A wise man said to me the other day that "as long as we have one parent alive, we are always young."
Well on Jan. 28, I officially became "old" with the passing of my mother. I thank all who expressed their condolences and shared stories with me regarding their experiences dealing with hospitals, hospice and "the system." Several asked me to tell them which documents I was referring to in my column about my mom and the cost of dying. So here are the four basic documents needed.
A will provides instructions for distributing your assets to your family and other beneficiaries upon your death. You can customize its provisions to meet your needs. You appoint a personal representative (also known as an "executor") to pay final expenses and taxes and then distribute your assets. If you have minor children, a will is the only way you can designate a guardian for them.
To be effective, a will must be filed in probate court after your death. Probate is a judicial process for managing your assets if you become incapacitated and for transferring your assets in an orderly fashion when you die. The court oversees payment of liabilities and the distribution of assets. Because a will does not take effect until you die, it cannot provide for management of your assets if you become incapacitated. That's why it is important to have other estate planning documents, discussed below, that become effective if you should become incapacitated.
2. Durable power of attorney
A power of attorney is a legal document in which you name another person to act on your behalf. This person is called your agent or attorney-in-fact. You can give your appointed agent broad or limited management powers. You should choose this person carefully, because he or she will generally be able to sell, invest and spend your assets.
A traditional power of attorney terminates upon your disability or death. However, a durable power of attorney will continue during incapacity to provide a financial management safety net. A durable power of attorney terminates upon your death.
3. Health care power of attorney
A durable power of attorney for health care authorizes someone to make medical decisions for you in the event you are unable to do so yourself. This document and a living will can be invaluable for avoiding family conflicts and possible court intervention if you should become unable to make your own health care decisions.
4. Living will
A living will expresses your intentions regarding the use of life-sustaining measures in the event of a terminal illness. It expresses what you want but does not give anyone the authority to speak for you. In some states, this document may be combined with a health care power of attorney.
The biggest question is "do I need an attorney to do this"? The answer is — yes and no.
There are several ways in which you can accomplish the above. You can purchase an estate planning software program and do it yourself, you can use an internet service or you can utilize the services of a local attorney who specializes in estate planning. Having the basics is far better than not having anything at all.
We used an attorney when it became unclear as to my mom's status with end-of-life issues or need for Medicaid planning. Prior, we used the self-directed method with estate planning software. I am not an attorney and I don't practice law, but I looked at all the alternatives and chose the best one for me, and so should you.
If your estate is complicated, then it is imperative that you utilize the services of an attorney because you will never be able to maneuver through the system to protect your estate without one. The need for a trust might be on the horizon, but which kind is something only a qualified estate planning attorney can answer and execute for you.
No matter which way you decide to go, I suggest you sit down with your children (or your parents like I did) and have that very, very hard discussion and plan now so the end is clear and uncomplicated.
Fred L. Goldenberg is a certified senior advisor and the founder of Senior Benefit Solutions, LLC, a consumer and financial services organization in Traverse City. If you have any questions or comments about this article or any senior issue, he can be reached at 922-1010 or email@example.com.