If you are recently married and a new parent, you have probably already heard how important estate planning is. While everyone knows how important a Will is, the two other documents, a Power of Attorney and a Health Care Directive, are equally important to estate planning. Together, these three documents are the initial steps to ensuring both your and your family’s well-being no matter what happens in the future. Before speaking with an attorney, it is worth understanding what each document is and what it does.
A Will is the most well known document in estate planning. It ensures your property is distributed in the way you intend it to be after your passing. For young people, the thought of passing on does not come across your mind too often, particularly when you are just beginning your life as a spouse or parent. But, unfortunately, sad and unexpected things can happen. Taking a short amount of time for estate planning, allows you to rest your head at night and know that no matter what happens, your family is taken care of. Beyond the residual estate, a well-thought out Will allows the testator to determine whether he or she would like anyone to have specific gifts that have sentimental meaning, such as a wedding ring to a daughter, or tools to a son, or a keepsake to a good friend.
Of particular importance for young families’ estate planning is ensuring that a Will has a guardian clause and includes the setting up of a trust. Should both spouses pass, the guardian clause ensures that the people to look after your children are the people you choose, with values that you share.
A trust is important in the event that you pass before your children achieve majority (18 years old). Without a trust provision, your children will receive their share of the entire estate upon their eighteenth birthday. That is a lot of money and a lot of responsibility to bestow upon an eighteen-year-old. A trust ensures that the estate proceeds are held by a trustee, again chosen by you, and the money is given to the children at a time chosen by you. In between the date your child is to receive the proceeds, the money can still be used for the well-being of your child. An example would be for schooling, or health reasons.
A Power of Attorney, though potentially dangerous, is a very important document in estate planning. It grants someone of your choosing (your “agent”) the power to stand in your shoes regarding the management of your assets. It is important part of estate planning, because it allows your agent to take care of your personal business if you are unable to do it yourself. As an example, should you sustain some sort of disabling injury, an agent would be able to make sure your bills are paid and your finances are in order. If you are disabled and you do not have an executed power of attorney, you run the risk of losing your assets because you cannot take care of them and none of the trusted people in your life will be allowed.
While important, a Power of Attorney can also be dangerous. As soon as it is executed, it becomes effective immediately, granting the agent the ability to access your assets. In order to overcome this, the decision of who is your agent becomes critical. Often, a spouse is the best choice, particularly nowadays when many spouses do not share bank accounts. However, if you cannot find a person you trust completely, another option is to limit the Power of Attorney. An example would be granting the agent the right to withdraw only a maximum amount of money per month.
An Advanced Health Care Directive consists of a Living Will and a Health Care Power of Attorney.
The Living Will provides doctors and any family members with a clear statement of your wishes should you be in a terminal condition or in a state of permanent unconsciousness. It allows the declarant the ability to make the choice of whether to have the doctors keep him or her alive, or whether he or she would rather be kept comfortable and pass on naturally. The Living Will is importakes these emotional decisions out of the hands of loved ones and relieves them of the pressure of making such a decision.
The Health Care Power of Attorney designates someone (your “health care agent”) to make decisions for you regarding medical treatment if you are not able to. The best example of this is if a person were to sustain a brain injury. In that case, the person’s health care agent has the authority to authorize surgical and medical procedures, as well as placement in a nursing, residential or rehabilitation facility and request medical records.
For young people just starting families, it may seem inapposite to have to think about what would happen if you were to pass on. But, this also marks the first time in your life that you are being depended upon as a provider. By having a Will, a Power of Attorney and a Health Care Directive that are all well thought out and drafted according to your wishes, you can rest assured that the most important people in your life are taken care of regardless of what the future holds.Back To All of our Blog Stories A