17 Nov Cornerstones of an Estate Plan: The 4 Estate Planning Documents Every Adult Needs
November 17, 2014 | By: Kristen R. DeNoia
The phrase “estate planning” may bring to mind thoughts of wealth, tax shelters, and death. However, estate planning is much more than that. While it addresses issues arising after your death, it also addresses issues arising in the event of disability. Estate planning is necessary for all adults – single or married; with or without children; and of all economic means. While there are some estate planning documents that may be recommended depending on the size of your estate, type of assets, and family dynamics, the following four documents are absolute essentials for everyone.
1. Will
A will dictates certain things to an appointed estate representative, called an “executor,” after your passing. It will direct how your wealth is to be divided among your family, friends, and chosen organizations, taking into account family dynamics and tax savings strategies. You also have an opportunity to protect beneficiaries who may need to receive inheritances through a trust due to disabilities, creditors, and/or spendthrift tendencies. Finally, a will allows you to name a guardian for minor children or adult children for whom you have been named as guardian.
Without a will, your estate is subject to the laws of intestacy of the state in which you are domiciled at the time of your death. These laws embody the state’s assumption of how someone in your position would want his or her wealth to be divided. However, in many instances, this may not be what you would have chosen. For example, in New Jersey, if you pass away with a surviving spouse and a surviving parent, but no children, depending on the size of your estate, both your spouse and your parent will receive a portion of your estate.
Further, without a will, you are unable to protect your beneficiaries from receiving outright inheritances that may not be in their best interests. A beneficiary with disabilities may lose his or her benefits by receiving an outright inheritance; a beneficiary with significant debt may lose his or her inheritance to creditors; and a beneficiary who lacks maturity and responsibility may spend the inheritance on foolish expenditures.
Finally, for parents of minor children, failure to have a will may have tragic consequences. The children will be considered wards of the state until the court can determine the best guardian; a process that can become quite lengthy.
2. Power of Attorney
A Power of Attorney addresses issues that may arise during your life, while you are under a disability. It appoints another person to make legal and financial decisions on your behalf; it can be set up as springing or durable. A springing power of attorney is only effective upon your disability; whereas, a durable power of attorney is immediately effective upon signing.
Without an adequate Power of Attorney in place, should you be under a disability, someone must be appointed by the court as your conservator or guardian in order to manage your legal and financial affairs. This process can be time-consuming, emotionally difficult and intrusive, and expensive.
3. Health Care Proxy
A Health Care Proxy appoints another person to make medical decisions on your behalf when you are either unable to communicate your wishes or are unable to understand a medical situation.
Like the failure to have a Power of Attorney, the failure to have a Health Care Proxy will necessitate the court’s appointment of a guardian in order to make medical decisions on your behalf.
4. Living Will
A Living Will guides your health care proxy as to what end-of-life decisions to make for you. This document can be meticulously detailed; broad, in giving discretion to your Health Care Proxy; or anywhere in between.
Without a Living Will, you can be sustained on life support for much longer than you would wish. You may recall the situation of Terri Schiavo, a young woman in Florida, who was on life support for fifteen years, while her husband and parents fought in court through countless petitions, motions and hearings and fourteen appeals.
If you do not have the above four estate planning documents, or last had them prepared many years ago, please contact the firm at 732-747-7100, for a free consultation to further discuss your unique estate planning needs.