The Who, What, and When of Estate Planning Documents 

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Lauren Pitman

Author, Attorney

Feeling overwhelmed by estate planning? You’re not alone. Too many people put off planning because they think they don’t have enough money or assets to need a last will and testament. But comprehensive, modern estate plans aren’t just about distributing your assets if you pass away unexpectedly. They have benefits today–even while you are alive and healthy–and they help your loved ones maintain family harmony after you’ve passed away.

Let’s break it down: What do these important documents actually do? When do they work? And who do they protect?

And if you want to explore specific scenarios, learn in more detail, and take the first steps toward creating an estate plan of your own, subscribe to the Side by Side Planner.

Durable Power of Attorney: 

What it does: This document names the person you would like to appoint to make your financial decisions if you cannot. If you were injured in an accident, your bills would still need to be paid, and someone might need to make financial decisions such as continuing care for you or maintenance for your assets.

When it works: A durable power of attorney works when you are still alive but are unable to make decisions because you are incapacitated. That’s the difference between a power of attorney and a durable power of attorney: a durable power of attorney works even when you are unconscious. That’s why it’s such a powerful document, and why it’s so important.

Who it protects: This document protects you from falling behind on your regular bills while you are incapacitated. It also eases stress on your loved ones, because you have given them legal permission to handle your finances, which would otherwise require a court order. If you have chosen someone who can work well with your health care agent, you will ensure that you and your loved ones will have an easier time getting things done even in such a difficult position.

Health Care Power of Attorney:

What it does: This document names the person you would like to give authority to make your health care decisions if you cannot. It’s so important for any adult over age 18 to have a health care power of attorney, because healthy adults are more likely to be injured than die in an accident (That’s anyone over 18–yes, your college-age child is an adult in the eyes of the law, and you would need a durable power of attorney to make decisions for your child if they were injured).

When it works: A health care power of attorney works when you are still alive but are incapacitated.

Who it protects: If there were an emergency and you were unconscious, your health care power of attorney document would protect you because it allows the person you have carefully chosen to make your decisions. This also protects your loved ones because without the document, they would need to decide, in a stressful time, who would become your agent. Make life easier for them by choosing the person you believe will best represent the decisions you would make, if you were able to make them yourself.

Living Will:

What it does: A living will allows you to express your health care wishes in a legally enforceable document. You can decide how you’d like your body to be treated if you were in a persistent vegetative state and in other dire scenarios. It is also a place for you to discuss whether or not you’d like to receive CPR and if you have any religious or cultural beliefs about procedures such as blood transfusions or artificial nutrition. A living will may also include your preferences about how your body is treated after you die, including organ donation.

When it works: A living will works while you are still alive (hence “living” will), but most importantly, it only works when you are completely unable to speak for yourself. As long as you are able to communicate in some way—by nodding, giving a thumbs up, etc.—you maintain control over your health care decisions. Your living will is consulted for guidance about your health care wishes only when you are unable to communicate.

Who it protects: When you cannot speak for yourself, this document can help you receive, or not receive, health care. It also protects your health care agent, who may feel uncomfortable making decisions about your care and uses the document as a guideline. They can better understand what you would do if you were conscious and able to make the decision by reading this document. They will feel a greater sense of peace of mind.

Last Will and Testament:

What it does: Perhaps the most important document, a last will and testament appoints a Personal Representative to manage and carry out your wishes after you pass away. It describes the ways you would like your assets to be distributed, and whether you would like to manage some of those assets in a trust. If you have young heirs, this is a valuable tool for you to create boundaries that can protect them and the money you’ve earned and reserved for them.

When it works: After you have passed away, when there is a death certificate, your last will and testament will be reviewed by the court. The court will ensure that the person you have chosen as Personal Representative is willing and able to perform the task, and if so, they will likely be given permission to enact the plan you outlined in your will.

Who it protects: This document offers great versatility that allows you to protect many people you love and things you cherish. First, you can protect your children and other young heirs with different types of trusts. A trust can protect your assets from creditors, future divorces, and other liabilities. It names the person you have chosen as guardian for your children, if you have children under age 18. It can include funds and appoint a guardian to provide for a beloved pet. A will protects all of this and more.

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Disclaimer: The information contained in this article should not be considered tax or legal advice and is not a substitute for such advice. State and federal laws change frequently and the information in this article may not reflect your own state's laws or the most recent changes in state or federal law. For current tax and legal advice, please consult with an accountant or attorney licensed to practice in your state.
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