NATIONAL PREPAREDNESS MONTH:
FOUR ESTATE PLANNING DOCUMENTS TO PREPARE FOR THE UNEXPECTED AND THE INEVITABLE
September is “National Preparedness Month,” and we’re seeing advice on having a plan in place in case of natural or man-made disasters, and lists of items to include in our disaster kits. While we don’t generally think about estate planning in quite the same way as, say, preparing for an earthquake, here are four essential documents you should have in order to be prepared for the unexpected (such as disability) and the inevitable (mortality).
- Durable Power of Attorney (Financial). A “Durable Power of Attorney” is a simple and inexpensive way to ensure that someone will be able to manage your finances if you became incapacitated and unable to make financial decisions for yourself. It can be a blessing for your loved ones; without it, a court proceeding is likely necessary to obtain authority to act on your behalf. You name a person you trust to act as your agent; as long as you are competent, you can revoke a durable power of attorney at any time. In California, this form must be notarized or signed by two witnesses.
- Advance Health Care Directive: There are two health care documents everyone should have: a durable power of attorney for health care that names someone you trust to oversee your health care if you become incapacitated, and a “living will,” a document spelling out the types of medical treatment you would or would not want to receive in certain situations. In California, a power of attorney for healthcare and a “living will” are combined into one form: an “Advance Health Care Directive.” Without this document, heath care decisions may wind up in the hands of people who do not know or care about your wishes.
- Last Will and Testament. Without a will, when you die your assets will be distributed in a court process called “probate” to your legal “heirs” according to law; without a will it won’t matter that you told your favorite niece she should have your mother’s wedding ring. With a will, your assets will be distributed as you intend to your chosen beneficiaries (after payment of debts and taxes, of course). A will is an essential part of a complete estate plan that includes a living trust.
- Revocable or “Living” Trust. With a living, or revocable, trust, all of your assets—your home, bank accounts, stocks, etc.—are put into the trust, used for your benefit during your lifetime, and then transferred to your named beneficiaries when you die without having to go through a court proceeding (called “probate”). (If, as sometimes happens, you have assets at your death that are not in the trust’s name, your will directs that those assets are transferred to the trust upon your death, and are then distributed to your chosen beneficiaries according the terms of the trust.) Of course, since it’s “revocable” you can amend or revoke the trust at any time, and it is likely you should do so upon major life changes: marriage, children, divorce, remarriage.