Get Your Estate in Order with These 5 Essential Documents

Estate planning does not have to be a long drawn out process, nor does it need to be overly complicated. There are really only five essential documents that you should absolutely have at a bare minimum, regardless of whether you have more specific needs later on.

Will: This is a document that tells the court and your family who gets what after you die. The law abhors unclaimed stuff and it has found a way to facilitate the earthly passage of your possessions, with or without your direction. A will is your chance to give those directions and, if there are minor children involved, to appoint guardians for those children. Of course, if you fail to leave a will when you die, the law has a system for that too. It’s called intestacy and the law, not you, determines who gets the proceeds of your estate. Wills can be problematic too, especially if there are several contradictory versions around or the will’s maker is not of sound mind when making the will. However, a solid will that specifies your wishes is often better than leaving no will at all. Remember too that a will is only valid when you die and has no effect while you are living, including making decisions regarding your health if you are unable to make those decisions on your own.

Health Care Directive: This is a document that is more than just a Do Not Resuscitate (DNR) order. A health care directive will allow someone that you appoint to step in and make decisions about your healthcare when you are unable to do so. It can specify the level and type of medical care that you want to receive if you are unable to communicate those instructions yourself. This document is not just for the elderly. Adults, 18 years and older, should have a health care directive that makes these choices clear so that family members can follow your specific wishes if the need arises. Consider carefully who you want to appoint to make medical decisions on your behalf, keeping in mind that it does not have to be a family member or relative.

Power of Attorney: All adults are considered to have responsibility for their own affairs, which means they can make their own decisions concerning their health, welfare, and well-being. It is what allows us as adults to sign contracts and open bank accounts. A power of attorney gives that right to dictate choices as to your personal and financial affairs to another individual. A power of attorney can give the appointed person the ability to make financial decisions, decisions regarding the sale of a property, and business decisions on behalf of the individual. The power of attorney does not have to be all encompassing. Some only cover financial matters or certain business decisions. Depending on the type of power of attorney you choose, you can appoint someone to make these decisions for you even if you are still functioning and able to communicate. A durable power of attorney, however, is often the best option as part of an estate plan, as it allows the continuation of authority even if the individual becomes incapacitated.

HIPAA Release. With the Health Insurance Portability and Accountability Act (HIPAA), those who want to view a person’s medical records must be given specific permission to do so. If the person becomes incapacitated before giving this authorization, it can make things much more difficult for the person who has been appointed to manage their care as they may not have access to all of the relevant information. Ideally, the document should identify a few trusted individuals who will have access and the specific situations in which they would have access, i.e. incapacitation. This ensures that no one can access your medical records without your consent, but when they do need to have access, they have permission.

Living Trust. Trusts are often used to streamline estate administration by allowing assets that are placed in the trust to avoid probate. Probate is a court action, and it can be a very timely and expensive process for heirs to undertake. Trusts also have the added benefit of discretion, as a will may be made public upon the filing of a probate estate. Trusts can also be used to protect beneficiaries from hazards down the road such as a divorce or creditor claims.