An estate plan consists of several documents including a will, usually a living trust, a financial power of attorney, a health care power of attorney and a HIPAA (Health Insurance Portability and Accountability Act) Waiver. Here is a break down of what each document is:
Will – Describes how assets (Cash, Property, Collectibles, etc.) held in your individual name pass to heirs. A will is necessary even if you have a trust to insure that assets held in your own name are transferred into your trust. The Will is also where you would name guardians for minor children.
Revocable Living Trust – A revocable living trust is a legal entity that holds your assets while you are alive. In other words, the Trust is like a manager of your assets. In the event of incapacity it dictates the transfer of assets to your heirs or beneficiaries on your death. It also avoids probate.
Financial Powers of Attorney – A financial power of attorney allows a person of your choosing to handle your individual assets. This document can be drafted to become effective immediately or only upon your incapacity. A financial power of attorney can give your person of choosing, or agent, the authority to do some or all of the following:
- Pay your everyday expenses
- Manage your real property, including buying, selling and maintaining the real property
- Collect social security, Medicare or or other government benefits
- Invest your money
- Handle transactions with banks and other financial institutions
- Buy and sell insurance policies and annuities
- File and pay your taxes
- Operate your business
- Claim property you inherit
- Transfer property to your trust
- Prosecute or litigate cases on your behalf
- Manage your retirement accounts
Health Care Power of Attorney – A health care power of attorney allows you to appoint someone to make your health care decisions if you are incapacitated.
HIPAA Waiver – is a legal document that allows doctors to communicate with specifically named individuals about your health history and current health situation. Without such authorization, doctors are legally barred from discussion anything about a patient with third parties, including family members.
Next week: Estate Planning 101: Why Should I Have an Estate Plan?