Tax and Money Tip of the Week:
Estate Planning
December 4, 2013 | No. 164

Key Estate Planning Documents You Need

This is a general, informational piece only and not intended to provide legal advice. Each individual should seek legal advice for their own situation.

There are five estate planning documents you may need, regardless of your age, health, or wealth:

1. Durable power of attorney
2. Advanced medical directives
3. Will
4. Letter of instruction
5. Living trust

Durable Power of Attorney
A durable power of attorney (DPOA) can help protect your property in the event you become physically unable or mentally incompetent to handle financial matters. A DPOA allows you to authorize someone else to act on your behalf, so he or she can do things like pay everyday expenses, collect benefits, watch over your investments and file taxes.

Advanced Medical Directives
Advanced medical directives let others know what medical treatment you would want, or allows someone to make medical decisions for you, in the event you can’t express your wishes yourself.

There are three types of advanced medical directives. First, a living will allows you to approve or decline certain types of medical care. Second, a durable power of attorney for health care (known as a health-care proxy in some states) allows you to appoint a representative to make medical decisions for you. Finally, a Do Not Resuscitate order (DNR) is a doctor’s order that tells medical personnel not to perform CPR if you go into cardiac arrest.

Will
A will is often said to be the cornerstone of any estate plan. The main purpose of a will is to disburse property to heirs after your death. Equally important, the will gives you the ability to name the executor who will manage and settle your estate and allows you to name a legal guardian for minor children or dependents with special needs. If you don’t leave a will, these items will be determined according to state law, which might not be what you want.

Letter of Instruction
A letter of instruction (also called a testamentary letter or side letter) is an informal non-legal document that generally accompanies your will and is used to express your personal thoughts and directions regarding what is in the will. Unlike your will, this document remains private and gives you the opportunity to say the things you would rather not make public. This can be the most helpful document you leave for your family members and your executor.

Living Trust
A living trust (also known as a revocable or inter vivos trust) is a separate legal entity you create to own property, such as your home or investments. The trust is called a living trust because it’s meant to function while you’re alive. You control the property in the trust, and whenever you wish, you can change the trust terms, transfer property in and out of the trust, or end the trust altogether.

As always, give us a call if you have any questions.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.