Many people think estate planning involves simply creating trusts and wills, but these documents aren’t the only ones to consider. There are also living wills, powers of attorney, and health care proxies. Here’s a quick overview of each type of document.
A living will also known as an advanced directive, is a legal document that allows you to state your wishes regarding medical treatment if you become incapacitated. For instance, this includes if you want to be put on life support, end of life planning, etc. It doesn’t replace a trust or power of attorney but rather supplements them.
For instance, if you suffered a traumatic brain injury and paralysis in a skydiving accident, an advanced directive can take into account whether or not you want to be put on a ventilator or other life support measures.
A trust is a legally binding document between the Settlor, Trustee, and Beneficiary. In a trust, the Beneficiary nominates a trustee to act on their behalf and serve over holding and distributing assets and property.
Power of Attorney
A power of attorney gives another party the ability to act on your behalf when you’re unable to make decisions for yourself. It is best practice to appoint two power of attorneys – one financial power of attorney and another medical power of attorney. These should be different people to avoid a conflict of interest.
For example, if you were injured in a car accident and couldn’t speak for yourself, you could appoint your spouse as financial power of attorney, so they could pay bills and file insurance claims on your behalf.