Preparing the right estate planning documents is critical to making sure your wishes are carried out when you die or if you become incapacitated. Properly drafted documents ensure that you get the medical treatment and end-of-life care you desire, that your family is cared for and that your assets go to the beneficiaries you choose.

A will is an important part of your estate plan, but prudent preparation doesn't end there. You should also have a durable power of attorney designating who will manage your affairs if you're no longer able to do so yourself. Additionally, it's a good idea to prepare documents that spell out your preferences for medical treatment and end-of-life care in case you're unable to communicate your wishes.

The Purpose of a Will

Your will is the legal document that states how you want your assets distributed when you die. It becomes legally valid when you "execute" it by signing it in front of witnesses. You may change it at any time, provided you're legally competent. A will greatly simplifies the process of settling your estate, and allows you to:

  • Name an executor to administer your estate

  • Appoint a guardian for your minor children

  • Pay debts, expenses and taxes, or fund your legacy

  • Specify who will inherit your assets

The Role of Your Executor

Your estate's executor plays a critical role. He or she:

  • Speaks for you in the probate process

  • Makes sure your assets are properly identified

  • Settles your debts, expenses and taxes

  • Distributes the balance of your estate to your beneficiaries

It's usually a good idea to give your executor broad administrative powers so that he or she doesn't have to seek court permission to take action.

The Perils of Passing without a Will

If you die without a will, a probate court will use the laws of your state to determine who inherits your assets. Depending on how those laws are written, the probate court may distribute your assets in ways you wouldn't have wanted.

Preparing a will lets you choose who will administer your estate. If you die without one, a probate court appoints your executor — and it might be someone you would not have selected. The same holds true for the guardian of your minor children. Without a will, the court decides who cares for them and who supervises their property.

The probate process can be expensive and time-consuming if there is no will to guide the court. In addition, legal and tax problems could arise. For example, without a will, you may lose the opportunity to make inheritance arrangements that avoid estate taxes.

How to Prepare a Will

Your will should be prepared by an attorney who can ensure that it meets your state's technical requirements. In general, a valid will requires that you:

  • Are competent and of legal age

  • State clearly that the document is your last will

  • Sign the will or, if physically unable to do so, have someone sign the will at your direction, generally in your presence

  • Have two or more eligible individuals witness the signing

In some states, a will is deemed valid if you also prepare a "self-proving affidavit" when you sign it. A self-proving affidavit is a notarized statement, signed in the presence of two or more witnesses, stating that you followed the legal requirements for executing a valid will. With this affidavit, your executor may not need to provide other evidence in court to prove that your will is legally binding.

Protecting Your Estate Before You Pass

Ensuring that your wishes are carried out while you're alive is just as important as arranging what happens after you die. Several documents can make sure that happens.

Create a Durable Power of Attorney to Manage Your Finances

A durable power of attorney is a legal document naming someone, known as your "attorney-in-fact," as your financial agent. A durable power of attorney is the easiest and least expensive way to manage your financial affairs if you become incapacitated. Without the document, a prolonged and costly proceeding may be needed to appoint a guardian to manage your affairs.

A durable power of attorney can take effect when the document is properly signed, or it can come into force only when a defined event occurs, such as incapacity. In that case, your attorney-in-fact has authority to handle your finances.

A durable power of attorney can sometimes cause problems and should be considered only a temporary fix. The attorney-in-fact is not supervised, third parties may be unwilling to recognize the durable power of attorney, and when you die, your assets must still go through the probate process.

Document Your Health Care Wishes

Three distinct documents help ensure that your health care wishes are carried out if you are unable to communicate. These documents are particularly helpful to family members, who might otherwise be forced to guess what you want:

  • Health Care Proxy: This document, known as the "Durable Power of Attorney for Health Care," lets you designate one or more people to make health care decisions for you.

  • HIPAA Authorization: This authorizes your doctors to discuss your medical situation with people you name.

  • A Living Will: This specifies your wishes regarding health care and end-of-life preferences, including whether you want medical personnel to take aggressive measures to keep you alive.

The Importance of Being Prepared

A will, a durable power of attorney, and documents expressing your health care wishes can help to ensure you will be cared for and that your estate will be managed and passed on the in the way you want. Additionally, they can minimize the cost and delay of the probate process. In the next part of our series on the basics of estate planning, you'll learn the ins and outs of navigating this probate, and how your assets and property may be affected by it.

  • This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation. ©2016 The Bank of New York Mellon Corporation. All rights reserved.