Estate planning is a nice name for what will you want to happen to your money when you die – whether you expect it or not. Statistics are irrefutable in this matter as the death rate continues to be one per person. You hear about famous people dying and not leaving a will, for example. It is not clear that they intended to die without a will, so there’s no way to know for sure. But how about you? Plotting without a will often leave your state in charge of how any extra money is distributed. If you have any experience with the government you know they not only can take years to get something done, but by the time the issue is settled the result ends up being totally wrong. So let’s talk about the key estate planning documents that are essential to your and your family’s financial well-being.
The will is the most commonly known after death document, and its purpose is to allow you to determine who gets what (after all the debts are paid off). One thing to remember when setting up your will is never to do it when very angry or very happy. Now a will is not only about money, it also includes any personal property and assets that have a determinable value. Items of sentimental value can be included, but these types of decisions need to be made very carefully, as bequeathing the beat up old cigar box handed to your from your great-grandfather may not mean anything to your favorite child.
Taxes are another reason to set up a will, as the government financial locusts will eat up as much as possible in the absence of a will. A will is a legal document, and the person who is assigned to manage your estate is required to abide by your wishes. Make sure you spell them out clearly, as the more room for interpretation or confusion there is, the greater the chance of the will being contested. There are several good movies about contested wills, so you may want to watch a few before deciding on the exact language.
Finally, since age has more to do with assets in considering a will, remember that your children are assets. It may be hard for some people to awaken to this reality, but if you die with children who have not yet reached the age of majority, and if no will has been made, the state will determine who the children’s guardians will be. If that doesn’t motivate you to create a will sooner than later, it’s hard to be optimistic about you ever writing a will.
A Living Will
This is particularly essential for people who have a major medical issue or a chronic disease such as diabetes. What the living will does is legally speak for you should you not be able to communicate your personal wishes concerning medical treatment. You often hear about living wills when it comes to people who are comatose and not expected to live; the question is whether to “pull the plug” or not. Doctors really suck at this, so you don’t want to leave any decision in their hands. If a decision ends up in court your family will not only have to deal with the emotional stress but the lawyers will cash in on this. Save everybody the trouble and keep your estate out of the hands of the doctors and lawyers by talking to someone in the hospital about how to go about setting up a living will. It might take a bit of time, but it will be time well spent.
Power of Attorney
This is a legal document that has the potential to cause a lot of family in-fighting if you have scads of money (and you are getting up there in years). A power of attorney gives the person you declare on the document the power to conduct all financial and legal matters on your behalf in the event you become legally incapacitated. It’s important to remember that this is not only a matter of whether you are in a hospital bed. If you later suffer from dementia or some other form of mental illness, and it is legally determined that you can no longer function normally, the person with the power of attorney will manage all your financial and legal affairs.
There is no hierarchy with these three legal documents. All have equal importance, though some are more important than others depending on the situation you end up in. If you’re dead, there’s not much you can do about what goes on after that. But a power of attorney covers more potential situations, so it will require more thought on your part. Regardless of your age, if you are missing any one or all of these documents it’s time to get started on them before the month is out.