Estate planning is a reality we all have to face at some point. Of course, many of us continue to put this off. It’s certainly not very fun to think about your death, but it’s an event that we all need to be ready for.
Estate planning is the process of managing and preserving your assets while you’re alive and conserving and controlling their distribution after your death. There are four key estate planning documents that most adults should have, regardless of age, health or wealth. They ensure:
- Your personal wishes are known and carried out.
- Your loved ones are not burdened with unnecessary complications at a very difficult time in their lives.
- Your assets are not eroded by legal processes. (For related reading, see: Getting Started on Your Estate Plan.)
1. A Durable Power of Attorney
A durable power of attorney is a document allows you to authorize a person of your choice to act on your behalf and handle your financial matters in the event that you become physically or mentally unable to do so. The person you empower can do things like:
- Pay bills and expenses.
- Watch over your investments
- File taxes on your behalf
2. Advanced Medical Directives
These directives let others know what medical treatment you would want or not want in the event that you can no longer express your wishes for yourself. If you don’t have one of these documents in place, medical care providers are obligated to prolong your life using artificial means, even if you would not wish to have such procedures.
In the state of Texas, you must fill out two separate forms to have a complete advance directive: A living will called a directive to physicians and family or surrogates and a medical power of attorney (a.k.a. health care proxy).
3. A Will
The main purpose of a will is to distribute property to your heirs after your death, according to your wishes. In your will you can name an executor to manage and settle your estate and a legal guardian to care for your minor children. A will is a formal legal document that is filed with the court and eventually becomes part of the public record in a process known as probate.
4. A Letter of Instruction
This is an informal, non-legal document that generally accompanies your will and expresses your directions about what is in your will. It may also include other things that are important to you, such as personal thoughts you want to express, burial wishes or the location of important documents. A letter of instruction can be the most helpful document you leave for your family members. Unlike your will, a letter of instruction remains private.
A financial planner can help you prepare these important documents. Once you have them prepared, revisit them every few years to make sure they remain up to date. (For more, see: Top 7 Estate Planning Mistakes.)