As we age, these 3 documents are more important than ever to have. Don’t go without them!
#EstatePlanning #Healthcare #Life
It’s a good idea to review your legal documents every year to make sure each document is complete and up-to-date.
In previous articles, such as Planning For Life’s Unexpected Turns, we have covered a few cornerstones of estate planning. In this reading, we discuss three essential legal documents—the Health Care Proxy, Power of Attorney, and Will—and the risks we take without them.
If there is one thing to know about your Health Care Proxy, Power of Attorney, and Will, it is that they are the primary way to ensure that your wishes are made a priority in the event of accident, incapacity, or death.
So, what happens if these documents have not been put in place to protect your wishes?
What is a Health Care Proxy?
This document designates a person to make medical decisions on your behalf in the event that you can’t make them yourself.
No Health Care Proxy?
If you cannot make your own healthcare choices, decisions may be made according to the specific laws of the state. In general, this means that the hospital will attempt to find a family member to make decisions for you; this can result in tension if multiple family members are contacted and differ on the course of medical action. If there are no family members available (or they can’t agree), medical decisions will be made by the attending medical staff according to what they feel is in your best interest. In either case, this means that your preferences may not be known or carried out.
What is a Power of Attorney?
This document designates a person, as well as the degree of control you grant them, to ensure that your personal financial affairs stay in order.
No Power of Attorney for Finances?
While you are capable of handling your own finances, a power of attorney may not be necessary. However, if you become incapacitated, your loved ones may have difficulty taking care of your financial affairs, such as paying your bills, accessing needed funds, transferring assets to cover expenses or implementing financial planning for your future. Generally, if a person has not assigned an agent to act on their behalf, control of financial management reverts to the State. The court will appoint a guardian or conservator to oversee the management of your estate and your family may be forced to petition the court to gain the authority to care for you. This, of course, takes time and money and can lead to additional frustration on top of handling medical issues.
What is a Last Will and Testament?
This document gives you control over how your assets are distributed and who will have the responsibility for minor children currently in your care, once you pass away.
While inheritance laws differ from state to state, they generally favor spouses and blood relatives as heirs. With some exceptions, such as life insurance policies, retirement accounts or bank accounts with designated beneficiaries, unmarried partners, friends, and charities receive nothing. Depending on your state, this may also apply to registered domestic partners. Without a will and/or beneficiary designations, your entire estate will be distributed according to state distribution rules. Without planning, there may be estate taxes which could have been avoided.
When dealing with the custody of minors, the court will appoint their guardian. Information will be gathered concerning the children, their family circumstances, and the deceased parents’ wishes and utilized to make a decision about the children’s best interests.
To understand how your assets will be distributed, review your individual state’s intestate laws. On most points they read very similarly—splitting your assets evenly among your closest legal relatives—but there may be some practices particular to your region that take you by surprise.
For our clients in New York and California, here are links to the intestate laws:
If you need a referral to a lawyer or need help gathering materials to share with a lawyer, contact us today.