Planning for the future can be stressful, but having the right legal documents in place brings peace of mind for you and your family members. It’s important to protect not only your financial affairs but also your personal and medical decisions. Understanding and preparing these essential legal documents helps ensure your wishes are respected and upheld.
In this post we explore five important legal documents and learn what they are and why they are so important; Will, Living Trust, Advance Directive, Durable Power of Attorney, and Financial Power of Attorney.
Among the most important documents are a last will, a durable power of attorney, and a revocable living trust. These documents help manage various aspects of your life—from financial decisions to medical care—whether during incapacitation or after death. Naming a healthcare proxy and establishing an advance directive ensures your healthcare providers follow your medical treatment preferences. Additionally, having clear beneficiary designations on retirement accounts and life insurance policies can help avoid the lengthy probate process and ensure your assets go to your intended loved ones.
This article is not intended as a substitute for an estate planning attorney or a law firm. As I’m not an attorney, I can’t advise you on your documents’ legality, or which ones your particular situation needs. Each state has different laws. If you fill out your forms yourself, you might want to have an attorney look them over to ensure your wishes are carried out as stated.
At a Glance: What 5 Legal Documents Everyone Should Have:
Legal documents are essential for protecting your rights, wishes, and assets. They can help you avoid conflicts, confusion, and costly legal fees in the future. Here are five legal documents that everyone should have:
- A Will: A Will is a document that specifies how you want your property and assets to be distributed after your death. It also names an executor who will carry out your wishes and a guardian who will take care of your minor children if you have any. A Will can help you avoid intestacy laws, which may not reflect your preferences or benefit your loved ones.
- A Living Trust: A Living Trust is a legal entity that holds your assets during your lifetime and transfers them to your beneficiaries after your death. Unlike a Will, a Living Trust does not go through probate, which is a court process that can be time-consuming, expensive, and public. A Living Trust also allows you to name a successor trustee who can manage your affairs if you become incapacitated.
- A Durable Power of Attorney: A Durable Power of Attorney is a document that authorizes someone you trust to act on your behalf in financial and legal matters if you are unable to do so yourself. This can include paying bills, filing taxes, selling property, and accessing bank accounts. A Durable Power of Attorney can help you avoid the need for a court-appointed conservator or guardian, who may not be someone you know or want.
- A Health Care Proxy: A Health Care Proxy is a document that appoints someone you trust to make health care decisions for you if you are unable to communicate or consent yourself. This can include consenting to or refusing treatments, surgeries, medications, and life-support measures. A Health Care Proxy can help you ensure that your wishes are respected and that family members and doctors are on the same page.
- A Living Will: A Living Will is a document that expresses your preferences for end-of-life care, such as whether you want to receive CPR, artificial nutrition and hydration, pain relief, and organ donation. A Living Will can help you avoid unwanted interventions and reduce the burden on your loved ones and health care providers.
For more information on each of these legal documents, please scroll down to the detailed sections below.
Video: 5 Legal Documents Everyone Should Have
What Legal Documents Should Everyone Have?
Will
A Will is a document that states how you want your estate handled after your death. Not a cheery thought, but it should be done.
What Information Do You Put in Your Will?
In a last will, the main purpose is to specify how you want your estate—such as furniture, photographs, and jewelry—distributed after your death.
You can also name a guardian for your minor children or dependents.
Nowadays, many people include who will take care of their pets. Confirm with the person beforehand to ensure they are willing to take on the responsibility. You can stipulate a monetary amount you are leaving for the pet’s caretaker with the intended use for your pet’s expenses (s).
What Is Not Included In a Will?
Insurance policies and bank accounts often aren’t included in a will and testament because they usually have named beneficiaries. Make sure your beneficiary designations are up-to-date for all these accounts. Any name changes, address changes, etc., should be updated.
You May Be Interested in Reading: Quicken WillMaker & Trust
Probate
If you die without a last will, your property undergoes a process known as probate. During probate, a probate court judge appoints an executor to distribute your estate, which may not align with your final wishes. Having a will is vital to ensure your desires are met.
Together or Separate?
It is generally advised for spouses to have separate wills. This step is particularly important if previous relationships or children from different marriages are involved, as it ensures each person’s wishes regarding their estate are respected.
Witnesses
Wills often need to be witnessed, typically by someone not mentioned in the will to maintain impartiality. Some state laws require two or more witnesses to validate a will.
Updates
It’s a good idea to review your will every 2–3 years or after major life events such as:
- Divorce
- Marriage
- Birth of a Child
- Death of a Beneficiary
Contested
A will can be contested by someone who feels wronged or believes the will does not comply with state laws. Contesting can also occur if it’s suspected that the will-maker was not of sound mind or was coerced. Adding a no-contest clause may deter these challenges by stating that beneficiaries lose their inheritance if they dispute the will.
The best thing to do is to be clear and concise about what you want. It’s also a good idea to have an estate attorney look over your completed estate planning documents.
Definitions
Below are some standard terms that will be helpful when considering and drawing up a Will are:
- Testator
- The person who makes the will.
- Executor
- The person assigned to manage and distribute the estate as specified in the will. Multiple executors can be named.
- Estate
- The possessions and property owned by the testator, including real estate and personal items like jewelry.
- Intestate
- Dying without a will, resulting in the estate being distributed according to state laws.
- Probate
- The legal process of distributing the estate through a court.
- Administrator
- The person appointed by the court to act as executor if there is no will. This person follows state laws, which may not align with your wishes.
Revocable Living Trust – Trust No One
Perks of Holding a Revocable Living Trust
A revocable living trust provides several advantages. First, it allows someone to make decisions for you if you become incapacitated. This person, often a family member, can handle your financial affairs and medical care. Through a durable power of attorney and a health care proxy, important decisions about your medical treatment and end-of-life care can be made on your behalf.
Another benefit is avoiding the costs and delays associated with probate court when you pass away. The trust facilitates faster distribution of your assets, like retirement accounts and real estate, without the hassle of probate court. Also, it ensures that these transactions remain private and do not become public record.
A revocable living trust is also a great place to manage and safeguard your important legal documents, such as life insurance policies, beneficiary designations, and financial assets. By organizing these in the trust, you make it easier for the personal representative to execute your final wishes and funeral arrangements.
If you have a Revocable Living Trust, you still need a Will. Why? Because a Revocable Living Trust only covers assets with a title, such as a home, retirement account, car, etc. It doesn’t cover property such as furniture, jewelry, or photographs. You also cannot assign a guardian for dependents in a Living Trust.
Remember to store the trust and related documents in a safe place where your chosen representatives can access them when needed.
Be aware that Revocable Living Trusts need to be funded. Funding refers to transferring ownership of the property from your name to the name of the trust.
Here is a video to explain it a little more.
Advance Directives & Durable Power of Attorney for Health Care
Accidents and illnesses can happen to anyone, even the healthiest individuals. It is essential to have the right legal documents to ensure your medical decisions are respected if you are incapacitated. Creating an Advance Directive and a Durable Power of Attorney for Health Care are two crucial steps you should take.
An Advance Directive specifies your wishes for medical treatment if you can’t speak for yourself due to injury, illness, or mental incapacity. This directive can include instructions on life support, life-sustaining treatments, and other medical care choices. Having this document helps guide healthcare providers and your family members on your preferences, bringing peace of mind.
A Durable Power of Attorney for Health Care lets you designate a trusted person, also known as a healthcare proxy, to make your healthcare decisions if you become unable to. This person should be someone who understands your medical wishes and is willing to act on your behalf. Discussing your preferences with this person in advance is a good idea.
Without these critical documents, your family members may face difficult decisions regarding your care without knowing your exact wishes. This can lead to stress and potential conflicts during already challenging times. Ensure that these essential legal documents are included in your estate planning to avoid uncertainty and provide clear directives for your medical providers.
Preparing an Advance Directive and a Durable Power of Attorney for Health Care is an important step to safeguard your healthcare decisions. This preparation offers the best way to make sure your medical and personal affairs are handled according to your wishes, providing peace of mind for you and your loved ones.
Financial Power of Attorney
A Financial Power of Attorney (POA) lets someone handle your financial matters when you can’t. This includes tasks like paying your bills, accessing your bank accounts, and making financial decisions on your behalf. Since this document grants significant power, select a trustworthy person.
It’s crucial to ensure this document is prepared while you are mentally competent. Once you are incapacitated, it becomes extremely difficult to set up. In such cases, a court procedure called guardianship or conservatorship would be necessary.
The durable power of attorney keeps its validity even if you’re unable to make decisions on your own. This document can cover various financial aspects, including managing brokerage accounts, handling insurance policies, and controlling pension documents and annuity contracts. It also extends to managing bank accounts, real estate, and vehicle titles. Having this document in place provides peace of mind and ensures your financial affairs are handled appropriately.
Documents, Documents, Documents – Are They Necessary?
Completing your estate planning documents may seem overwhelming but can be so worthwhile. Once your important legal documents are in place, you will have peace of mind knowing that your wishes a clear, leaving your loved ones with a clear understanding of what you want.
According to best-selling author and expert money guru Suze Orman: …the biggest oversight people often make is not figuring out what will happen to their belongings when they are no longer able to make decisions. Creating a will is a good first step, but it isn’t the only document you’ll need to protect yourself and loved ones in the case of your death.
Having your estate planning in order is worthwhile and brings peace of mind. Taking steps to prepare the right legal documents helps ensure your wishes are carried out, making it easier for your family members during difficult times.
Key Documents for Estate Planning
- Last Will and Testament: This outlines your wishes regarding property disposition and guardianship of minor children.
- Durable Power of Attorney for Healthcare: Allows someone to make medical decisions on your behalf if you’re unable to.
- Financial Power of Attorney: Allows someone to make financial decisions on your behalf if you’re unable to.
- Advance Directive: This includes a Living Will and a Healthcare Proxy to specify your wishes for medical treatment and life support.
- Revocable Living Trust: Helps manage your financial assets and property, potentially avoiding probate court and reducing taxes.
Protecting Your Rights and Wishes
- HIPAA Authorization: Grants access to your medical records and health information to specified individuals.
- Beneficiary Designations: Ensures that retirement accounts, life insurance policies, and other financial assets are passed on according to your wishes.
- Letter of Last Instruction: Provides your personal representative with details on your final wishes and funeral arrangements.
Important Information to Include
In addition to estate planning documents, make sure to have your birth certificate, driver’s license, social security card, and insurance cards stored in a safe place. Also, consider a HIPAA release for healthcare providers to access your health information.
Consulting with an estate planning attorney or financial advisor is a good idea to ensure all documents comply with state laws and any specific requirements. Many offer free consultations to get you started on your legal plan.
FAQs
Can I make handwritten changes or corrections to estate documents?
Handwritten changes can sometimes cause legal documents to be invalid or confusing. It’s a good idea to consult an attorney for proper amendments. They can help ensure your last will, durable power of attorney, and other important legal documents are filed correctly.
What happens to my estate documents if I move to a different state or country?
Laws regarding these documents can vary by jurisdiction. If you relocate, it’s wise to review and update your documents to ensure they comply with the laws of your new residence.
How do I store my estate documents securely?
Laws differ by location, so if you move, review your documents to comply with local laws. Keep your advance directive, living will, and other essential estate documents updated to match your state’s laws to avoid complications.
Is a living Will the same thing as an Advance Directive for Health Care?
A “Living Will” and an “Advance Directive for Health Care” (sometimes called an “Advance Healthcare Directive” or “Healthcare Proxy”) are related documents, but they serve slightly different purposes and are different.
An advance directive is a general term for any legal document that outlines your health care wishes in case you cannot speak for yourself.
A living will is a specific type of advance directive that states your preferences for medical treatment if you become terminally ill.
There are other types of advance directives as well, such as a medical power of attorney, a do-not-resuscitate order, and a portable order for life-sustaining treatment.
How should I store my estate documents securely?
Store documents like your revocable living trust, health care power of attorney, and HIPAA release in a safe place. Options include a safe deposit box or a trusted attorney. Ensure family members or a trusted friend know where these documents are in case of an emergency.
Final Thoughts
Ensuring you have these five essential legal documents—will, durable power of attorney, healthcare proxy, living will, and a revocable living trust—provides invaluable peace of mind. These documents not only safeguard your wishes and assets but also ease the burden on your loved ones during challenging times.
Taking the time to prepare and update these legal instruments empowers you to take control of your future, knowing that your affairs are in order. By addressing these crucial aspects now, you can focus on living your life to the fullest, with the assurance that your legacy and well-being are protected.
Do you have any experience with preparing a legal document that you would like to share? Please comment below; I would love to hear them.
Additional Reading
Just read this article and wanted to share my thoughts. a very strong but important topic. Some individuals may not look that far into their future but after reading this, it makes me what to prepare more, thank you!
Hi Ethan,
I know sometimes completing these types of documents can be daunting and even admitting to ourselves that we’re not invincible. Once the documents are done don’t forget to revisit them every so often to be sure they are up-to-date and to make any changes needed. Thank you for reading the article and commenting.