Good question, as there are really three (3) that are non-negotiable.
In fact a recent article you may have caught calls them the "Big 3."
The article comes to us via NJ 101.5 and is titled “Here are the important estate planning documents you should have.”
Here are the "Big 3," according to that article - a will, a general durable power of attorney and an advance health care directive.
Your Will:
A will lets you give away your assets at your death to whom you wish in the manner appropriate for your beneficiaries.
In addition, a properly drafted will allows you to name an executor (also known as a "personal representative") to handle the administration of your estate.
Fail to name an executor in your will and the probate judge appoints an "administrator" to settle your affairs.
Hint: The process goes a lot more easily (and less expensively) when you name an executor in your will.
Your General Durable Power of Attorney:
This legal documents is needed by everyone age 18 and older.
Through it you appoint a trusted individual as the agent to act on your behalf regarding financial matters.
Also, if the power of attorney is durable, its effectiveness continues after your incapacity. You certainly want to give this authority.
Why?
Giving this power to an agent will eliminate an expensive "conservatorship" proceeding if you become incapacitated down the road.
Your Advance Health Care Directive.
An advance health care directive will include a durable power of attorney for health care decisions. Think of it as the health care "kissing cousin" to your general durable power of attorney for financial matters.
Again, this legal document is necessary for everyone age 18 and older to avoid a "guardianship" proceeding if you are incapacitated.
The other component of an advance health care directive is the "health care treatment directive" which allows you to express your treatment wishes when your life and death hang in the balance.
Hint: If you want your agents to err on the side of maintaining your life through health care measures, then do not appoint a friend or family member who is a veterinarian. [A little estate planning humor there.]
Other Considerations:
While you are taking care of getting these "Big 3" implemented, be sure to review all of your beneficiary designations to be make sure they reflect your wishes on the disposition of each asset.
Did you know that an asset with a beneficiary designation is considered a "non-probate asset" that is not distributed under the terms of your will?
It is true.
Accordingly, changes to your will do not change the distribution of such non-probate property.
In fact, retirement accounts and life insurance policies are the most common assets that pass by beneficiary designation, as well as POD (payable on death) and TOD (transfer on death) accounts.
Along with the “Big Three,” you may want to consider creating a revocable living trust to hold property during your lifetime and distribute it privately without probate at your death.
In addition, irrevocable trusts are often employed for estate tax planning purposes. One of the most common of these is an irrevocable life insurance trust (ILIT), which can eliminate the value of insurance proceeds from your taxable estate at your death.
Talk with an experienced estate planning attorney to make sure you have all the documents you need.
So, how do you find an "experienced" estate planning attorney?
First, ask around. Friends, family and other professional advisors are trustworthy sources.
Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "Estate Planning Anytown MoKan").
Third, either way, verify! Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.
How?
Two helpful online resources are just a mouse click away to assist with your due diligence: Avvo.com and Lawyers.com.
Check any Avvo ratings, client ratings/testimonials and attorney endorsements on Avvo.com and any "peer ratings" by judges/other attorneys and any client ratings/testimonials on Lawyers.com.
In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: NJ 101.5 (September 13, 2016) “Here are the important estate planning documents you should have”
