Many people feel that a well-drafted testamentary will is all they need when it comes to estate planning documents. In fact, there are four basic estate planning documents that everyone should have: a testamentary will, a financial power of attorney, as well as a power of attorney for health care and declaration to physicians. When properly executed, these four documents allow a person to not only dictate the distribution of their assets upon death, but also the control of their assets in the event they become incapacitated.

The Testamentary Will

A testamentary will serves as more than just a document to distribute financial assets after death. It is also essential for individuals with underage children. A testamentary will is a document in which parents name a guardian for any underage children. A testamentary will is a document in which parents name a guardian for any underage children. A guardian is the person who raises a child should both parents pass away before the child turns 18, while a trustee manages the assets the child inherits through the testamentary will. A testamentary will may also be used to make bequests of specific items or gifts to favorite charities.

The Financial Power of Attorney

If an individual becomes incapacitated or otherwise unable to make financial or medical decisions, a family member normally must initiate a guardianship proceeding in Circuit court. The court then appoints someone as the legal guardian of the incapacitated individual, a costly and time-consuming process. There is no guarantee that the person appointed will be the person the incapacitated individual would want in control of their health care and financial decisions if they had thought to name someone.

A guardianship proceeding can usually be avoided if an individual executes a financial power of attorney and a power of attorney for health care. The financial power of attorney names a person designated to manage the incapacitate individual’s financial affairs. This authority allows the named person to, among other things, ensure every day expenses are taken care of, taxes are filed, and collect any benefits to which the incapacitated individual is entitled. Generally, this allows for the designated person to have full decision making authority in regards to the incapacitated individual’s bank accounts, stocks, real estate, and other forms of property, but can be tailored to restrict the authority granted.

The Health Care Power of Attorney

The health care power of attorney works in a similar fashion by designating someone to act as an individual’s health care agent should they become incapacitated. It is important that the individual executing a health care power of attorney discuss their wishes with the person named as the health care agent. It is the agent who makes any necessary health care decisions should an individual become incapacitated and ensures that physicians that physicians and other health care providers give the incapacitated individual the type of care they would wish to receive. Again, if this document is executed properly it is usually possible to avoid a guardianship proceeding.

The Living Will

A declaration to physicians, also known as a “living will,” is another type of health care directive. However, instead of naming an individual, the declaration to physicians informs a doctor directly of an individual’s decisions in regard to life-sustaining procedures. Despite being known as a living will, this document bears no relation to a testamentary will in distributing assets; it’s strictly a place for an individual to spell out any health care preferences.

The Bottom Line

Most individuals need at least these four documents to ensure their wishes are carried out. These documents work best when planned in conjunction with one another, but only if they are properly executed. An individual may wish to have other additional estate planning documents in place to avoid probate or ensure their assets are used for a designated purpose after they pass away, but even then it is important to have these four key documents in place.

Duxstad & Bestul is a Wisconsin estate planning law firm practicing primarily in Green and Lafayette Counties.