Many people donít think that they have sufficient assets to need estate planning, but the truth is that everyone has an estate and needs at least basic documents in place. The basic estate planning documents include wills, revocable living trusts, financial powers of attorney, medical powers of attorney and living trusts.
A will states where you want your probate property to go on your death. The problem with wills is that they do not cover as much as you might think. Life insurance, annuities, 401(k)s and IRAs are all controlled by the beneficiary designation, even if your will names someone else. Real estate and bank accounts in joint tenancy pass to the surviving owner.
A revocable living trust is a trust over which the trustmaker has complete control during his or her lifetime. It works as a will substitute to avoid probate and distribute property on death. It provides instruction for caring for the trustmaker during the trustmakerís incapacity. A living trust is more comprehensive than a will since it is often the beneficiary of life insurance policies and other accounts. A living trust
A financial power of attorney allows your agent (the person nominated) to make financial decisions for you. Even a spouse does not have a legal right to make financial decisions for the other spouse. For example, imagine the situation where a husband has a stroke and is rendered incompetent. Without a financial power of attorney, the wife would not be able to refinance or sell their residence. She would be forced to commence conservatorship proceedings in court, resulting in additional stress and legal fees often in excess of $2,000.
A medical power of attorney give the person named the right to make medical decisions for you if you are unable. It avoids the need for a court-appointed guardian to make those decisions. You can name one person or multiple people acting together to make those decisions.
A living will states what you would want to happen if you were in an end of life situation. It can be drafted to meet your personal decisions. Living wills state if you would want to be kept on life support, have artificial nourishment and artificial hydration if you were in various situations. It works in conjunction with your medical power of attorney.