We’ve all heard the saying: “Only two things are certain; death and taxes,” before. Because death is certain and permanent, you need to be prepared so your family can carry out your wishes.
We put an emphasis on being prepared to survive anything that could or possibly would happen to us. But are you prepared for the certainty of death? Even if you think it’s too soon to get ready for this eventuality, that’s almost never the case. These are the 5 documents that you should really have in place before death.
A trust is a legal instrument that provides ongoing management for your assets. It can be inter vivos (also known as a Living Trust, which exists during your lifetime) or Testamentary (one that is created by your will upon your death). It is a good idea to leave assets in the trust if the beneficiaries are minors, incapacitated, or if they are simply not fiscally responsible for any reason. The trust document names a trustee who has the responsibility of managing the assets in the trust and determines when and how much of the trust assets to distribute (subject to the terms you have written in the trust). You may want to name a trustee while your child(ren) is/are under a certain age (most say 25 – 30.) Then, once your child reaches that specific age, they can either act as their own trustee, or the trust can terminate and distribute all of the assets to your child(ren) outright.
A trust is a legal vehicle that greatly expands your options when it comes to managing your assets, whether you’re trying to shield your wealth from taxes or pass it on to your children. “A trust,” according to Fidelity Investments, “is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries.”
2. Power of Attorney and Healthcare Power of Attorney
Most often, these two people are one and the same. A Healthcare Power of Attorney (also known as a Medical Power of Attorney) gives a trusted individual the authority to make decisions about your medical treatment should you be unable to do so on your own. (For example, if you are in a vegetative state, a healthcare power of attorney will decide if you continue to get life support or not.) No financial authority is granted in this document, only medical power. But married couples often choose each other and they will, therefore, then choose their spouse as their power of attorney as well. You could, however, provide one person the Durable Power of Attorney and another person the Healthcare Power of Attorney if you desire.
3. Living Will
While the Healthcare Power of Attorney authorizes another to make medical decisions on your behalf, a Living Will (also known as a Directive to Physicians) sets out your predetermined wishes regarding end-of-life care should you become terminally ill or permanently unconscious. Essentially it takes the decision to withhold life out of the hands of your medical providers and the ones you love so that they are not burdened by it and so that you can be assured your wishes are respected.
A living will outline what you want to happen if the time comes when you’re still alive but can’t communicate due to a serious medical situation.
4.Last Will & Testament
The fundamental purpose of a will is to outline who will receive your assets upon your death. Another important purpose of a will is to specify guardianship for your minor children. A guardian is one who takes legal responsibility for the care of your minor or incapacitated children after you are gone. It is important to understand that a will does not become effective until the date of death. So it does not provide any benefits during your lifetime. A will can be changed at any time (assuming you are not mentally incapacitated). It can be amended by using a codicil or revoked by writing a new will. A will can also create a trust upon your death (more on this below). If your estate is large enough (over $5.49 million in 2017), you may also need to incorporate federal estate tax planning into your documents.
5. Letter of Intent
A Letter of Intent is a simple, non-binding personal letter to the ones you love expressing your desires and special requests. It may include information regarding burial or cremation or a specific bequest of collectibles or personal items. While it does not typically have legal authority, it can help to clear up confusion regarding your personal preferences.
*Estate planning can be complex and the laws vary widely by state. This article is general in nature and is intended for informational purposes only. It is not meant to provide legal advice. We recommend that you engage the services of an estate planning attorney to discuss your wishes and prepare the appropriate documents before death.