There are a myriad of legal strategies you might consider implementing as you design your estate plan. Regardless, there are a handful of "must have" estate planning documents you must create before anything else.
You should have: (i) a will – everyone needs a will; (ii) a health care directive for decisions concerning treatment when you cannot make or communicate your own wishes; (iii) financial and health care powers of attorney authorizing "agents" you know and trust to take care of your financial matters and make your health care decisions when you are unable to do so yourself; (iv) a declaration of guardian to appoint back-up parents for your minor children in the even of your death or incapacity; (v) a legal authorization that allows a loved one or friend to access your medical information; and (vi) a trust (based on your situation) to manage, protect and eventually distribute your assets.
Will. A will is a legal document that describes your intentions for your estate when you pass away. Without a will, a person would die "intestate." In that case, state law divides and distributes the estate to surviving family members based on their relationship to the deceased. No consideration is given under state law to how "close" such family members were to the decedent (or if they fought constantly). Contrary to popular belief, a will has absolutely no legal authority until the maker of the will dies … and the will is given to the proper probate court within the time limit prescribed by state law. Accordingly, your will has no authority to appoint financial or health care decision-makers (agents) for you if incapacitated by an illness or injury (more on that later). In many states, a will is required to appoint the guardians (backup parents) in the event minor children are orphaned. What could be more important than appointing the people you want to rear your children if you are not around?
Health Care Directive. A health care directive, often known by other names such as an "advance directive," is a document you sign now to specify the type and extent of medical and personal care you would want later were you unable to make and communicate your own decisions. Everyone age 18 and older needs to have this fundamental legal document signed, a copy on file with their physician, and a copy given to each of their appointed agents.
How does a health care directive help my family?
A health care directive appoints the persons (whether in order of priority or as a "team") you have selected to make end-of-life decisions, so your family and the medical staff know what to do (or what not to do). A directive can take some of the worry and anxiety out of your final days for your family, as they will know your wishes when it comes to making tough choices. With that in mind, choose your "point persons" carefully. They will be charged with carrying out some potentially difficult decision and, perhaps, difficult family members.
Power of Attorney. This is a legal document giving another person — sometimes called "the attorney-in-fact" or "agent" — the legal authority to make decisions on business matters and other issues on your behalf. The exact scope of the power given is spelled out in the document itself. These powers cease when the maker passes away; they also may no longer be in effect when the maker becomes unable to make or communicate decisions. A "durable" power of attorney should be used in that situation, or a health care directive.
Declaration of Guardian for Minor Children. Parents with children who are under 18 years of age need to include in their estate plan a Declaration of Guardian in the event that both of the child’s natural parents die or become incapable. It is important for parents with minor children to decide who will be responsible for raising your children, both as guardian of the person and guardian of the estate. Additionally, parents with minor children should use trusts in their estate planning in order to avoid the necessity of a guardian of the state of the minor which oftentimes is required when parents, grandparents or others inadvertently leave assets directly to minors.
Permission to Access Personal Medical Information. This document should be right on top of or specifically incorporated within your health care directive. It is your authorization for named persons to view your medical records and discuss your care with medical providers. Without this document or specific authorization, there is the possibility your doctor may decide not to speak to your designated "point persons" — the persons you want to make those tough decisions about your care if you are in an unresponsive state.
Trusts. These come in all sorts of shapes and sizes. Generally speaking, a trust is a legal entity with at least three parties: the creator of the trust, the trustee, and the beneficiary. With most "revocable living trusts," you are all three parties. Depending on your circumstances, there could be advantages to establishing a trust. The most common advantage is avoiding probate. This can help streamline administration of your estate should you become incapacitated and upon your death, keeping your plans private in the process. Some irrevocable trusts may protect trust assets from creditors. For example, trusts established under a will or revocable living trust can protect the inheritance for loved ones from squandering, divorces, lawsuits and bankruptcies.
It depends on a great many factors. Consult John M. Lane, an experienced estate planning attorney to thoroughly review your situation and your objectives.