No matter where you are in life, there are several documents that you should consider as part of your core plan. These are the starting point for most people.
1. Medical Documents
A health care proxy appoints someone to represent you, advocate for your health, and make medical care decisions on your behalf if you are incapacitated. Related documents include an Advance Directive (or Living Will), which allows you to describe how much end of life care you wish to receive, and a HIPAA Authorization, which allows loved ones to access your medical records.
2. Power of Attorney
A power of attorney gives an agent of your choosing the authority to manage your legal and financial matters, such as paying your bills and taxes, while you are healthy or at the time of your incapacity. This document terminates at the time of your death.
A will directs who should receive your probate assets upon your death; nominates a Personal Representative to navigate the probate process; appoints guardians for your minor children; directs who should receive your possessions, such as jewelry, pictures, family heirlooms, or your favorite laptop; and what should happen to your electronic assets, such as social media accounts.
4. Revocable Trust
Most people should also consider creating a revocable trust. A revocable trust can hold your assets, while allowing you to maintain complete control over them during your lifetime.
Because property held in trust avoids the probate process, at your death your heirs will avoid the delays and costs associated with probating your estate.
A revocable trust also allows you to appoint a successor trustee to administer your assets if you are unable, and to administer assets for your beneficiaries after your death, providing significant asset protection, and supporting your heirs with their life goals, making distributions only when they have reached appropriate maturity and for well-defined purposes.
A well-drafted trust will ensure that trust assets support beneficiaries with their life goals, without curbing their own sense of accomplish, need to work hard, and pursue meaningful life pursuits.
Finally, certain types of revocable trusts can significantly reduce estate taxes.