Do I need more than a will? Many people believe that if they have a will, their estate planning is complete, but there is much more to a solid estate plan. A will typically does not cover all authority and instruction that is needed at your death. In addition, the will gives no authority to others to handle your affairs if you are incapacitated.
What is a Will and What Does It Do?
A will is a legally-binding statement directing who will receive your property at your death. A will also appoints a legal representative (called an executor or a personal representative) to carry out your wishes. However, a will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly-owned property, property in trust, life insurance proceeds and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate and aren’t covered under a will. Oftentimes, if an individual desires to update his or her beneficiaries, change of beneficiary forms for life insurance, IRAs, and the like will need to be completed to coordinate with the beneficiary changes in the will.
What other Documents Do I Need?
Power of Attorney
A power of attorney allows a person you appoint — your “attorney-in-fact” — to act in your place for financial purposes when and if you ever become incapacitated. In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship, your representative may have to seek court permission to take planning steps that she could implement immediately under a simple durable power of attorney.
A medical directive may encompass a number of different documents, including a health care proxy, a durable power of attorney for health care, a living will, and medical instructions. The exact document or documents will depend on the choices you make.
Both a health care proxy and a durable power of attorney for health care designate someone you choose to make health care decisions for you if you are unable to do so yourself. A living will instructs your health care provider to withdraw life support if you are terminally ill or in a vegetative state. A broader medical directive may include the terms of a living will, but will also provide instructions if you are in a less serious state of health, but are still unable to direct your health care yourself.