funeral Arrangements
In the absence of planning, state statutes usually give the next of kin the authority to make decisions regarding funeral arrangements and the disposition of your remains. Wouldn't it be better if you could plan this yourself? Some people may not want to be buried in a cemetery; others may wish to plan an elaborate funeral "party" celebrating their life. The best way to curb any unwanted end-of-life plans is to arrange them yourself ahead of time. For example, a person can state their desires in a legally acceptable document prior to death that outlines their wishes and can preplan and prepay funeral arrangements.

Post-Mortem Letter
The post-mortem letter, also referred to as a letter of instruction, is an often-overlooked estate planning tool. It provides executors and survivors with the locations of your assets, the identity of professionals consulted by you during life and the location of important records. This will be a tremendous help for whomever you appoint as your estate executor. You can also use this letter to summarize your life's goals and highlights and say your last goodbyes to loved ones. (For more information on this important document, read Letter Of Instruction - Don't Leave Life Without It.)

Planning ahead of time for unforeseen circumstances can not only save you and your loved ones considerable money down the road, but it can also make your life much more manageable at a time when peace of mind is critical, both for yourself and your family. (For more information of covering the costs associated with aging, read Long-Term Care Insurance: Who Needs It? and A Look At Single-Premium Life Insurance.)

Next: Estate Planning: Conclusion »

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