The big six
Six documents you and your loved ones need to help navigate life as you age. Do you have them?
If you said ‘no,’ you are not alone. The number of Americans with a will continues to decrease and is now well below half, 31% according to one survey, and presumably some of those are outdated. The reasons so few Americans have wills are obvious: it feels complex and expensive (it isn't) and it causes an existential crisis (doesn't have to.)
Yet it's so important. Estate planning protects your loved ones, can spare taxes, eliminates family squabbles, and most importantly protects your minor children.
Estate planning for most nonprofit professionals, and most of the middle class in general, can be narrowed down to six documents:
A will helps your family distribute assets as you wanted, appoints someone to do it, and avoids costly and complex court processing. Even with few assets, a will is helpful to those unwinding your accounts and possessions.
A medical directive (also known as an advanced directive or living will) allows you to make critical medical and life care decisions ahead of time, reducing the stress placed on caregivers. Many states have preferred forms, so if you've moved you might want to update them.
A financial power of attorney allows someone else to handle your finances when you are unable to do so due to physical or mental incapacity. Durable POAs are less likely to be refused by a bank than a Limited POA.
A health care power of attorney is a document in which you designate someone to be your representative in the event you are unable to make or communicate decisions about your health care. Like the Financial POA, durable is often preferred to limited.
Beneficiary designations are not contained in a single document but attached to most of your bank and investment accounts. These designations tell the bank to whom assets are distributed when you die, and they bypass your will. It’s important to coordinate these so your estate wishes are fulfilled.
An asset list and account information. This is the most overlooked document. Your heirs or financial POA can’t help you if they don’t know where to look. These lists should include account information, login and – don't forget – passwords. There is software that can help like password managers with ‘emergency access’ features, Mint.com or RightCapital.com for accounts and GetEncircle.com for home inventory management.
