Estate planning is the process where an individual decides what will happen with their property upon their death. Your estate is made up of all of the property that you own. Estate planning is not just for the elderly or wealthy. No matter how much or how little property you own, you still need to plan ahead. No one knows when their final day will come, and accidents and illnesses can come out of nowhere. It is important to have a plan in place when the unexpected occurs. At a minimum your estate plan should including the following four documents.
Estate Planning Document 1: The Last Will and Testament
This document is the foundation of estate planning. The last will and testament is a legal document that details how a person wants his/her property to be distributed upon death. You also nominate an executor to carry out your wishes regarding your property. This document is filed with the Probate Court when an estate is opened.
Estate Planning Document 2: Durable Power of Attorney
This is a written document where one party (the principal) appoints an agent to act on his/her behalf. Individuals routinely sign powers of attorney to allow the agent to take care of certain activities. The agent steps into the shoes of the principal and act act on his/her behalf. However, the power of attorney does not take any power to act away from the principal. The power of attorney is durable unless you state otherwise. This means that the power of attorney is still valid even if the principal becomes incapacitated. The power of attorney may need to be recorded with your county recorder’s office if you are creating this document to assist with real estate transactions.
Estate Planning Document 3: Health Care Power of Attorney
This document is similar to the power of attorney mentioned above. However, the important difference is this power of attorney solely applies to making health care decisions. You can also list multiple back up agents if the first person is unable or unwilling to perform the duties.
Estate Planning Document 4: Living Will
A living will applies if you are in a permanently unconscious state or facing a terminal condition and are unable to make your own health care decisions. In this document you make your wishes known that you do not want your life prolonged by using life support equipment. You can name two individuals as points of contact. However, you are not giving a family member of friend to make this decision for you. This document is commonly confused with the Last Will and Testament. This document has nothing to do with the distribution of your property.