Life happens – and when it does, vital documents provide a playbook for the people in our life we rely on to help sort out the issues. Having decisions solidified in contracts ensures there isn’t confusion and identifies a clear direction for handling even the most challenging life event.
The good news is that it is never too late to start thinking about these document and getting your house in order. While some people choose to tackle these documents on their own (if at all), it’s smart to tap the assistance of knowledgeable legal experts.
Here are at least four documents that are essential in staying prepared for even the most adverse life event:
- Living Will or Advanced Directive
- Durable Power of Attorney
- Last Will and Testament
- Living Trust
Living Will or Advance Directive
If you ever have to check into an emergency room or have a prolonged stay at a hospital, a common question you may hear is, “Do you have a living will?”
A living will, also referred to as an advance directive, helps guide medical officials and family in the event you are unable. One of the most important aspects of a living will is identifying someone you have elected to help make your decisions. That agent can be anyone you have a close relationship with, such as a family member, partner, or spouse.
The living will will clearly spell out your beliefs about things like if you do not want to be resuscitated (DNR), or what type of religious person you want at your bedside in the hospital. Having a frank conversation with your family and a legal expert now can avoid serious disagreements with doctors and family that could have huge legal repercussions down the road.
Tip: All states require your agent to be at least 18-years-old. Also, different states have different regulations. If you move to another state, be sure that your living will is up to those standards. It helps to review your living will annually or as life changes require that impact the people you chose.
Durable Power of Attorney
If the living will clarifies your medical and religious beliefs during medical emergencies, the durable power of attorney identifies the person who can make financial decisions during moments you cannot.
This applies under medical circumstances, but can also work for people who travel internationally frequently.
Like a living will, the person you select can be a close relative or spouse and is known as an agent. That person will ostensibly be able to act on your behalf in order to handle your financial affairs. They can have a wide-range of access or as little access as you choose to pay taxes, collect benefits, buy insurance policies, handle financial transactions, or manage stocks and investments.
The advantage of selecting your agent and completing a power of attorney mitigates massive legal and financial headaches later.
Tip: While most states require minimal paperwork to complete a power of attorney, some banks have their own forms. In addition to your original power of attorney document, it may be helpful to prepare additional copies that align with the financial institutions you do business with.
Last Will and Testament
Often associated with dramatic scenes depicted in books and movies, the will declares your final wishes with regards to where your assets, possessions, and property will be distributed when you die.
There have been many high-profile cases that illustrate just how important it is to have a will. Without one, the distribution of your assets and property could be left to a judge instead of your loved ones. In some places, state laws automatically dictate where your assets and property goes in the event you do not have a will prepared. Some assets may be divided between spouses and children–or they could and can be the source of bitter legal battles.
A will is also an important contract that maps out a plan if you have children. There are important sections of a will that identify who the legal guardians and financial executors are for minors in the event that you and your spouse cannot be there to support them.
What does a will do?
- Appoint someone (know as an executor) who is responsible for handling financial and legal responsibilities.
- Decides who will receive your property.
- Allocates charities that will receive assets.
- Says who will watch your children.
- Outlines your last wishes.
Tip: Revisit your will annually, especially if it involves many different members of your family. Understand your state laws so they don’t bite you in court.
For some people, a will is not enough. If you have a lot of assets and property spread across different states, then a living trust may be something to consider.
With a will, your wishes will be heard and executed through a probate–court proceedings which will ensure your assets are allocated and distributed according to your wishes.
With a living trust, there are two big benefits. First, since a will requires probate, it could take months or years to figure out where everything goes. A living trust will allow the distribution of assets to take a matter of weeks. Second, a will involves legal proceedings which can become public. A trust keeps the division of assets and property a private matter.