Estate Planning Basics – Core Documents

Published On: February 7, 2020

Written by: Ben Atwater and Matt Malick

Following our Market Insights essay series, we are now turning to a series on Estate Planning Basics.  Today, we begin the series by examining the four essential documents that every estate plan should include – a Will, a Healthcare Directive (or Living Will), a Durable Power of Attorney for Health Care, and a Durable Power of Attorney for Finances. 

Take this opportunity to review your documents.  Make sure they are still consistent with your wishes.  Just as importantly, make sure you have talked to your family and anyone else (charities, friends, professional advisors) involved in your plan to be sure they understand your intentions, your plans and their responsibilities under the estate plan.  Don’t let anyone involved be surprised by your plans.

If you don’t have documents or you aren’t satisfied with your documents, please act quickly to meet with an attorney specializing in estate planning to create an up-to-date estate plan.  We are happy to recommend an estate planning attorney who best meets your needs, so don’t hesitate to reach out to us.   

For many, the hardest estate planning decision is choosing the agents to name in various documents.  After all, you are putting an enormous amount of trust in the hands of other people to carry out not only your financial wishes, but also your healthcare wishes, and potentially even who will care for your children. 

Let’s start with your will.  In a will you make sure “the right stuff gets to the right people.”  In doing so, you need to name an executor (or executrix).  An executor of an estate is an individual you appoint to administer your estate.  Your will governs your probate estate and your executor carries out your wishes. 

If you have minor children or children who will require the care of a guardian after you are deceased, you will name the guardian in your will.  If you create a trust under your will, you’ll name the trustee as well.  In a future note, we’ll talk more about trusts.  Aside from the responsible parties you name, you will also name the beneficiaries in the will.  This is simply who you want to receive your probate assets and in what shares. 

The next document is an advance healthcare directive (i.e. living will). This document guides choices for doctors and caregivers if you’re terminally ill, seriously injured, in a coma, in the late stages of dementia or near the end of life.  This document will help relieve your family of the burden of having to make the hardest health care decisions for you. 

Because medical technology can prolong life even with no chance of recovery, the process of dying can be painful, expensive, and emotionally burdensome to both you and your family.  Ideally, a living will should address these issues for you and your family in advance of an end-of-life situation. 

Another healthcare document is the durable power of attorney for healthcare.  Some planners combine this document with the advance healthcare directive, and some keep it as a separate document. 

Regardless, the two documents serve different purposes. A durable power of attorney for health care allows you to appoint an agent to make health care decisions if you cannot act for yourself. A living will states your wish to have certain types of care withheld or withdrawn in specific situations, such as if you have a terminal condition or are in a permanent coma.

A durable power of attorney for health care is broader because it can apply to any condition you may have or treatment you may need. Under a durable power of attorney for healthcare you authorize a person to make medical decisions for you and to have access to your medical records, even if you are only temporarily incapacitated and fully expected to recover. 

Your agent can make a wide range of health care decisions like admitting or discharging you from a hospital or nursing home and which treatments or medicines you do or do not receive.  Your agent can only make these decisions if you cannot do so yourself, and your agent must follow your wishes when making these decisions. 

Regarding a durable power of attorney for health care and a living will, provide copies to your primary care physician as well as any specialists you regularly use so these doctors have your documents on file. 

The last document we’ll cover today is the durable power of attorney for finances.  In this form, you authorize persons to make financial decisions if you cannot act for yourself.  For example, your agent would be able to sign checks, prepare tax returns, transact in accounts, access safety deposit boxes, transfer assets, and, in some cases, even make gifts and update beneficiary designations. 

You can customize this document but be sure to leave enough latitude for an agent to be effective.  After you name your agent, we’d recommend you get the agent on record at your various financial institutions.  It is much easier to act in the event of an emergency if these agents are already registered with your bank, brokerage firm, mortgage lender, etc. 

Clearly, having an estate plan is vital for your family.  Don’t delay, if not for yourself, then for your loved ones.  We are available to talk through these issues with you.  There is a great deal of nuance to an estate plan and people frequently make mistakes.  Our series will aim to address some of these areas, but everyone’s situation is unique, so please don’t hesitate to call on us.