When tragedy strikes, it reminds us that life is precious. Recently, friends of clients of mine lost their 17-year-old son to a skiing accident in France. He fell 400 meters off of a cliff and in the blink of an eye, his life was cut short. Neither he nor his family saw it coming.
At moments like this, it’s important to take time to reflect on your own life, be grateful for what you have and prepare for the future, expected or not. I recommend all legal adults over the age of 18 create an estate plan to prepare for death and incapacity. To help demystify this process, I’ve created an estate planning checklist that covers five essential estate-plan documents to protect your future.
5-Step Estate Planning Checklist
Here are the five must-have documents in your estate plan:
- HIPAA Authorization
- Power of Attorney for Healthcare
- Durable Power of Attorney for Property Finances
- Will
- Revocable Living Trust
Throughout this blog post, I’ll talk about the purpose and priority level of these documents and address some of the questions you’ll need answers for.
1. HIPAA Authorization
The first document that all adults need in their estate plan is a HIPAA authorization form. This document gives those closest to you permission to have a conversation with your healthcare professionals.
Why You Need It
Imagine you’re suddenly hospitalized or need medical attention. A HIPAA authorization form ensures that your family and other close relations are not cut off from your medical team.
Most healthcare professionals will notify your immediate family in the event of an emergency. However, if the ER doctor or nurse is not certain of a friend or family member’s right to access your information, that person may rightly withhold details of your condition out of fear of violating HIPAA privacy rules.
You can prevent confusion by filling out a HIPAA authorization form and naming the people you want to be able to access your medical information.
How to Assign HIPAA Right of Access
Ask your primary care doctor to provide you with a HIPAA authorization form. Most doctors can email you one to fill out and submit. You can also download this sample document from the American Bar Association for more information. Many estate-planning attorneys also provide such forms.
What to Consider
Before signing a HIPAA authorization, think about who you would want to know the details of your care plan if you were injured in an accident or suddenly fell ill.
If your immediate family lives in another state, you might want to think about authorizing close friends or acquaintances that live nearby.
It is advisable to notify the persons you list on a HIPPA authorization form.
2. Power of Attorney for Healthcare
The second document on your estate planning to-do list is a Power of Attorney for Health Care. This document appoints an agent to make personal and medical decisions on your behalf if you become incapacitated.
Why You Need It
Imagine that you’ve just been in a severe car accident and are in a coma. You’re unconscious — unable to speak or make decisions for yourself. The doctor has assessed that if you recover, you’ll function at a low level compared to your current self.
When the doctors ask your loved ones about next steps, half of your family wants to take extreme life-extending measures in hopes that you will come out of your coma. The other half of your family is willing to let nature take its course.
If your family can’t come to a consensus on what to do, your case may have to be decided in guardianship court where a judge has the authority to select a guardian of the person to be responsible for your health care decisions. The judge may end up selecting the last person you would choose if given the choice.
Without a Power of Attorney for Health Care, you risk the chance of the wrong person making life-and-death decisions, along with determinations over such matters as where you reside. Making your wishes known with a Power of Attorney for Health Care gives direction to others regarding your care for better peace of mind.
What to Consider
Select a trusted loved one as your agent under a Power of Attorney for Health Care who:
- Understands you
- Can decipher medical terminology
- Is willing and able to fight for you
- Is accessible, whether living in the same town or 1,000 miles away
Think about who you would want making medical decisions. Choose someone you can depend on and who would be available in an emergency. Also, select one or two alternate agents if your first choice cannot act on your behalf.
3. Durable Power of Attorney for Property Finances
A Durable Power of Attorney for Property, which deals with various financial aspects of your life is the third document on our estate planning checklist. A Durable Power of Attorney for Property allows you to select an agent (or proxy) to control your money and pay your bills if you become incapacitated. Please note that it is different than a nondurable Power of Attorney, which allows someone to act on your behalf for a specific financial transaction or series of transactions because you are unavailable.
Why You Need It
If you become incapacitated and don’t have a Durable Power of Attorney for Property, your family may have to spend money on a lawyer to go before a judge to appoint a conservator of your estate. Depending on the circumstances and family dynamics, this can be a long, drawn-out process. Judges usually award conservatorship to your closest family member — someone you may or may not want to handle your money.
What to Consider
Ensure the person you select as your agent is:
- Someone you trust
- Understands bill paying and simple contracts
- Shares your financial philosophy
Keep in mind that when drafting your Durable Power of Attorney, you can set limits on what your agent can and cannot do. When setting limits, think about all of the possible financial decisions this person may need to make.
In the document, specify how you want the agent to handle various transactions. The most common financial transactions a conservator makes include:
- Paying your bills
- Paying your taxes
- Paying medical expenses
- Managing your real estate assets
- Accessing your financial accounts
- Investing on your behalf
- Collecting retirement benefits
- Transferring and selling your assets
- Buying insurance for you
- Operating your small business
- Hiring an attorney to represent you
- Other activities that involve contractual authority
4. Will
A Will is the fourth must-have in your estate planning checklist.
A Will specifies who will receive your possessions and assets after you die and states your funeral wishes. In the state of Illinois, a Will is the best document to nominate a guardian to care for your dependents or minor children.
Why You Need It
If you die without a Will, a court will distribute your individually owned assets according to state intestacy laws. In most states, these laws distribute your property to family members in order of closeness of relation. Typically, half of your assets go to your spouse and half go to your living children.
If you wish to award your property to people outside of these two categories, a Will is necessary.
If you have minor children or dependents, it’s even more critical that you have a Will. If you die without nominating a guardian, the court will decide who will take care of your children, deciding such matters as where they live and go to school. Judges typically award guardianship to a living parent first, followed by the next closest relative.
What to Consider
There are several questions you need to answer before creating a Will.
- Who do you want to name as your executor to carry out the wishes in your Will?
- Who are your heirs according to state law and do you want them to receive all your assets?
- Other than your heirs, is there anyone else that you want to receive assets after you die?
- Who would you want to care for your children after your death?
- What are your individually owned assets?
- What are your funeral wishes?
Need help making these crucial decisions? Check out our Will Planning Guide or contact us for assistance.
5. Revocable Living Trust
A Revocable Living Trust is the fifth document on our estate planning checklist. It can do everything that a Will does — and more. The difference is that, unlike a person, a Trust does not die. Upon your death, the Trust continues, without court involvement, to manage your assets according to its terms.
To ensure your Revocable Living Trust efficiently transfers assets to your beneficiaries after you die without having to go to probate court, you must fund it. Usually, you will name yourself as the initial trustee. Doing this allows you to transfer ownership of your assets to the Trust. Now, instead of owning your assets individually, you own them as a trustee of your Trust.
Upon your incapacity, the Trust is administered according to your best interests for the rest of your life. After you die, your Revocable Living Trust either becomes irrevocable under new testamentary terms, or its assets are distributed and the Trust ends.
Why You Need It
Probate can be a costly, time-consuming process. A Revocable Living Trust lets you avoid this process altogether. A Revocable Living Trust can be helpful if you have a modest to large estate or complicated family dynamics, because, coupled with a Testamentary Trust embedded within it, you control assets even after your death.
What to Consider
Creating a Revocable Living Trust can be complicated, so it’s best to seek legal assistance before signing one.
If you do not fund the Revocable Living Trust, it can still carry out most of the functions of a Will, but it will not avoid probate.
Estate Planning with Matlin Law Group
Need help with estate planning in Chicago or Northbrook, Illinois? At Matlin Law Group, our compassionate approach to estate planning helps us create estate plans custom-fit to your needs. We take time to understand your family dynamics. Our goal is to give you peace of mind knowing that your affairs will be handled correctly in the event of a potential incapacity and eventual certain death.
Check out our estate planning FAQs to learn more or contact us today for a free consultation.
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