Estate Planning 101: The Importance of Basic Estate Planning
Everyone over the age of 18 should have basic estate planning in place. This includes the following four different documents:
- Last Will and Testament;
- Power of Attorney;
- Healthcare Proxy; and
- Living Will.
Last Will and Testament
This document describes what will happen to your property upon your death and appoints an executor of your estate. This individual will marshall your assets (collect them after your death), make sure they’re safeguarded, and then distribute or sell them according to your wishes as described in your will.
In addition to an executor, there may be other individuals appointed in your will, depending on your circumstances. For example, if you have minor children and would like their inherited assets held in testamentary trust until a certain age, you will need to designate a trustee — a person with “signing authority” and the discretionary power to give some or all of the assets to the minors, either immediately, according to need, or over time.
The Last Will and Testament also provides a way for you to designate a guardian for your children should something happen to both parents at the same time. The guardian becomes the substitute parent for custody, healthcare decisions, etc.
The people chosen for the different jobs outlined in the Last Will and Testament are usually chosen because they have a particular skill set and can perform all of the necessary duties. Some individuals can wear multiple “hats.” There can be overlap or each position can be filled by a different person of your choosing.
When choosing a(n):
- Executor, designate someone who is organized, can quickly gather information, and work with other professionals (lawyers, accountants, realtors, etc.) in order to accomplish things;
- Trustee, designate someone who generally has capabilities similar to an executor and may possess a financial background;
- Guardian, designate someone who has parenting skills and will ensure your children’s health and safety. In addition, you should consider someone who shares your values and will be able to raise your children the way you would have.
It is important to note that assets that pass automatically by operation of law do not have to be distributed through your will. This could include joint property such as a bank account as well as life insurance or IRAs that have designated beneficiaries.
Power of Attorney
This document gives someone else the authority to sign legal and financial documents for you. Powers of Attorney can be drafted in different forms.
You can create a limited use Power of Attorney that restricts the scope of authority to a single event, like a real estate closing.
Or you could have a Springing Power of Attorney that only becomes effective upon a condition that you place upon it — most often, the condition is incompetency. In this case, the power of attorney would only “spring” into action (and be effective) if and when you ever become incompetent.
Most people who are 50 years or older create a broad Power of Attorney, which provides broad authority to sign on the other person’s behalf. Typically, a husband and wife utilize this type of document; however, you can designate someone else to be a successor should the first designee predecease you, or is unavailable or unwilling to perform his or her function.
Healthcare Proxy
A Healthcare Proxy designates someone to make healthcare decisions for you if and when you are unable to do so or cannot communicate your wishes.
For example, if you are in a medically induced coma and a medical decision regarding a procedure or medication must be made, your health care agent can discuss the decision with your physicians and then make the decision for you.
In New York, a Healthcare Proxy is a binding legal document.
Living Will
By contrast, a Living Will also deals with healthcare issues; however, it is not a binding document under New York law. The living will is a document that expresses your wishes for end-of-life decisions.
Because these wishes may be applicable at any point, it is important that everyone over the age of 18 have a Living Will — irrespective of age. In end-of-life situations (irreversible mental condition, incurable condition, unable to eat/drink on your own, etc.), you may want to limit the type of extraordinary medical treatment you receive under those circumstances.
Moreover, the Living Will can help to settle disputes in the event that family members have differing opinions on how to handle this type of situation.
Of the four crucial estate planning documents, the Living Will is the only one that is not binding in New York State. The others (Last Will and Testament, Power of Attorney, and Healthcare Proxy) have legal authority that cannot easily be set aside or overlooked as long as the document was prepared correctly, executed properly, and complies with current law. These documents are often the most important documents that most of us make in our lifetimes. Preparing “canned” documents, sold in stationery stores or online, or drafting your own, is fraught with problems. Improper drafting or execution can nullify the document and it will have no force or effect.
It is important that everyone has these four documents prepared by an experienced attorney. Contact us today to get started.
James F. Leonick
Leonick Law, P.L.L.C.
TEL: (631) 486-9500
Email: info@LeonickLaw.com
