Thinking about Creating an Estate Plan? Here’s Your Checklist

If your approach to estate planning is to leave a mysterious slip of paper in a bank vault with cryptic instructions to lead your relatives on a scavenger hunt for their inheritance, you might want to rethink your plan. Similarly, if you think that all you need to worry about is having a legible will that gives your prized stamp collection to your cat, it’s time to rethink the purpose of estate planning.

Contrary to popular belief, estate planning is not just to dictate what happens to your possessions and assets when you die. Estate planning is also life planning, as in you need to plan for a situation where you are still alive, but are unable to manage your assets. Here’s a checklist of the most essential estate planning documents to cover these very important bases.

Advanced Health Care Directive (a/k/a Medical Power of Attorney): Car accidents, sudden illnesses, or workplace injuries can all result in you being temporarily or permanently incapacitated and unable to manage your own medical care. With an Advanced Health Care Directive, you can appoint a trusted family member or friend to make decisions about your medical care when you are unable to do so.

Living Will: When nearing the end of life, a person may not be capable of expressing their desires as to what is to be done (or not done) to keep them alive. A Living Will is the way for an individual to decide and express their preferences for end of life care at a time when they are not immediately in that situation. A Living Will can be part of an Advanced Health Care Directive or a separate document.

Durable Power of Attorney: An Advanced Health Care Directive is only for health decisions, and is useless for managing a person’s other affairs, including finances and business. A power of attorney allows a trusted friend or relative to be appointed to handle these matters on behalf of the incapacitated person. The key is to have a durable power of attorney, which is a power of attorney that remains valid even after a person becomes incapacitated. Keep in mind that some financial institutions and title companies are very picky about the power of attorney document, so it is really important that it is drafted in an accurate matter and in accordance with state law.

Revocable Living Trusts: With a revocable living trust, the owner of the assets transfers ownership of those assets to the living trust and then become the trustee of the trust. The creator of the trust (a/k/a the settlor or grantor) can also be the beneficiary during their life time, and continue to have control over the trust assets while still alive. With a revocable living trust, the settlor can make changes to the trust terms while he or she is still alive, including adding or removing trust assets, or terminating the trust altogether. Trusts are also great for avoiding probate, which can be a time-consuming and expensive process for heirs.

HIPAA Release: Privacy of medical information is now mandatory under the federal Health Insurance Portability and Accountability Act (HIPAA). Under the most strict interpretation, even spouses cannot gain access to each other’s medical records without signing a consent. Therefore, it is crucial to have a HIPAA release allowing certain trusted individuals of your choice to have access to your medical records and your medical providers.

Organ Donation Authorization: Of all of the steps in estate planning, this one is by far the easiest and lease expensive (as in FREE). Many states allow individuals to indicate when they sign up for a driver’s license whether they wish to donate their organs. Other states also allow individuals to register with an organ bank. It is also very important to let your loved ones know of your choice.