When you're 40, chances are you're not the same person you were at 20, and your estate plan should reflect the changes you've experienced. Here's a rundown of the estate-planning tools you should have if you're just beginning your life's journey, midway through or approaching the final leg.
Young, single and carefree"When you're a child, your parents can make financial and medical decisions for you," says Gabriel Cheong, an estate planning attorney at Infinity Law Group LLC in Quincy, Mass. "But when you turn 18, they no longer have that legal right. If anything were to happen to you, you'd probably want your parents to control your health care and financial decisions. You'd also want them to be able to talk to your medical providers and have those providers respect your parents' right to make health care decisions, including discontinuing treatment if necessary."
So if you're over 18 and unmarried, execute four documents to make sure your loved ones can carry out your wishes:
1. A general durable power of attorney enables you to designate who will control your finances if you become incapacitated, whether it's your parents or another loved one.
2. A health care proxy allows you to designate who will make medical decisions on your behalf in the same situation.
3. A living will lets you lay out your wishes regarding life-sustaining medical treatment.
4. Finally, a Health Insurance Portability and Accountability Act, or HIPAA, release allows your designated agent to discuss your medical condition without violating patient privacy laws. Without those documents, your loved ones may be forced to go to court to seek guardianship over you to assert those controls.
Estate planning life stages
- Young and single.
- Single, but committed.
- Just married.
- The middle years.
- The golden years.
Single, but committed"If you're in a long-term relationship but unmarried, create a will or trust if you want your life partner to inherit your possessions," says Mark Clair, an estate planning attorney at The Clair Estate Planning and Elder Care Law Firm in Maumee, Ohio. "Otherwise, they'll go to your closest relatives according to your state's law."
We're engaged!"A prenuptial agreement isn't only for people who have a lot of money," says Cheong. "It's essential for everybody. A lot of people divorce because they've never had conversations about money. A prenuptial agreement forces people to engage in this financial conversation."
Just marriedRevise your durable power of attorney, health care proxy and HIPAA release if you want there to be no question that your spouse should control your financial and medical decisions if you become incapacitated. "Think of Terri Schiavo," says Leanna Hamill, an estate planning and elder law attorney in Hingham, Mass., referring to the woman whose parents and husband battled publicly for seven years over the right to make health care decisions on her behalf after she became incapacitated. "She didn't have a health care proxy."
Without a revised durable power of attorney, says Hamill, your spouse also can't administer property solely in your name or property you hold jointly with your spouse. Also specify the person you'd like to make financial and medical decisions on your behalf if an accident incapacitates you and your spouse.
If you don't already have one, this is also the time for a will or trust. "In a lot of states, if you die without a will and have a spouse but no children," says Hamill, "your spouse will inherit some of what you own, but your parents will also inherit." Rather than risk a fight between your spouse and parents over who should inherit, have a will or trust definitively state who should receive your assets. Also, if you own a home, purchase life insurance that will pay off your mortgage if one spouse dies.
Finally, change your beneficiary designations on such things as health insurance and investment plans so they pass to your spouse. "A lot of people think when they get married, those things change on their own, and they don't," says Hamill. "Go to your human resources department and ask which documents include a beneficiary. Health savings accounts and flexible spending accounts sometimes have a beneficiary, as do bank accounts payable on death."