The Estate Plan Documents Every Person Should Have

As the generation born from 1947 through 1963 approaches retirement age, many individuals are considering estate planning for the first time.  As an estate planning attorney, these are the recommendations I most frequently make as to who should consider estate planning, as well as what basic documents they should consider.

Estate planning is not just for retirees. It is also critical for younger adults. Accidents, sudden illness, or unexpected death make estate planning timely at any age, particularly for those with minor children.  For those who do not properly plan for their estates, monies may be needlessly spent, or worse, may not be distributed to the intended beneficiaries.

There are four basic documents that should comprise any estate plan: Last Will and Testament, Power of Attorney, Health Care Power of Attorney, and Living Will.

Last Will and Testament.  In Indiana, when a person dies without a will, the estate becomes subject to the law of intestate succession.  This series of statutes describes what happens to the estate of a decedent when he or she dies without a will.  In addition, when a person dies intestate (without a will), someone must petition the probate court to become the administrator of the estate. This may not be the individual who he or she would prefer to administrate the estate.

Accordingly it is critical for anyone with even modest assets to create a will to ensure that their property is distributed as they intend, as well as to appoint the individual or institution he or she wants to administer and distribute the estate.

Wills can provide for gifts to various family members, friends and charities.  For those people with minor children, they can also provide for guardians for their children, should both of the parents die.

Without naming guardians, there may be a family fight in the court for custody of the children, which may alienate one side of a member’s family. 

Trusts.  Financial control of a minor’s distribution is also important. Besides limiting the investments for the child, distributing the estate outright at age 18 is not appropriate. Trusts can be created that extend the time period that the monies are held in trust.

Generally, trusts should be held until a child has graduated from college (at least age 23). When creating your will, you can name one person to take care of the day-to-day needs of your child and a different person to manage their funds. This creates a check and balance to ensure your child’s care.

Trusts within wills can also be used to minimize estate taxes, preserve benefits for disabled beneficiaries, and ensuring the proper distribution of your estate.

According to the estate attorney, creating a will is only one part of the estate planning process. Wills ensure for the distribution of an estate for someone who has died, but cannot be used if someone becomes disabled, physically or mentally, permanently or temporarily.

Power of Attorney.  A Durable Power of Attorney allows you to name who you would want to take care of your day to day financial decisions, should you be unable to do so. This includes the ability to pay bills, access savings, investment and retirement accounts, sell property and generally deal with day-to-day business.

Many people believe that only single people need a power of attorney, because if married, their spouse is entitled to manage their financial affairs.  This is not the case.

Spouses do not have the right to manage each other’s affairs; they cannot access their life insurance policies or investments. If one spouse was disabled, and the other spouse needed to sell their house, they do not have the right to do so.

A power of attorney can provide for these rights.  Additionally, powers of attorney leave you the ability to name the person you want to manage your financial affairs. Sometimes the agent on a power of attorney is the other spouse, but it can be family members or trusted friends.

Also, you can provide for contingent or back-up agents, in case the person you named is unable to manage your finances (for example if two spouses named each other as their agent, and they were in a common accident, leaving them both unable to help the other).

Health Care Power of Attorney.  While a Durable Power of Attorney deals with day-to-day financial affairs, a Health Care Power of Attorney deals with the management of your day-to-day medical affairs.

The Health Care Power of Attorney allows you to name an agent to have you admitted or discharged from a hospital or doctor’s care, get medical records, talk with doctors, make treatment decisions, etc.

Again, spouses do not have the automatic right to make these decisions for the other.

The person you name as your agent on your health care proxy does not have to be the same person you name as your agent on the power of attorney.

The person who is your financial agent, may not be best for handling medical care, therefore you can name someone more appropriate.  As with the power of attorney you can name contingent agents on the Health Care Power of Attorney, should your primary agent not be able to manage your medical affairs.

Living Will.  The final document necessary in any estate plan is an advance directive for health care, which is sometimes known as a Living Will.

This document provides for application for or removal of life support treatments should you be in a coma or suffer from other terminal conditions.  Again the creation of this document allows you to name to persons who will make those decisions for you, and provides directions for it.

Without the creation of the Durable Power of Attorney, Health Care Power of Attorney, and Living Will, a guardianship is necessary to manage the affairs of an incapacitated person.

For those of you who have not begun any estate planning, there is no time like the present.