You know that a Will allows you to designate who receives your assets after your death. This document also allows you to choose who manages the estate administration process, including the investment of your assets and the payment of your debts. If you have minor children, you will wish to designate a Guardian to care for them should you pass away before they turn 18.
With a properly structured Will, you can also alter the timing of when beneficiaries receive your assets. This is accomplished through the creation of a trust. The trust can either be included inside your Will (known as a "Testamentary Trust") or in a separate document known as a "Living Trust." The trust will specify how assets are distributed to beneficiaries. For example, you can say that the trust will pay for a beneficiary's health, education, maintenance and support. The trust can either be for the beneficiary's lifetime or you can provide a designated age at which he or she can withdraw the assets.
Durable Power of Attorney
You take care of your investments, pay your bills and otherwise manage your finances. What happens if you are in a car accident or have a health emergency that results in you being hospitalized and unable to do these things?
Without advance planning, a family member will have to petition your local probate court to be appointed as your Conservator (or, in some states, a "Guardian"). This is a difficult and expensive procedure because your family member will likely have to hire an attorney for himself or herself and the Probate Court will appoint an attorney for you. The Court will take testimony and, if you are deemed incapable of caring for yourself, the Judge will appoint a Conservator for you.
To avoid this legal nightmare, you can sign a Durable Power of Attorney. This document will designate someone to manage your financial affairs if you become incapacitated down the road. Most importantly, you choose which family member or friend takes this role.
Health Care Proxy (Sometimes Combined with a Living Will)
As noted earlier, a Durable Power of Attorney allows someone to make financial decisions for you if can no longer do so. It is also important that you sign a Health Care Proxy, which designates a family member or friend to make your health care decisions in this event. Once again, without a Health Care Proxy, your local Probate Court may have to appoint a Conservator to make these decisions for you. Depending on your state, the Health Care Proxy may be combined either with the Durable Power of Attorney or with a document known as a Living Will.
A Living Will states your wish that, if you ever are in a terminal condition and in a persistent vegetative state, that no extraordinary measures be taken to keep you alive. Let's be clear: this is not a "Jack Kevorkian document." That is, no one is going to take steps to actively kill you, but your physician is directed not to use means such as artificial nutrition and hydration to keep you alive under these circumstances.
Additional resources provided by the author
The documents referenced above are all state-specific. Accordingly, your best bet is to consult with an attorney in your jurisdiction to discuss your estate planning.
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