Wills, Power of Attorney, and Health Care Proxy

Unfortunately, we all need legal documents to protect us when we die or if we are unable to speak for ourselves. Wills ensure that our property – homes, cars, cash, retirement accounts, stocks, bonds, etc. – are disposed of in the way we wish. The legal term for dying without a will is called "intestate". If you die intestate, your property will be awarded to your heirs (and creditors) according the way the court sees fit. Power of attorney protects your interests in the event you can't speak for or represent yourself. It allows a person of your choice, not the court's, to pay your bills and make decisions on your behalf if you are not capable of doing so. Finally, a health care proxy allows the person of your choosing to make medical decisions for you if you become incapacitated.

While these topics aren't usually ones we enjoy talking about, they are crucial when it comes to estate planning. Each of these legal documents protects your interests and ensures that your wishes are followed and your property protected.

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Creating a Will

A will is simply the legal way to transfer property from the deceased to a beneficiary. A simple will can be written without the help of an attorney, but if you have significant assets and dependents, it's always a good idea to secure the help of an attorney. Anyone over the age of majority (the age at which the state in which he or she lives considers one an adult) and who has the appropriate mental capacity can draft a will. In general, the following must be addressed in the will in order for it to be valid: the testator (the person writing the will) must clearly identify himself or herself as the writer of the will, and include the words "last will and testament" in the document. If a previous will is in existence, he or she must declare that this will is valid by revoking all prior wills. He or she must also state that he or she has the mental capacity to dispose of property and does so freely and willingly. The will must then be signed and dated. If witnesses who are not beneficiaries are available to sign the document, they should do so as well.

Additional requirements may be necessary depending on what state you live in, so it's always a good idea to either meet with an attorney or utilize an online service that is familiar with the rules and regulations of your state.

What is Power of Attorney?

A "Power of Attorney" is a written legal document that is used when a person wants to appoint another adult to handle his or her financial, property, or legal matters. A valid PoA allows a person of your choosing to make decisions for you if you are unavailable or become incapacitated. For example, a business owner may give an associate PoA when on a business trip abroad. An elderly parent may give an adult child PoA to pay bills and handle other financial matters if he or she becomes ill.

The person who creates a power of attorney document in order to give another person the authority to make decisions is known as the principal. The person who has Power of Attorney is known as the attorney-in-fact. He or she is not required to be an attorney, but must be a competent adult at least 18 years of age. The principal always has the right to revoke or cancel the Power of Attorney at any time he or she chooses to do so. He or she can also set up the PoA for a specific amount of time, after which it is no longer in effect.

Most states have established separate powers of attorney for financial and medical issues. If you want to establish a power of attorney for both, it is recommended you establish two separate documents, rather than combining them into one. Also, it's recommended that a "durable power of attorney" be set up in the event a person becomes incapacitated while a power of attorney document is in effect. In other words, unless the document is established as a durable power of attorney, it will become ineffective if you are declared mentally incompetent, even if a power of attorney is in effect. This is an especially critical point if you or a loved one is currently ill or suffering from a major illness.

Signing a Health Care Proxy

A health care proxy can be executed without the aid of an attorney. It's simply a document that states another person has your permission to make health care decisions for you if you are unable to do so.

Health care proxies are available as downloadable forms on the websites of most state health departments. By choosing a proxy, you can make sure that your health care providers follow a course of action that you would want them to. Regardless of your financial situation, if you're over the age of 18, you need to appoint a health care proxy. There are two situations in which the services of a health care proxy would be needed.

The first is in the event of a temporary inability to make health care decisions. For example, in the event of an outpatient or minor surgical procedure that requires general anesthesia. Should something unexpected happen and a health care decision need to be made, your health care proxy will be able to communicate your wishes. The heath care proxy cannot make decisions for you once you regain consciousness.

The second purpose of a health care proxy is in the event of your permanent inability to make health care decisions for yourself. For example, if you were to become comatose due to an accident or terminal illness, if you were to contract an illness and were unable to communicate, or if you're elderly and suffering from a form of dementia or Alzheimer's disease. In these instances you would more than likely want a person who knew what your wishes were to make decisions about your treatment.

Protecting yourself and your family with these three simple legal documents is fast and easy. While these are not topics any of us enjoy talking about, it's imperative that these documents be set up to ensure that your wishes are clearly communicated to the court, health care providers, and all other entities.

While we've covered the basics of estate planning here, there is much more to implementing a solid estate plan. To make sure you're on the right track, contact a licensed financial advisor. It only takes a few minutes, Start Now.

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