But there are three legal documents that every adult needs. And I do mean every adult, so stick with me, especially if you have adult children over 18.
By the way, I am not an attorney, and none of this is legal advice. So, please talk to one before you start downloading templates from the internet and copying and pasting your name onto them.
1. LAST WILL & TESTAMENT
First, let’s start with your will – and what can go wrong if you don’t have one.
We all know that a will directs how your assets are transferred after you pass away. I’ve had plenty of people say to me, “Wait just a minute there, guy-on-the-internet. I don’t have any assets, so I don’t need a will! Checkmate.”
Fair enough, I guess. But if you have kids, your will is the legal document that names their guardian if they’re not yet adults. And that’s something you may not want to leave up to the courts.
If you do have some level of assets, dying without a last will & testament will absolutely make things more complicated for your heirs, even leading to legal battles and strife among your family.
Now, if you don’t like your heirs, well, this might be a good way to harass them from the grave.
If you die without a will, it’s known as dying “intestate” and your estate’s disposition will be decided by the intestacy laws of your state. Basically, your next of kin is decided for you by your state of residency.
However, it’s likely that not all your property will pass this way. Any joint accounts, life insurance policies, and retirement accounts pass outside of the probate process.
It can be a big mess to sort through this process, especially once your estate starts to move through the court system and lawyers get involved.
But what happens if you’re simply incapacitated for a while? While it may sound like the perfect conditions for an amnesia-based rom-com, there’s another document you’ll need.
2. FINANCIAL POWER OF ATTORNEY
Our second crucial legal document, a financial power of attorney, names the person or persons who can deal for you in financial and legal matters.
There are two types of these documents: durable and springing. For most states, the default is a durable power of attorney, where your named person has the legal authority to act on your behalf as soon as the document is executed.
A springing financial power of attorney is only valid if certain conditions have been met. From what I’ve been told, the springing powers of attorney can become complicated if the conditions are too vague or inaccurate. So, your attorney might steer you away from the springing powers of attorney, depending on your state of residence.
3. ADVANCE DIRECTIVE FOR HEALTHCARE
Where a financial power of attorney names the person who can act on your behalf in legal and financial matters, an Advance Directive for Healthcare names the person who can make decisions for you in health-related matters. These are often called Living Wills, .
Both documents name your guardian and dictate your wishes for your medical care, should you become incapacitated. A living will is a type of advance directive, but not all advance directives are living wills, if that makes sense. It’s like every lager is a beer, but not every beer is a lager.
To make things easier on medical professionals, many states now have statutory advance directive documents, which is nice. This way, the hospital staff doesn’t have to try and figure things out since every document looks the same.
Hey, it’s one thing to make your heirs fight over who gets the 1978 Cutlass Supreme, but please, please don’t put your family through the turmoil of making end-of-life decisions for you.
WHERE THIS GETS PERSONAL
Now, before I talk about considerations for adult children, I want to share with you why this topic is personal for me.
Years ago, a very good friend of mine sustained a life-threatening injury. After being transported to the hospital, the doctors needed authorization to perform emergency surgery.
Unfortunately, my friend did not have an advance directive set up. But, instead of being able to authorize the doctors to perform the surgery, his spouse had to go before a judge in order to be granted the legal authority to grant the doctors permission.
Ultimately, my friend eventually died due to further complications from his injury. Would the delay in the procedure have changed things? Maybe not.
But it might for you or someone you love.
That’s why I think the advance directive for healthcare is the most important of the three estate planning documents. Not only does it specify who can authorize a potentially life-saving procedure, but it also relieves your family and loved ones of the burden of making these types of medical decisions on your behalf – because you’ve already stated your wishes for them.
WHAT ABOUT TRUSTS?
Trusts can be a helpful supplement to your will, especially if you live in a community property state. Everything in a trust passes outside of the probate process – and has more privacy than simply using a will.
However, anyone with a trust will need to move their assets into the trust first. This means that you may have to retitle your property our accounts to show that the trust is the owners.
ADULT CHILDREN
So, if every adult needs these legal documents, does that include young adults?
Absolutely!
Will you have the legal authority to make medical or legal decisions for your 21-year-old child, should something go wrong?
Not necessarily!
It isn’t something you want to think about for someone in the prime of their life, but, as the kids say, it’s part of “adulting”.
And, since cash is usually tight at this age, these documents often go neglected.
That’s why I would recommend you talk with your attorney about having these legal documents created for your adult children the next time you have your own estate planning documents updated.
Bring the kids into the attorney’s office with you so they can see and understand the process. It’s a gift that they’ll definitely appreciate – a couple of decades down the road.
If you need help sorting out your estate planning documents, then click here to set up a quick, complimentary introduction call to see if Prana Wealth is a good fit. We do still have the capacity to take on new clients.
As a fee-only financial advisor in Atlanta, we can (and do) work virtually with clients all across the U.S. and we’re here to help you when you’re ready.
