A Cheat Sheet For Estate Planning

If you’re confused about estate planning, as many people are, here’s a link to a helpful Wall Street Journal article by financial journalist Tom Lauricella introducing you to the four estate planning documents everyone should have.

1.  A will

The most basic estate planning document is a will.

“Many people think they don’t need a will. But sitting down with a lawyer and completing a will is the best way to ensure your wishes will be fulfilled—and to avoid leaving anything up to the courts,” says Lauricella.

In your will, you can name your estate’s executor (called a “personal representative” in Florida), identify guardians for your minor children, and specify who gets your assets – including your home, brokerage, and bank accounts after your death.

2.  Durable power of attorney.

Unlike a will which only takes effect at your death, a durable power of attorney only works while you’re alive.

A power of attorney, explains Lauricella, “gives someone else the authority to act as your ‘agent’ and make legal and financial decisions should you become incapacitated.”

Don’t underestimate the importance of a durable power, or DPOA. Without this in place, you could end up with a very costly guardianship under the supervision of the courts if you are unable to manage your own affairs due to a medical emergency (even temporary) or dementia.

When you pick someone as your attorney-in-fact (the person who exercises the durable power), make sure to name a person who is organized, trustworthy and capable of handling your financial decision-making.

3.  Medical power of attorney

Also known as a health-care proxy, this document allows you to name someone else to make medical decisions on your behalf should you be unable to make them yourself.

It needn’t be the same person you’ve entrusted with your financial affairs via the durable power of attorney.

(The difference between the two documents? The DPOA addresses financial affairs, while the medical power of attorney covers health and medical issues).

Financial acumen is not the key qualification for this job. Your best choice for the medical power of attorney is someone who knows you and your family situation well, and understands your values and lifestyle.

4.  A living will

Like a medical power of attorney, a living will addresses medical contingencies and puts into writing your wishes for end-of-life care.

“That includes such things as whether you want to be resuscitated if your breathing or heartbeat stops, or whether you want to be kept alive through artificial respiration or feeding,” says Lauricella.

Some final thoughts

Lauricella has some good practical advice:

“Lastly, make things easier for everyone by keeping your important documents, financial records and even information about doctors and medication updated and in one place. (Just not in a safe-deposit box, which will require a power of attorney to access.)”

And here’s our two cents. Don’t try to draft these documents yourself, or use someone who’s not qualified to do estate planning.  An experienced, knowledgable estate planning attorney can save you from making a disastrous mistake that won’t be discovered until it’s too late to fix. That doesn’t mean you need to spend a fortune; there are plenty of qualified and reasonable attorneys — just ask other financial professionals for referrals.

And by the way, don’t neglect a key document Lauricella forgot to mention. Many accounts, like your 401(k), IRA, annuities and insurance policies, are governed by their own beneficiary designation forms. These are free to fill out, and determine how these accounts will be distributed at your death.

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!


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