Estate Planning Essential Documents
According to the American Bar Association, 55% of Americans pass away without a will or an estate plan. If you consider the age when a person should be giving serious thought to these things, 62% of Americans aged 45-54, and an even higher percentage of women that age have not drafted wills.
Below is a brief overview of the types of documents that are essential to any estate plan, and the reasons why.
Will
A will is often said to be the foundation of any estate plan. The main purpose of a will is to disburse property to heirs after your death. If you don't leave a will, disbursements will be made according to state law, which may not be what you would want.
There are two other equally important aspects of a will:
You can name the person (executor) who will manage and settle your estate. If you do not name someone, the court will select an administrator, who might not be someone you would choose.
You can name a legal guardian for minor children or dependents with special needs. If you don't appoint a guardian, the state will select one for you.
Keep in mind that a will is a legal document, and the courts are quite hesitant to overturn any provisions within it. Therefore, it's essential that your will be well composed and articulated and properly executed under your state's laws. It's also important to keep your will updated.
Letter of instruction
A letter of instruction (also called a testamentary letter or side letter) is a non-legal document that typically accompanies your will and is used to express your personal thoughts and directions concerning what is in the will (or regarding other things, like your burial wishes or where to locate other documents). This can be the most helpful document you leave behind for your family members and your executor. As opposed to your will, a letter of instruction remains private. Therefore, it is an opportunity to say the things you prefer to not make public.
Durable power of attorney
A durable power of attorney (DPOA) may help protect your property in case you become physically incapable or mentally incompetent to handle financial matters. If nobody prepares to look after your financial affairs when you can't, your property could be wasted, abused, or lost.
A DPOA enables you to allow someone else to act on your behalf, so he or she can do things like pay daily expenses, accumulate benefits, watch over your investments, and file taxes.
Advanced medical directives
Advanced medical directives let others know what medical treatment you might want, or enables someone to make medical decisions for you in case you can't express your wishes yourself. If you don't have an advanced medical directive, medical care providers must prolong your life using artificial means, if necessary. With today's technology, physicians can sustain you for days and weeks (if not months or perhaps years).
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