In estate planning, one common tactic individuals consider to avoid probate is adding their children…
An estate plan is much more than a will to distribute your worldly goods. An estate plan plans for incapacity, including conveying your end-of-life care wishes and tells others how you want to be cared for when you cannot speak for yourself.
There are a number of documents that need to be completed in an estate plan, and most of them focus on issues that your loved ones will need to deal with while you are still alive, according to a useful article from Forbes, “The Biggest Estate Planning Mistake People Make.” Note that the titles of these documents are different in different states, but these are the key ones you need to have in place.
Advanced Health Care Directive or Medical Power of Attorney. With this document, you designate the individual (known as a “health care agent”) who you want to make decisions about your health care, if you become too ill or injured to make them for yourself.
Living Will. This details the kinds of medical care and treatment you want and don’t want to receive, if you’re close to death and there is no prospect of a recovery. Your health care agent will have the power to make sure your wishes are followed. A living will may be part of an Advanced Health Care Directive, but in some states, they’re two separate documents. A living will lets your family know exactly what you want to happen for your treatment.
Durable Power of Attorney. In the event you become incapacitated, your debts need to get paid, like the mortgage and the car loan. Your investments must also be managed. A Durable Power of Attorney names a person during your incapacity to manage your finances. He or she can write checks and speak with your financial companies.
A Durable Power of Attorney is different from a plain old Power of Attorney. The POA is no longer legally valid, when you become incapacitated. When that happens, you need a Durable Power of Attorney. Ask your financial institutions and real estate title companies about their requirements for this, because some are rigid. They might want you to use theirs.
Revocable Living Trust. Some people with larger holdings elect to avoid problems with Powers of Attorney and create a revocable living trust. This acts like a super power of attorney. Banks must comply with their terms. With a revocable living trust, you transfer title of your assets to the trust and name yourself as trustee, so you can continue to manage and benefit from those assets as you did before they were in the trust. If you can’t act as the trustee because you become incapacitated, your designated successor trustee will manage the trust. This doesn’t eliminate the need for a Durable Power of Attorney—you’ll still need that document to identify the person you want to manage your retirement accounts, because those types of accounts cannot be transferred into a living trust.
HIPAA Release. This is the federal Health Insurance Portability and Accountability Act which prohibits your doctors from discussing your medical condition and treatment with anyone, except those you name on your HIPAA form. Only these individuals will have full access to your healthcare team.
Organ Donation Authorization. Be very clear with family members and loved ones whether or not you want your organs donated when you die. You can do this on your driver’s license or register with a local organ bank or hospital. The documentation is important, but so is letting family members or your health care agent know about your decision. Organs must be harvested quickly, if they are to be helpful for others, so this is a delicate topic that you have to discuss in advance.
Reference: Forbes (August 16, 2017) “The Biggest Estate Planning Mistake People Make”