Having these three documents can ease the burden for the people who must continue on without your input, and they’re necessary to establish legal guardians of your minor children. Importantly, having the three key estate planning documents is something you should make a priority – no matter what life stage you are in.
Planning for Care: It’s Critical to Make Your Wishes Known
It’s essential to have a plan in place to carry out your wishes if the worst happens – such as if you become incapacitated and your minor children are left on their own. Otherwise, a court will make these decisions for you. You’ll have no say in who cares for your children, how your own care is managed, or what happens to your assets.
So, how can you prepare? The first and most important step is to have an attorney draft the three legal documents that everyone needs so that your plan can be legally enforced. The essential documents are:
- A will that appoints a guardian for minor children,
- A health care proxy that specifies your wishes and appoints someone to make healthcare decisions on your behalf, and
- A durable power of attorney that gives someone of your choosing the legal right to handle your finances and pay for your care.
Document #1: A Will
Wills are the documents that most often come to mind when we talk about estate planning. It is the only legal way to appoint a guardian for your minor children. A will can also be used for other estate planning purposes, of course. It can name your beneficiaries and offer a great deal of control over how your assets will be distributed. One drawback of using a will for passing on assets is that they are subject to probate, which can be lengthy, expensive, and public.
You’ll want to hire an attorney to create a will, particularly if you are using it to name a guardian for your children. If your child has special needs or if the care of your child is complicated in some way, an attorney can guide you in creating a plan that aligns with your wishes.
The selection of an attorney is very personal, so it may make sense to start by asking someone you know and trust. An important consideration is that wills and estates are very specialized areas of law. The attorney you choose must be one who specializes in estate planning; a generalist may not have the expertise you need. Your financial advisor should be able to provide a referral to an attorney who has the needed experience.
Document #2. Healthcare Proxy
A healthcare proxy is a document that appoints someone to make health care decisions on your behalf. It can also express your wishes for what type of care you will receive. You can be as specific as you like – from treatments to doctors and hospitals, to when you choose to stop receiving care – and anything else you choose to include.
States vary in how they address these issues. In some states, you will need to combine the health care proxy with a living will that spells out your preferences for medical care. Together, these are sometimes called an “advance directive for healthcare”.
Other states have developed simple documents that combine both and do not require a lawyer. Georgia, for example, has created a standardized Advance Directive for Healthcare form that is easily available online and when executed and witnessed is a legal document. When setting up your health care proxy, be sure to check what’s available in your state.
Your doctor’s office is potentially a good place to start as they will be most familiar with your health situation and they have a stake in ensuring you have a treatment plan. If your state has created a healthcare proxy, they may have the forms available. If your state does not offer this, you’ll need to speak with an attorney.
Document #3. A Durable Power of Attorney
The third essential document is a durable power of attorney. It’s called “durable” because, unlike a regular power of attorney, it does not end if you become incapacitated. Once you have appointed a healthcare proxy and specified your preferences for care, you’ll need a durable power of attorney for your finances. Of course, this document will need to be drafted by a lawyer.
This durable power of attorney specifies a person to make financial decisions on your behalf, including paying your bills and paying for your care. The person you select does not have to be an attorney but will be referred to as your “attorney-in-fact” or “agent”. If necessary, this person can hire appropriate professionals that will be paid from your assets.
Three Legal Documents Everyone Needs
You’ve worked hard to build a life for yourself and your loved ones. To make sure your wishes – both for yourself and everyone you care for – are carried out, it’s important to put some thought into your estate planning. At a minimum, there are three legal documents everyone needs. Hiring an attorney to draft and update them as needed, is the beginning of a true estate plan.
If you’d like help finding an estate planning attorney to help you create your estate plan, click here to set up a quick, complimentary introduction call to see if Prana Wealth is a good fit. We do still have the capacity to take on new clients.
As a fee-only financial advisor in Atlanta, we can (and do) work virtually with clients all across the U.S. and we’re here to help you when you’re ready.
The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.