I recently wrote about the importance of having a will in place. But a will does not protect you if you become disabled or incapacitated.
Generally speaking, in the event you become incapacitated and you do not have any estate planning documents in place, the court will appoint a guardian or conservator to take care of you and to handle your property. In most cases, the court will choose someone in your family to be your guardian. This could cause turmoil if multiple people want to be your guardian or if no one wants to take on the responsibility. Once appointed, the guardian has to follow state law as to how to manage your assets; they cannot make decisions based on the wishes of your family.
Below are four estate planning documents you should consider adding to your portfolio along with your will. You may not think you need these, but there is just as great, if not greater chance of you becoming disabled as there is of you passing away.
Durable Power of Attorney
Many are familiar with a Power of Attorney. It allows one person to act on another’s behalf. A Power of Attorney document ceases to be valid should you become incapacitated or incompetent. To protect yourself in this situation, you need a Durable Power of Attorney. The durable power of attorney ends upon death, unless otherwise specified.
With a living trust, you place all of your assets in the trust and act as the trustee. Doing so allows you to retain control of your assets. Within the trust, you designate a successor trustee (sometimes called a disability trustee) who takes control of your assets should you become incapacitated.
Health Care Power of Attorney
A Health Care Power of Attorney can be included in a Durable Power of Attorney, or it can be a separate document. The purpose of the Health Care POA is to appoint someone to make health care related decisions for you, should you be unable to make them yourself.
A Living Will is a statement of instructions for health care purposes when you reach a terminal condition. They are primarily used to limit life-sustaining treatment. Many people place these instructions into a Health Care POA, but most attorneys recommend a separate document.