In fact, a recent ABCNews poll found that only about 50 percent of Americans have created a will and significantly fewer have created the supporting estate documents like a living will or a power of attorney.
Preparing now for the end of your life or for illness may not sound like fun, but it is necessary. Having a plan for the future can help bring you peace and even put you on the road to stronger financial security. It can also help those you care most about. We’ve all heard cautionary tales about relatives or friends who did not have a will, and family members who were left with difficult but avoidable situations.
So, how do you start an estate plan? It has a lot to do with carefully drawn documents, but it’s the planning behind them that really counts. I would encourage you to work with a qualified financial, estate and/or tax professional in your home state at the earliest opportunity to make sure your plans fit your needs and the needs of your loved ones. Here’s a bit more detail on each.
A will, also called a testament, is the starting point. Wills are generally seen as the umbrella document that drives the rest of an individual’s estate process. A will generally accomplishes the following:
• It details how you want to leave your property to specific people or institutions after you die.
• If you have minor children, it allows you to name a guardian to care for them after you die or become incapacitated. It also indicates who will manage your kids’ assets, including what you leave them.
• It lets you name your executor, the trusted person who will carry out all your wishes in the will.
If you die without a valid will, your state’s court system may get involved in distributing your assets depending on intestacy laws on the books.
A living will, also known as an advance directive, allows you to define how you want to be medically treated under specific situations, including irreversible injury or terminal illness.
Depending on your state laws, living wills allow you to express your exact wishes about feeding, breathing assistance and other life-sustaining procedures, in addition to how you want them carried out at certain decision points in your care.
A living will may also provide information on pain or infection medications you either want or don’t want administered, as well as specific instructions about your remains, including release to your family or donation for medical research.
Powers of attorney are legal documents that allow you to name a specific person to take care of your money or healthcare wishes if you are incapacitated. It is particularly wise to seek professional counsel from a qualified trust and estate attorney in writing these documents. The person you designate as healthcare power of attorney will be speaking with doctors and executing your wishes on various forms of treatment; your financial power of attorney will be in charge of paying your bills and depending on the range of responsibilities you outline for that person, handling your investment and business affairs.
Both are extremely important jobs that should be carried out by people you trust, and that’s why they need to be people in the know. Make their preparation part of your estate planning so they know how to step in and carry out the assignments you’ve given them efficiently.
Bottom line: Estate planning is the final, responsible step in all good financial planning. While it may be unpleasant to do, it is essential in taking care of family and loved ones, and provides you with support after you’re gone.
Nathaniel Sillin directs Visa’s financial education programs.