If you care about who gets your assets after you pass away, creating a will is vitally important. If there is no will in place, the state in which you live will decide on who gets your assets. If you leave it up to the state, typically your assets will go to your spouse, your children, your parents, and your siblings in that order. If none of those people exist, then your assets get dumped into a broad category of “other” and things get more complicated from there.
A will is the most basic estate document that everyone should have. It will help to avoid fighting among the family you leave behind, which sometimes gets very nasty.
In addition to having a will, there are 3 other documents you should have created if you have not already.
Financial Power of Attorney
Creating a financial power of attorney lets you empower someone to make financial decisions on your behalf should you become incapacitated or unable to make those decisions on your own. The person you designate is called your “agent”. You can control the level of power granted to your agent. It can range from basic access to your banking accounts to having complete autonomy over the entire scope of your financial affairs.
If you do not have a financial power of attorney and you become incapable of handling your financial affairs yourself, the court will appoint someone to take care of your finances. Going through the court system can take time, and although the court usually will appoint a close family member, that individual may not be the person you would want handling your finances for a variety of reasons.
Today, with more couples choosing not to get married, this might be even more important. If you have a non-spouse partner that you want to be your financial power of attorney, then you better designate them as such yourself. The court will be more likely to appoint a family member.
Medical Power of Attorney
A medical power of attorney lets you designate someone to make medical decisions on your behalf should you not be able to do so. The medical POA gives your agent access to your medical records, lets them consult with healthcare professionals, admit you to a healthcare facility, and they will carry out your end-of-life instructions. These decisions can be very trying on loved ones, so it is a good idea to have an Advanced Medical Directive document prepared as part of the medical power of attorney. In it, you outline exact instructions for care you want or do not want such as tube feeding, living on a ventilator, dialysis, and more.
If you own a life insurance policy, 401k, IRA, or any other type of retirement account, you probably have signed a beneficiary designation for those accounts. Your beneficiary designations are vitally important. A lot of people do not realize this, but beneficiary designations supersede any wishes outlined in your will. Meaning they take first priority.
If you update your will because you remarried, had more children, or for some other reason, but you leave old beneficiary designations on these accounts, your money from these accounts will flow according to who you designated as beneficiaries, not based on