As part of the basics of estate planning you should have a will, a durable power of attorney for financial matters, a health care power of attorney, and a living will. These documents provide the foundation for any estate plan and help you stay in control. If you already have these documents, be sure to review them regularly.
Life events, such as deaths, births, divorces, marriages, or change in state residency often lead to changes in your goals, so your documents should change as well.
You should also review your basic documents as changes occur in federal or state estate tax laws.
In this section you will learn about:
- The benefits and limitations of a will
- Why you need a durable power of attorney for financial matters
- Why you need a health care power of attorney and a living will
We'll also briefly discuss the sensitive issue of funeral and burial instructions, and highlight some special considerations that apply to estate planning documents for LGBT individuals.Will
A will provides instructions for distributing your assets to your family and other beneficiaries upon your death. Your attorney can customize its provisions to meet your needs. You appoint a personal representative (also known as an "executor") to pay final expenses and taxes, and then distribute your assets. If you have minor children, a will is the only way you can designate a guardian for them.
Be aware of some limitations of a will.
A will governs only those assets that are owned individually without a specific beneficiary designation. Assets such as joint accounts are not controlled by the will.
Jointly held assets will pass automatically to the survivor. Likewise, assets with a beneficiary designation are not governed by a will.
A will does not avoid probate. In most cases, a will must be filed in probate court to be effective.
Probate costs vary in each state. Costs may vary depending on the complexity of your estate.
Probate is also a public process, insofar as court files are generally open to the public. LGBT individuals who desire greater privacy may want to explore alternatives to probate.
If you own real estate in more than one state, your beneficiaries could face multiple probates, each one according to the laws – and costs – in that state.
A will is effective only after your death. To provide protection if you become incapacitated, you may need a durable power of attorney.
A durable power of attorney is a legal document that gives another individual authority to act for you if you become incapacitated. When you die, the power ends.
Regardless of whether you are single, married, or part of a couple, it is very important for you to take control and designate in advance who would make financial, legal, and health care decisions for you if you cannot make them yourself.
Your attorney may recommend two documents:
- A durable power of attorney for financial and legal matters
- A durable power of attorney for health care (also called a health care power of attorney) to deal with health care decisions. (We will discuss this document in the next section.)
A durable power of attorney allows an individual whom you choose to step in to manage your affairs outside the probate process. This person can be your partner, spouse, family member, a child, or anyone you trust. Remember, you are naming this individual to act on your behalf to manage your financial and legal affairs. You should choose this person carefully, because he or she will generally be able to sell, invest, spend, and possibly gift your assets. A durable power of attorney can apply to all of your financial affairs or be limited and apply only to particular assets or accounts you own. You may also authorize the use of your assets to help support your spouse or partner and household expenses.
A durable power of attorney can take effect immediately or at the time of your incapacity, but it must be established while you still have your legal capacity.
If you become incapacitated and do not have a durable power of attorney, then a court-supervised conservator or guardian is appointed to oversee your assets. You may not have any vote in who is chosen. Guardianships or conservatorships are generally cumbersome, public, unpleasant, and expensive.
If you have a revocable living trust, you should still have a durable power of attorney to manage assets that are not part of the trust, such as IRAs or qualified retirement plans. In addition, it is wise to have a power of attorney so that someone will have authority to act for you on matters that do not involve managing assets, such as signing your tax return, handling insurance claims, or other legal matters.
When choosing an individual to serve as an agent under a durable power of attorney, it's important to communicate your wishes to the person and to choose one or more alternates in case he or she is unable to represent you.
A durable power of attorney for health care, also known as a health care directive or health care proxy, gives a person you designate authority to make health care decisions on your behalf if you are unable to do so.
When choosing an individual to serve as an agent under a durable power of attorney for health care, it's important to not only communicate your wishes with the person but also to choose one or more alternates in case he or she is unable to represent you.
Even with the recent Supreme Court decision, state law will still determine who has "automatic" authority to make medical decisions for you. As such, it is very important that you execute specific health care powers of attorney to communicate your wishes regardless of whether you are married or unmarried.
A living will expresses your wishes regarding the use of life-sustaining procedures. A living will expresses what you want, but unlike a health care power of attorney, it does not appoint another person to speak on your behalf.
You can revoke the instructions in your living will at any time. It is important to make your family aware of your intentions while you are able to express them clearly.
You may also want to provide copies of your living will and health care power of attorney to your physicians and local hospitals for their files.
LGBT individuals should take special care to leave clear – and if possible, legally binding – instructions about who can make funeral and burial arrangements.
State laws typically provide that a deceased individual's "next of kin" are to have legal custody of the body, and the authority to make funeral and burial arrangements. This can be problematic for some LGBT individuals.
If a parent or relative would not be the individual you would choose to arrange your funeral and burial, then you should take steps to specify who will have this responsibility. Fortunately, many states allow you to take control of this issue and designate the person you want to be in charge of funeral and burial arrangements. The specific way of doing this varies greatly from one state to another, so it's important to get help from a lawyer in your state. Sometimes this designation is made in a power of attorney, or a health care directive, or there may be some other type of specialized document you need.
It is important to pay special attention to words and definitions used in your estate planning documents. Some of the "boilerplate" or standard definitions may not fit the personal and family situation for an LGBT individual. Your attorney will pay special attention to the language in your documents. At the same time, you should read drafts carefully and pay special attention to those issues.
Your documentation should clearly name the specific individuals you wish to benefit. Whenever general terms like "heirs," "descendants," or "child" are used, be sure that they are clearly defined in a way that is consistent with your wishes and objectives.