The Last Will and Testament
One of the oldest forms of an estate plan is the Last Will and Testament. With this plan, you create a Will that specifies who is to receive your assets after you are gone. You also select your Executor, who is the person you appoint to distribute your assets according to your Will at the conclusion of Probate. Contrary to what some people have heard and many have been led to believe, a Will does not shield you from Probate, it virtually assures it. The only exception is where your total gross estate is considered a small estate in the State in which you live. Your State sets by law a minimum value at which Probate must be conducted. For example, in California, the minimum probate threshold is $150,000, while in many other states, the minimum threshold is only $50,000. While your estate must still usually meet the minimum dollar threshold, a Will cannot be enforced until the court validates it through the Probate Process.
If your estate qualifies as a small estate, your executors or heirs can often gain access to your assets from financial institutions through an affidavit process, provided the assets are being accessed and distributed according to your Will.
Without a Last Will and Testament
The drawback to using a Last Will and Testament (Will) for your estate plan is the time and expense associated with Probate. On the plus side, a Will allows you to name your own executor and specify who should receive your estate. Without a Will, the State will distribute your estate (net of all the probate related costs) in accordance with State Law, not your wishes. You might be surprised to learn that if you are married when you die with no Will, and leave a spouse and children behind, the State will often give 2/3rds of your estate to your children and 1/3rd to your spouse. This may place your spouse in financial jeopardy and if you leave behind minor children, the resulting cost and complexity that ensues will not only tie your family’s hands but eat away financially at your estate.
Other Important Estate Planning Documents
Durable Power of Attorney
A Durable Power of Attorney is a written authorization that allows your chosen person to act for you on your behalf in administering your private affairs. Most often, durable powers of attorney are essential in dealing with decisions involving property and asset management.
Durable Powers of Attorney are “durable”, meaning that your agent can act for you, even if you are incapacitated. However, many financial and healthcare institutions are reluctant to honor a Power of Attorney that is more than a five years old. Therefore, it is a good idea to keep these documents updated, especially if you have had a change in your personal status or physical abilities.
These documents need to be countersigned by a licensed notary to make them legal viable. Without notarized durable Powers of Attorney in place, your person of choice (even if they are your spouse) will not be able to make financial decisions for you cannot do it for yourself. They will have to go through complex and costly court proceedings in order to be appointed your legal guardian. This process is not only expensive but can be public and humiliating as well.
With a durable power of attorney in place, your appointed person can privately and easily handle your personal and financial affairs if you become incapacitated. Because no judicial proceedings are necessary, you can save time and money. But more importantly, you can avoid the stress of court involvement and public accessibility.
Advance Health Care Directive
Similar to a Durable Power of Attorney, an Advance Health Care Directive, sometimes referred to as a Health Care Power of Attorney, gives a trusted person the legal authority to make medical decisions for you if you are unable to make them for yourself, including decisions about your care and comfort, medical procedures and end of life decisions related to life support measures.
DNR (Do Not Resuscitate) Orders
It is important to note that Advance Health Care Directives are not the same as DNR’s. Unlike an Advance Health Care Directive that you create to appoint an agent or proxy to make health care decisions for you when you cannot, A DNR is a directive created with you and your doctor. It instructs health care providers not to do cardiopulmonary resuscitation (CPR) if a patient's breathing stops or if the patient's heart stops beating.
A DNR order is created or set up before an emergency occurs. A DNR order allows you to choose whether or not you want CPR in an emergency. It is specific about CPR. It does not have instructions for other treatments, such as pain medicine, other medicines, or nutrition.
A DNR is usually only created when a person is near the end of their life or has a serious illness that will not improve, regardless.