Note: The following is a 2 part series about having the right legal documents you need to have in place before a situation arises. This is part 2; part 1 can be found here.
In our previous post (Basic Legal Docs – Part 1), we discussed all of the things you need to prepare for before seeing an attorney. We also addressed some common questions like how to find a good attorney or how to save money on your estate documents. We’ll now explain all of the legalese you will likely hear when you have your documents drafted.
Wills and Trusts
Let’s start with a will: A will is a legal document that directs how your money, personal belongings, and other assets will be divided after your passing. Wills are a way for you to override the state laws and instead state your wishes of how you want your assets divided and to whom you want them to go. Many people are nervous that a will costs a lot of money, and therefore, they avoid it altogether, which is not a good solution since it prevents their wishes from being considered.
Another instrument that your legal expert may consider for your situation is a trust, which is another type of legal instrument that allows you to protect and pass on your assets and belongings. One of the biggest functional differences between a will and a trust is that a will becomes effective only after you die, but a trust can take effect as soon as you create it. So, you may be able to begin protecting and even passing on assets and belongings before you die. There can also be significant differences in both legal and tax implications when property is passed on through a will versus a trust. You will definitely want to speak with a lawyer about the best options for you.
Medical and Financial Documents
Another important document is an Advanced Medical Directive (or AMD). If you have had a child or gone to the hospital recently for surgery, you may have noticed in the stack of paperwork you had to fill out that there are some medical documents you’ve had to fill out that discuss who you want to make future medical decisions for you if you are unable to. This is an example of an Advanced Medical Directive.
There are two types of advanced medical directives – the “Living Will” and the “Durable Power of Attorney for Healthcare”. A Living Will gives specific directions to the medical staff of what you do or do not want to happen if you are unable to make your own healthcare decisions. The Durable Power of Attorney for Healthcare, on the other hand, is a legal document that designates an agent (often a spouse, parent, trusted friend, or partner) to make healthcare decisions on your behalf if you are unable to. You can have both documents since there are a number of circumstances that cannot be predicted. Again, it is best to speak to a qualified and competent attorney to have the correct documents drafted for you according to the state you reside in. (Military and veterans are again able to receive these services free from their local JAG or VA office.)
A financial power of attorney is also an important document to consider. Similar to its counterpart for healthcare, a financial power of attorney is a legal document that allows a trusted agent to make financial decisions on your behalf if you are unable to do so yourself, such as paying bills, signing financial documents, etc. Depending on how the document is written, it can be effective immediately or when a specific event happens (such as military deployment, etc.). It ends upon the death of the principal (the person who the document is written for) or could end upon the incapacitation of the principal (if stated specifically). Again, these documents are state specific and it is strongly recommended that you speak with a local attorney about your need for this matter.
Documents for Children
Finally, if you have children, you also need two additional documents: guardianship and health care power of attorney for the children/minors. Guardianship is a crucial legal document that gives the authority for another person to make decisions for another, in this case a child, until they are able to make decisions on their own. For example, if something were to happen to you and your spouse, who would you want to care for your children? If you don’t appoint someone, the state will make that decision for you. By having a legal document showing your desired guardianship, this once again trumps the court system and allows you as the parent to choose where and with whom you want your children to go. (NOTE: You can outline guardianship in your will to avoid duplication with a separate document)
If you are leaving your child in the extended care of another person (i.e., summer camp, vacation, etc.), it can also be a good idea to give them a Medical Power of Attorney for the child. This would allow the person to consent to medical treatment for your child and make other medical decisions on their behalf while you are away. It is often only in effect for a short time period specified in the document. For both of these documents, like the others, it is important to speak to a qualified and competent attorney in your state.
Making it Happen
I know this seems like a lot of information at once, but honestly, with the help of a good lawyer, the main decisions you’ll need to make are who you want to appoint in what capacity and the lawyer will do the rest. I cannot stress how important these documents are, and how important it is to keep them updated. (Note: they should be updated at least on every out of state move, as well as every five to ten years and/or as life circumstances change). If you have specific people in your family that you do not want to make healthcare decisions and/or decisions for your children, then it is especially important to have these documents in place.
It is also important that when you have these documents, you store them in a safe place. You need to also let trusted family and advisors know how to get a hold of the documents if something happens. Oftentimes, the lawyer will also have it recorded with the state, but it is key to also keep a copy in your important files in a safe location where you aren’t the only person who knows where these documents are located.
If you want further information or more resources, a good resource is NOLO. There are a plethora of self-help legal resources that can help you understand the process and make informed decisions. Don’t delay and reach out today to your preferred attorney and ask them for help in having each of these documents drafted for you in case something happens and it’s too late.