The Three Key Estate Planning Documents
Estate planning can require that a client and attorney work through sensitive legal and financial information touching every aspect of a client's life. At its core, though, clients most often need three essential documents. This article is meant to be an extremely high-level, basic description of these three documents and purposely does not describe other documents lawyers commonly draft for clients (trusts, HIPAA documents, certain types of Powers of Attorney, and so on).
Last Will and Testament
A Will is a document in which a person describes what their wishes are with regard to their assets after they pass away. A good lawyer has a great deal of flexibility to put a document together in a way that works for the client's wishes. Without a Will, there are state laws that determine where assets go, but those laws do not always describe what someone's wishes are. While it is a common misconception that the State will end up with the money (that is possible but highly unlikely), it is entirely possible that different relatives will get money that are not the testator's desired heirs. If someone is charitably minded a Will is going to allow that to happen.
Durable Power of Attorney
A Power of Attorney is a document whereby a client appoints someone to act on their behalf for legal and financial matters. Legal and financial matters mean anything from executing deeds or legal contracts to paying bills to opening or closing bank accounts. It is often said that an Agent under a Power of Attorney “steps into the shoes” of the principal (the person who signed the Power of Attorney). This document is meant to allow someone to act for a client if the client is unable to act for themselves (whether by way of physical or mental incapacity).
There are a number of different types of Power of Attorney documents. I recommend that a Power of Attorney for estate planning purposes be a “general” document. This is to say that the Power of Attorney covers a broad range of actions, rather than something specific. A Limited Power of Attorney can be useful in some circumstances, like if someone is supposed to sell a house or if someone wanted to allow a car dealership to get license plates for a new car. The point is that a limited Power of Attorney covers specific events rather than a large range of possibilities.
I also recommend that a Power of Attorney be a “durable” one and that it take effect immediately. A durable Power of Attorney remains in effect even if someone becomes incapacitated. Without specific language in your document, a Power of Attorney stops being effective if you become incapacitated – and given that the purpose of the document to protect against incapacity, that would defeat the point. A Power of Attorney should also take effect immediately, rather than “springing” into effect upon incapacity. The latter type of document is more difficult to negotiate with a bank, and it is also not always clear when the document is effective.
Healthcare documents take two basic forms: describing what a person's medical wishes are as far as their end-of-life healthcare and describing the person who is to make those decisions. The documents may be called by any number of names (Advance Directive, Healthcare Proxy, Durable Healthcare Power of Attorney, Proxy Directive, Instruction Directive, Living Will, Five Wishes, POLST...) but essentially, they all do one or both of these two things. The documents also usually make arrangements to ease compliance with HIPAA privacy laws – lawyers also sometimes draft separate documents for HIPAA as well.
These documents are not effective once they are signed, but only become effective once the signer lacks the capacity to make their own healthcare decisions. As a result, most of the time the documents deal with end-of-life decision-making rather than routine medical care. Please also note here that lawyers do not generally draft DNR (do-not-resuscitate) documents for clients, because their effectiveness is limited to hospital and/or institutional care settings. While one might theoretically have a DNR at home they are difficult to enforce.
These three documents form the core of what most people need from an estate planning or elder law attorney to feel reasonably protected against sudden emergencies. It is always helpful to speak with an attorney to set up customized documents that cover the most common situations, as well as more uncommon circumstances and your unique facts.
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