Essential Estate Planning Documents
The minimum list includes the trust, will, HIPAA authorization, power of attorney, and living will.
Estate planning is something you should always have in mind, but this holds true now more than ever. Some are revisiting and revising the documents they drew up decades ago, while many others are frantically scrambling to write wills and make critical decisions regarding who will be in charge of their medical care and finances if they become incapacitated — which is a process that should never be rushed.
What’s considered essential? The minimum list includes these five items:
A trust is a fiduciary agreement that allows a third party or the “trustee” to hold assets on behalf of the beneficiaries. Trusts are used in estate planning to help avoid taxes and probate, and they can also protect assets from creditors. Trusts may also include “bequests”, planned charity gifts, that the trustee donates upon passing.
The will is the legal document that determines how your assets are distributed once you pass, and it can also determine who to appoint as guardian for minors. If you do not have a will at the time of death, your state’s laws will determine who receives your assets and property. You can check out Nolo’s state-by-state guide for more information based on your location.
Most states require two witnesses to watch you sign the will, and then they must sign as witnesses. Beneficiaries under the will typically do not qualify as an eligible witness.
By signing a HIPAA authorization form (named after the Health Insurance Portability and Accountability Act that was designed to protect privacy and ease of access to medical records), you give consent to a healthcare provider to share your patient information with certain individuals or groups, such as your family members. Notarization isn’t required, but you should ensure the original document is accepted by your doctor and his or her staff.
Power of Attorney
Sometimes known as a “durable power of attorney”, or health care proxy is the person you authorize to make health care decisions on your behalf should you no longer be able to make coherent choices. This might happen if you were to become incapacitated in a coma, for example, but still alive.
In most cases, people typically select a close family member or friend to take on this responsibility but be sure you discuss your clear preferences with them well in advance. Most states require you to sign, date, and notarize the document before it can go into effect; an adult witness isn’t necessarily required, but generally still advised.
Note: Keep in mind, depending on your circumstances, you may need a separate document to establish financial power of attorney that enables someone to manage your money if you become incapacitated.
A living will, or advanced healthcare directive, specifically outlines the type of medical treatment you prefer, rather than leaving the final decisions to the power of attorney. If you fall terminally ill and do not want to be kept on life support or feeding tubes, for example, you can make that known. You can also include instructions for organ donation.
For the document to be considered legally valid, it must be witnessed by two adults; usually, family members and attending physicians are excluded.
Drafting the Documents: Hire a Lawyer or DIY?
You have two choices when it comes to putting all your affairs in order. Many lawyers are offering virtual estate consultations over video call in which they learn your key decisions and then fill out each document with proper legal terminology so you can feel confident in an airtight estate plan.
However, lawyers can cost anywhere between $150 to $300 per hour. In other cases, they might charge a flat fee ranging from $300 to $1,500 to draft the will and other basic documents. For that reason, many people have turned to online do-it-yourself companies that make it very simple to accurately fill in your information for a much cheaper price.
Notarizing the Documents
According to AARP, 23 states allow for online notarization before COVID, and even more have followed suit since. You’ll have to research the laws where you live to determine the permissible mechanics of executing these legally binding documents. The good news is that most banks and post offices offer notary services, and those businesses are generally considered essential and therefore remain open.
These conversations are never easy, but you never know when disaster will come knocking at your door. Plan proactively so you and your loved ones can focus on spending time with each other when or if someone falls ill, rather than scrambling to create missing documents.
Authored by Samantha Rupp at 365BusinessTips in association with Trust & Will.