There are five key estate planning documents you may need, regardless of your age, health or wealth:
• Durable power of attorney: A 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. There are two types of DPOAs: an immediate DPOA, which is effective immediately (this may be appropriate, for example, if you face a serious operation or illness), and a springing DPOA, which is not permitted in some states, is not effective unless you become incapacitated.
• Advanced medical directives: There are three types of advanced medical directives. Each state allows only a certain type (or types). First, a Living Will allows you to approve or decline certain types of medical care, even if you will die as a result of that choice. Generally, one can be used only to decline medical treatment that “serves only to postpone the moment of death.” In those states that do not allow living wills, you may still want one to serve as evidence of your wishes. Second, a durable power of attorney for health care allows you to appoint a representative to make medical decisions for you. You decide how much power your representative will or won’t have. Finally, a Do Not Resuscitate order, or 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. If you don’t leave a will, disbursements will be made according to state law, which might not be what you would want. It is crucial that your will be well written and articulated, and properly executed under your state’s laws. It’s also important to keep your will up-to-date.
• Letter of Instruction: Also called a ‘testamentary letter or side letter” is an informal, non-legal document that can be very helpful to your family and generally accompanies your will and is used to express your personal wishes.
• 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. It is meant to function while you’re alive, and changes can be made as needed. The primary function is typically to avoid probate.
Send financial questions you wish to have answered in this column to Dorion-Gray Retirement Planning Inc. Fax them to 815-455-4989 or email email@example.com.
• Paula Dorion-Gray, CFP, is president of Dorion-Gray Retirement Planning Inc., 2602 Route 176, Crystal Lake.