Preparing for the future is one of the best gifts you can give yourself and your loved ones, but most Americans fail to take the necessary steps to ensure their medical and financial wishes are legally protected. A 2020 Gallup poll reveals only 45 percent of Americans have a living will and a poll conducted by the same organization the following year found that only 46 percent of adults in this country have a will to handle their property and legal affairs.
While it is not a pleasant topic, incapacitation or death can occur at any age, sometimes suddenly. Having the proper legal documents in place takes the burden off family members and helps your family and physicians clearly understand your medical wishes. It also gives you control over important medical and legal decisions. Unfortunately, a single document isn't enough to fully protect you. Learning about these essential legal documents is the first step in planning for your future.
Incapacity planning
If the time comes when you are unable to make decisions about your financial or healthcare needs, it is important that you have designated someone who can represent you in these matters. From a financial standpoint, there are documents that are essential in protecting your assets and giving decision power to someone you trust.Financial incapacity planning
- Financial Power of Attorney – this authorizes an individual of your choosing to handle your financial affairs when you are unable to do so. There are two types of power of attorney, or POA. A durable POA is effective immediately after the document is signed. This means the appointee can act on your behalf even when you are not incapacitated. The second type of POA is called a springing POA and is effective only after you have been declared mentally incapacitated. Many states offer their own POA form, which can easily be found by searching POA forms along with your state name. The typical requirement is that the agent acting on your behalf be eighteen years of age or older and of sound mind. Often, this form must be signed in the presence of a notary public. Without this legal document, should you become incapacitated, the courts may appoint a guardian to make these decisions for you.
- Will – this legal document becomes active upon your death. It designates exactly who you wish to receive your property. Without a will (or trust), state law will determine how your assets are distributed. Should you die intestate (without a will), typically the estate is passed to the surviving spouse and children, but stepchildren, friends, or charities will not be included. While having a will usually isn't enough to avoid probate (a court process to determine the validity of a will), it often speeds the probate process. A will can also minimize estate taxes, allows you to determine exactly who inherits specific assets, and puts you in charge of appointing a trusted individual to act as executor of your estate. Even if you establish a trust, many legal advisors recommend also completing a will.
- Revocable Living Trust – this is an estate planning document that authorizes another party to make decisions about your money or property should you die or become unable to manage your affairs. It also designates the person or persons who will receive your assets upon your death. A living trust simply means the trust is set up while you are living, and the term revocable means you can make changes in the document as you wish. By transferring properties and assets into a revocable living trust you can avoid probate, which is something you cannot do with a will. Your information remains private since the trust does not require the court's approval. Although a revocable living trust is the most common type of trust, there are many other forms of trusts, including testamentary trusts (a specific trust that goes into effect upon your death) and irrevocable trusts (an unchangeable trust that gives ownership and control of the trust to trustees). The size of your estate and your specific needs play a role in determining which trust is best for you.
Medical incapacity planning
Advance Directives are legal instructions that outline your health care wishes. Several documents fall under this term, including a medical power of attorney and a living will. While you may have discussed your desires with family or friends, it is important that these wishes be recorded in writing. Advance directive forms and requirements vary from state to state. Typically, you can complete these documents without the help of an attorney, although you may want to include them as part of your estate planning.- Medical Power of Attorney – also known as a health POA, this document gives an individual of your choosing the authority to make medical decisions for you should you be unable to do so. Under a medical POA, the individual, or agent, you select can only make healthcare decisions. This person may also be known as your patient advocate. This document does not authorize the agent to make financial decisions for you.
- Living Will – a written legal document that outlines the medical steps and treatments you want, or do not want, to be implemented for end-of-life care. These measures include cardiopulmonary resuscitation (CPR), mechanical ventilation, dialysis, tube feeding, organ or tissue donation, and more. Religious preferences may also be included.
Medical orders
Seriously ill or terminal patients may translate their wishes into medical orders known as Provider Orders for Life-Sustaining Treatment (POLST) or Medical Orders for Life-Sustaining Treatment (MOLST). Unlike advance directives, these documents require physician's approval. Such patients may also opt for a DNR (do not resuscitate) order, which also require physician sign-off. A conversation with your doctor can help in determining which of these options may be appropriate for you. Some online services offer estate planning kits that include the various forms discussed in this blog, but it is imperative that you understand the significance of these documents. There are many state and federal laws to consider. If you have questions or concerns, it is worthwhile to consult with an estate planning attorney who can explain the various options and provide any necessary legal advice.