The Retirement Corporation of America

The Documents You Absolutely Must Have

EVEN IF THE estate tax is once-and-for-all repealed, there will still be a huge need for a document that will be needed to:

•  Pass your wealth on to those whom you want to have it.

•  Arrange for the management of your wealth if you become incapacitated and can't manage it yourself.

•  Advise everyone who needs to know how aggressively you want doctors to work to keep you alive should your medical condition deteriorate to a point where it could become an issue.

You work with whoever is planning your estate to craft such documents—and to keep them up to date. Once they are created, your estate lawyer should keep copies. Other copies should be kept where they can be readily found. There is no point in creating a document that must be available should you become incapacitated, if no one knows where you keep it.

Your spouse should know where all vital documents are stored. One or more children should also know, and it's probably advisable to let a trusted friend know as well.

Where There's a Way, There's a "Will"

The will is the first document you absolutely must have. You definitely don't want to wait too long to craft a will, since you have no clue whatsoever when you might die and when the will might be needed.

As to why you need a will, you need one for Four Very Good Reasons:

Reason #1: To define and describe in detail how and to whom you want your assets distributed after your death.

Reason #2: To specify the person or persons you want in charge of your estate when you die.

Reason #3: If you have children who are considered minors, to specify who is going to be their guardian at your death. If you don't have a will and you have children, a court will make that decision for you. A total stranger could wind up making all the important decisions for your children.

Reason #4: If you don't have a will, the state will step in at your death, and through statutes called intestacy laws, decide who should be executor of your estate and how your assets will be distributed. Why defer deeply personal decisions that you should make to the state?

A will isn't something you create on your own without consulting your spouse. Since much marital wealth will be jointly owned, and since distributing marital assets is a joint decision, both spouses need wills, and both of the wills need to be coordinated.

While there are do-it-yourself will kits available in bookstores and online, the safest course is to let the attorney preparing your estate plan prepare your will, too.

What Power of Attorney Is All About

Right now, you are fit and in total command of your physical and mental powers. If there is an important decision to be made, you think things through and make the decision. But what happens if you have a stroke and can't speak? What happens if you are in a car accident and you are in a coma and unable to think through anything or to communicate with anyone?

Important life decisions still must be made. If you can't make them, someone else must make them for you. While you are still fit and mentally alert, you should designate someone else to make decisions for you if you can't, by giving them your power of attorney.

There are several types of powers of attorney. Here's how the field lines up:

•  General Power of Attorney. You give someone else full authority over your financial and estate affairs. The person with your General Power of Attorney can write checks in your name and move money around in your bank accounts. In other words, you are surrendering pretty broad control over your financial affairs to someone else. However, the person holding your General Power of Attorney can't make health-care decisions for you unless you specifically say so in the power of attorney document. More importantly, the General Power of Attorney is revoked if you become incapacitated and can't make sound decisions on your own.

Limited Power of Attorney. Instead of handing over broad decision-making power, as with a General Power of Attorney, here you specify exactly what kinds of decisions can be made on your behalf. You can set a time limit on how long the person will hold your Limited Power of Attorney. As with a General Power of Attorney, a Limited Power of Attorney is revoked should you become incapacitated.

Durable Power of Attorney. You can grant either general or limited powers to the person holding your Durable Power of Attorney. What's important is that a Durable Power of Attorney is not revoked if you become incapacitated. You might use other powers of attorney to handle other financial situations. Your estate plan must have a Durable Power of Attorney, so your affairs can still be managed if you are no longer capable of managing them.

Springing Power of Attorney. It only comes into effect when you are declared incapacitated by a doctor. That gives you protection against someone attempting to act on your behalf, even though you still have the physical and mental abilities to do so.

Durable Health-Care Power of Attorney. This permits whomever you designate to make health-care decisions for you if you become incapa-citated. Other powers of attorney permit whomever you designate to make financial decisions on your behalf. A Health-Care Power of Attorney can only be used to make decisions about your health care.

Picking Someone for Your Power of Attorney

Obviously, you don't want to pick just anyone. You might give someone familiar with your business and your finances a General Power of Attorney if you were going to be out of the country for a period of time. You would create a Durable Power of Attorney for Health Care when you first did your estate planning to have just in case it is needed. The person holding that would be someone very close to you who knows your wishes—such as a spouse or a grown child. It certainly isn't something you would give to a stranger—or even to your estate lawyer.

One reason for starting your estate planning at a fairly early life stage is to make sure that all the documents you might need are prepared, kept where they can be easily located, and that the "key players" are comfortable with their roles.