Thanks for visiting my post on wills and estate planning. Almost everyone knows that you should have a will as part of your estate plan. A will helps to ensure that your estate is distributed in accordance with your wishes after you pass on. However, most peope don't give much thought to the other types of documents that they should probably have in place in addition to a will. Here, we will touch on the other basic documents you will likely need as part of your estate plan. Hopefully you will find this information entertaining and useful.
Wills: A will, of course, is an instrument used for the disposition of a person's property after his death. Because I've already discussed the making of a will previously, I won't rehash those details here. You can find all the relevant information in my article on Making a Will.
Trusts: A trust (or trust fund) is a property interest held by one person (the trustee) at the request of someone else (the settlor) for the benefit of some third party, known as the beneficiary. By way of example, a grandfather may decide he wants to leave his 3-year-old grandson some real property and $10,000. As a toddler really isn't capable of managing property (or cash for that matter), the grandfather might ask his son (the grandson's father) to manage the trust until the grandson comes of age. Here, the grandfather is the settlor, the father is the trustee, and the grandson is the beneficiary. (Usually, the settlor will also name an alternate trustee, just in case the original pick is not willing or able to serve in that capacity. However, a trust will not fail for lack of a trustee; in other words, even if you forget to name one, you can be sure that a trustee will be appointed.)
In short, a trust can be a useful in varous ways, such as transferring property out of your estate prior to death. The rules for trusts vary by state, so you may want to consult with a lawyer when establishing one.
Medical Power of Attorney
In general, a power of attorney (POA) is a document that allows someone else to act as your agent or attorney-in-fact. Basically, it permits another person to do all of the things that you yourself would be allowed to do: sign contracts on your behalf, deposit and withdraw money from your accounts, etc. That said, a power of attorney can be limited; for instance, you can give someone a limited power of attorney with respect to buying a car for you. In other words, this authority would allow them to go purchase a car for you - and would limited by whatever price or other restrictions are present in the POA - but wouldn't authorize them to do anything else.
Likewise, a Medical Power of Attorney would allow someone to make medical and health care decisions on your behalf if you were unable to make them yourself. For instance, such a document is useful if a person is suffering from an illness such as dementia or Alzheimer's, or if they have suffered a traumatic injury that inhibits their ability to make their own health care choices (e.g., the person is in a coma). Typically, the agent with respect to a medical POA is either a spouse or an adult child.
Occasionally, a person will become incapacitated and require long-term care. In such instances, they will need a guardian of both their estate and their person. To prepare for the possibility of such an event, it maybe wise to draft a Declaration of Guardian in the Event of Incapacity.
Directive to Physicians
The Directive to Physicians and Family or Surrogates (sometimes just called a Directive to Physicians or Advanced Directive) is a document whereby an individual makes his wishes regarding medical care known to his physician in advance of being unable to make such decisions in the future. It is very much like a power of attorney (which is, in fact, another type of advanced directive), except you are making the decisions yourself in advance of a debilitating illness or injury rather than allowing an agent to make the decision later.
This type of directive is common when dealing with issues like terminal illness or when a person does not want heroic, life-sustaining efforts exerted on their behalf. Ordinarily, you will not have both a Directive to Physicians and a Medical POA - primarily due to the possibility of conflict. For example, a terminally ill patient may prefer to let nature take it's course and sign an advanced directive with a do-not-resuscitate order before slipping into a coma; however, a relative who has power of attorney may want the doctors to do everything possible to prolong the person's life, even if they aren't conscious. To avoid such conflicts, it is often necessary to make a decision about which form of advanced directive to embrace.
A Disposition of Remains document basically allows you to appoint an agent to handle - as the document title suggests - the disposition of your remains. Typically, this includes funeral arrangements, including burial or cremation. As with other such documents, you should appoint both a primary and an alternate agent in this regard. (Hopefully, those you appoint are individuals who are privy to and will respect your wishes in this matter.)
In general, a power of attorney (POA) is a document that allows someone else to act as your agent or attorney-in-fact. Basically, it permits another person to do all of the things that you yourself would be allowed to do: sign contracts on your behalf, deposit and withdraw money from your accounts, etc. That said, a power of attorney can be limited; for instance, you can give someone a limited power of attorney with respect to buying a car for you. In other words, this authority would allow them to go purchase a car for you - and would limited by whatever price or other restrictions are present in the POA - but wouldn't authorize them to do anything else.
Likewise, a Medical Power of Attorney would allow someone to make medical and health care decisions on your behalf if you were unable to make them yourself. For instance, such a document is useful if a person is suffering from an illness such as dementia or Alzheimer's, or if they have suffered a traumatic injury that inhibits their ability to make their own health care choices (e.g., the person is in a coma). Typically, the agent with respect to a medical POA is either a spouse or an adult child.
A medical POA should, at a minimum, cover the following:
- The POA's duration - how long it will last;
- Revocation - it should revoke any prior POAs, so that there is no conflict or confusion regarding who is the agent;
- The powers of the agent - this portion will establish the limits of the agent's authoriy - specifically, what the agent can and can't do; and
- Alternate agent - the medical POA should designate an alternate to serve as agent if the original selection is unwilling or unable to serve in that capacity.
A medical power of attorney is generally considered to be a good idea, particularly if you are more senior in age.
Declaration of Guardian
Occasionally, a person will become incapacitated and require long-term care. In such instances, they will need a guardian of both their estate and their person. To prepare for the possibility of such an event, it maybe wise to draft a Declaration of Guardian in the Event of Incapacity.
Basically, this ensures that you would be entrusting your long-term care (your person) and finances (your estate) to someone who you are sure will be concerned with your best interests. It is not necessary that the guardian of the person and the estate be the same individual, although that is frequently the case. Moreover, as with wills, trusts, and most other estate-planning documents, it's wise to appoint an alternate guardian in case your original selection is not in a position to serve.
Directive to Physicians
The Directive to Physicians and Family or Surrogates (sometimes just called a Directive to Physicians or Advanced Directive) is a document whereby an individual makes his wishes regarding medical care known to his physician in advance of being unable to make such decisions in the future. It is very much like a power of attorney (which is, in fact, another type of advanced directive), except you are making the decisions yourself in advance of a debilitating illness or injury rather than allowing an agent to make the decision later.
This type of directive is common when dealing with issues like terminal illness or when a person does not want heroic, life-sustaining efforts exerted on their behalf. Ordinarily, you will not have both a Directive to Physicians and a Medical POA - primarily due to the possibility of conflict. For example, a terminally ill patient may prefer to let nature take it's course and sign an advanced directive with a do-not-resuscitate order before slipping into a coma; however, a relative who has power of attorney may want the doctors to do everything possible to prolong the person's life, even if they aren't conscious. To avoid such conflicts, it is often necessary to make a decision about which form of advanced directive to embrace.
HIPAA Release
Even with a medical power of attorney, your agent may have difficulty making decisions that are in your best interest if the doctor isn't allowed to disclose your medical information. Such information is protected and confidential under the Health Insurance Portability and Accountability Act (HIPAA). Drafting and signing a HIPAA Release will alleviate this problem. You simply have to name your agent(s) in the document and the doctor will be authorized to disclose the requisite information.
Disposition of Remains
Even with a medical power of attorney, your agent may have difficulty making decisions that are in your best interest if the doctor isn't allowed to disclose your medical information. Such information is protected and confidential under the Health Insurance Portability and Accountability Act (HIPAA). Drafting and signing a HIPAA Release will alleviate this problem. You simply have to name your agent(s) in the document and the doctor will be authorized to disclose the requisite information.
Disposition of Remains
A Disposition of Remains document basically allows you to appoint an agent to handle - as the document title suggests - the disposition of your remains. Typically, this includes funeral arrangements, including burial or cremation. As with other such documents, you should appoint both a primary and an alternate agent in this regard. (Hopefully, those you appoint are individuals who are privy to and will respect your wishes in this matter.)
In conclusion, you can see that while it is certainly beneficial to have a will in place, that is really just the start of any true estate plan. There are several other documents which it would also behoove you to have drafted on your behalf in order to ensure that your wishes are respected in all regards.
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