To help ensure a safe and secure financial future for your heirs, it is important to have a proper estate plan in place. Generally, an estate plan helps your loved ones understand how you want your assets split up after your death. But it can be much more than that. Estate planning documents can also help ensure that your wishes are honored an executed as best as possible.

Professional and well-executed estate plans can also reduce the amount of your assets that are lost to the estate tax system. Without an effective plan in place, your loved ones may be led to the forced sales of assets since estate taxes are due within 9 months of death.

Estate Planning Documents

Everyone’s estate and family situation are unique to them. As such, your estate planning documents shouldn’t be cookie-cutter. You need a customized plan to help ensure that your assets are properly transferred to the right heirs and that your wishes are honored to the fullest extent possible.

There are 3 essential documents to your estate plans. These are a Will, a Power of Attorney, and a Health Care Proxy. Below, we will detail some important aspects of each.

Last Will and Testament

The Will is a document that highlights your wishes for distributing assets, providing guardianship for minors and other wards in your care, appointing an executor or executors, and establishing Trusts. Trusts can help you reduce the amount of your assets that will be taxed through estate taxes. Wills generally have specific execution functions, to be carried out by your executor(s). In many cases, individuals will also ask their attorney to act as the executor.

Power of Attorney

A Power of Attorney document establishes a trusted individual to act on your behalf on certain financial, legal, or business activities. Generally, a spouse, trusted family member, or adult offspring is chosen. As the principal,  you grant them certain powers in the document. If you are incapacitated, disabled, or otherwise indisposed, the chosen individual can act on your behalf in an official capacity. This document allows your loved ones to handle matters directly if you become incapacitated without going through a lengthy guardianship proceeding. A power of attorney becomes invalid upon the principal’s death.

Health Care Proxy

A Health Care Proxy is similar to power of attorney but for medical care and procedures. The health care proxy is meant to make choices in your stead if you are unable to voice your own opinion in a full capacity. This can be important if you are in an accident that leaves you incapacitated. It can also be important for a loved one to make on-the-fly decisions if there are complications during a procedure where you are under anesthesia, for example. Generally, a spouse can be the default proxy without this document. But it may be necessary to name one of your children or another trusted family member to act as your proxy. Even if you have a spouse, naming an additional proxy can be important. This is especially for cases where you and your partner could both be in an accident together.