Estate planning is one of those daunting tasks that we tend to put off, even though we know it’s imperative. And who can blame us? Estate planning requires contemplating a number of uncomfortable topics, like acknowledging our mortality and deciding what will happen to our loved ones and belongings after we are gone.
If the existential crisis-inducing nature of such planning isn’t reason enough to avoid it, the multitude of fancy-sounding documents and complicated-looking forms provides yet another excuse.
Then, of course, there is the fact that our situations are all unique. More reasons to avoid estate planning: What if I don’t have any children? What if I’m about to get married (again)? What if I don’t have any significant wealth, or don’t care what happens to my stuff when I’m gone?
When it comes to estate planning, there is no one-size-fits-all solution. Generally speaking, however, there are at least a few documents, other than a will of course, that everyone should have prepared.
Power of Attorney
What is a power of attorney?
Essentially, a power of attorney is a document that allows you to designate another person to act on your behalf and manage your affairs. A power of attorney (POA) does not necessarily give the person (called your “attorney in fact”) unfettered power to manage all your affairs; powers of attorney can be much more limited in scope.
General Power of Attorney – This is the “all inclusive” type of power of attorney. A very broad document, the General POA can grant your attorney in fact the power to handle your legal and business decisions, or even manage your bank accounts or sell your property.
Special Power of Attorney – More often, you may want to give someone authority to only act on your behalf with regard to certain, specific areas. For example, say you are selling your car, but will be out of town when the title needs to be signed over. In that case, you may want your brother to have authority to sign the title over on your behalf, and you could grant him a limited power of attorney over the disposition of your car. Special powers of attorney are also known as “limited powers of attorney.”
Durable Power of Attorney – A durable power of attorney is a power of attorney, general or special, that has language keeping the power of attorney in force. Rather than being temporary, this power of attorney endures. Such a provision can be useful in the case of mental or physical incapacitation. Simply put, it allows your attorney in fact to keep acting on your behalf, even when you no longer can.
Springing Power of Attorney – So, what if you like the idea of your sister-in-law managing your finances in the event that you become incapacitated, but you don’t necessarily want her to have the authority to act on your behalf unless you actually do become incapacitated? That’s where a springing power of attorney comes into play. Much like the name implies, this power of attorney lays dormant until a specific time or event, at which time it “springs” into action.
When planning for potential disability or incapacity, a springing power of attorney can often be a key element in that plan.
Why a Power of Attorney is a Must-Have
Simply put, a power of attorney gives you the power to delegate, and can give you peace of mind in knowing that there is someone else who can act on your behalf if need be.
While it’s often wise to consult with an attorney before handing over power of your estate to another person, you may feel comfortable and confident enough to do a POA on your own. To set up a power of attorney quickly, there are a number of online forms available by state, such as those at powerofattorney.com. Just download, fill out, print, and have notarized.
Advance Directive for Healthcare
When it comes to estate planning, people tend to focus only on coordinating what happens after they are gone. Many people overlook a critical aspect of planning: What to do in the event that you are alive, but not able to make decisions for yourself?
This question becomes especially important when it comes to medical decisions. While most people take for granted the fact that their spouse or parent will speak on their behalf, this is a dangerous assumption.
There is the potential for conflict among your loved ones as to what should be done. However, even if there is no disagreement between your loved ones, a doctor may not be willing, or able, to act on that alone.
That is where the advance directive for healthcare comes into play. An advance directive, sometimes referred to as a medical power of attorney, is a document that allows you to exercise your right to have another person make medical decisions for you, on your behalf. The document itself need not be complicated, and indeed many states have a statutory form which can be utilized.
This document, in addition to allowing you to name an agent to act for you, allows you to make your wishes known regarding end of life decisions. Such decisions include whether you would wish to remain on life support, receive certain types of pain medication, or donate organs in the event of your death.
Why an Advance Directive is a Must-Have
While it is certainly uncomfortable to think about these types of choices, it may be more uncomfortable to consider what might happen if you fail to make your wishes known, or appoint a trusted individual to speak for you when you cannot. Even a person who has no spouse or children would still benefit from the peace of mind that comes from proper medical care planning. To establish an advance directive easily and on your own, check out this by-state listing provided by Caring Info.
In our modern world, privacy is an issue most people consider to be extremely important. In 1996, the Health Insurance Portability and Accountability Act, also known as HIPAA, was signed into law. The primary purpose of HIPAA is to protect the privacy of your health information.
In some ways, the HIPAA Release form can be considered a close relative of the advance directive. HIPAA creates substantial limitations on who can have access to your medical information, and likewise gives you broad authority to determine the timing and scope of that access.
Without a HIPAA release, medical professionals and even health insurance providers are, in most cases, not permitted to share your medical information without your consent.
A HIPAA Release is just like it sounds: a document that authorizes an individual, or individuals, to access your medical information. As with all the other documents discussed above, this document can be broad in scope or can be very narrow, allowing only certain information to be released.
Why a HIPAA Release is a Must-Have
As with medical decisions in general, many people assume that their spouse, parents, or children will be given access to their information when necessary. This is certainly not the case and unfortunately, without a HIPAA Release, many medical professionals will not give out any of your personal information, even to immediate family members. Sometimes will even refuse to confirm whether you are under their care at all.
It is almost unthinkable to imagine your loved ones not being able to find you or learn of your condition, should you become injured in an accident. A HIPAA Release form can help avoid such circumstances by giving the person(s) you choose the right to access your health care information.
Perhaps you’re not ready to plan your estate down to the last penny just yet. At the very least, however, a power of attorney, advance directive, and HIPAA release should be at the forefront of your priority list. These documents not only ensure that your wishes be granted, but enable your family to make the necessary decisions regarding your estate and medical care, should you no longer be able to do so.Topics: Personal Finance • Retirement Planning