If you have ever been involved with an estate in which the deceased has died without a will, you know what a disaster it is. In efforts to tremendously simplify the process for your family and loved ones, you should consider putting a few essential estate planning documents in place. If you have already done so, it may be a good time to review your documents in light of the recent tax law change. The lifetime estate tax exemption has increased from $5 million to $10 million per person. Effectively, a married couple has $20 million, and with inflation it is approximately $22.4 million. Provisions you put in your original will may have unintended consequences due to the increase in the exemption.
At a minimum, your estate plan should include the following legal documents:
- Last Will and Testament
- Power of Attorney for Health Care
- Living Will
- Financial Power of Attorney
Here is a brief summary of the purpose of each document.
Last Will and Testament
Having a will lets you determine how your property will be distributed after you die. Without a will the state will decide for you under the state’s intestacy laws. In your will you will leave detailed instructions on who will receive your property and whether they will receive it directly or in a trust. You may also designate some of your property be given to charity. You will also name an executor who will be responsible for carrying out the provisions of the will. If you have minor
children, it is important to appoint a guardian for them.
You must have a will in order to ensure that your wishes are carried out and that your estate is protected from being contested.
Power of Attorney for Health Care
A power of attorney for health care allows you to name someone as your health care agent. Your health care agent will make health care decisions for you if you are unable to make them yourself. A power of attorney for health care can also be used to designate someone to serve as your guardian or conservator in the event a court determines that you have become mentally incapacitated.
A living will contains instructions regarding whether or not you want to receive life sustaining procedures if you have an end-stage medical condition or are terminally ill. Your physician must honor it, and it gives guidelines to your family members on what should be done if you are terminally ill. A typical provision in a living will reads as follows:
“If I suffer an incurable, irreversible illness, disease, or condition and my attending physician determines that my condition is terminal, I direct that life-sustaining measures that would serve only to prolong my dying be withheld or discontinued.”
Financial Power of Attorney
A financial power of attorney allows you to designate an individual who will manage your financial affairs in the event you become incapacitated. Typically an individual will sign a durable power of attorney. The durable power of attorney allows an individual to make bank transactions, sign social security checks,
apply for disability, or simply write checks to pay the bills while an individual is medically incapacitated.
Having these documents in place will help your family to know what your medical wishes are and who can make the decisions regarding your health and finances should you become incapacitated. Upon your death, the Executor and your will should provide for an orderly settlement of your estate.
If you have any questions about this information or would like to discuss this subject further, please contact your Kreischer Miller tax advisor.
You may also like: