You probably already know that having an estate plan is vital to protect your family after you are gone. However, you might not know all the documents required to make up a valid and legally binding plan.
According to AARP, there are five essential documents all estate plans should include. These documents protect the best interests of your family, but they can also serve your interests while you are still alive.
Will
A will is crucial in virtually all estate plans. It provides guidance on how your heirs should receive your assets. It also allows you to make arrangements for the care of minor children by naming a guardian in the event the unthinkable happens. Even families with few assets and simple estates must have a will in place.
Advance directive and durable health care power of attorney
Advance directives and durable health care powers of attorney are often linked together because they serve a similar purpose. An advance directive explains your wishes for end-of-life medical care regarding things like CPR, defibrillation, feeding tubes, and other life-preserving treatments. A durable health care power of attorney is a person that represents you and can explain your wishes in detail. It is best to have both in place to ensure your medical staff and family are on the same page.
Durable financial power of attorney
Like a durable health care power of attorney, a durable financial power of attorney makes decisions on your behalf when you cannot. You can provide your representative with as much or as little financial authority as you see fit. This typically includes paying bills and taxes, making decisions about property, and other essential financial matters.
Revocable living trust
A revocable living trust is not just for the ultra-wealthy. These estate planning tools allow you to establish guidelines on distribution of assets (such as providing assets in increments instead of one lump sum). They also help you avoid probate, since assets within a trust pass directly to heirs upon your death.
The sooner you begin estate planning, the more you will rest assured about the future. Early planning also allows you to make changes as your life progresses, such as after the birth of a new child or divorce.