The documents I will discuss in this post are important for every family to consider. They reduce stress in circumstances that commonly arise as people age. No one wants to think about what will happen as we or our parents get older, but it is best to be prepared for everything, rather than wait until it is too late. Indeed, it is a sad reality that death and disability often come unexpectedly even to younger people. With that in mind, here are the first two of the “big five” estate planning documents that everyone should consider having:
1. Power of Attorney – Statistically speaking, most people have a greater chance of becoming disabled in any given year, than of dying. Without having a power of attorney in effect, it is far more likely that filing a court action to become the guardian for the disabled person would be necessary, which is a very costly process.
A Power of Attorney gives a designated person the power to make financial decisions for someone else, typically a spouse or parent. The person so designated, known as the “attorney in fact” (not to be confused with an “attorney-at-law”, which is what I am), can thereafter handle the financial affairs of the person who gave them power of attorney. Note that a power of attorney can be drafted only to take effect upon disability, or it can be drafted to take effect immediately, regardless of disability.
2. Health-Care Proxy – One of the hardest issues that arises when a person becomes disabled is who should make the health care decisions for them. This document lets them select who that person will be, and set guidelines for care, and for when the “plug can be pulled”, before it’s too late. Otherwise, a situation may arise where a court order is necessary, which can be very expensive to obtain.
Next time, I will briefly discuss three more documents that families should think about having on hand.