4 Key Estate Documents for Young Professionals

Most young professionals wonder if they need estate documents that deal with their health or belongings when they are unable to do so.  In many cases these documents are important because they enable you to decide now how you want your estate to be settled in the case of death or how your health care and finances should be handled if you are temporarily incapacitated.  These document have the added benefit of providing your family and friends with specific instructions that can reduce their stress in the event of a terrible event.

I’ve listed four estate documents in the order of importance along with why the document is necessary. In some situations you can use a form from the web, but as your situation becomes more complex, it is best to get legal help to ensure your documents are drafted and executed properly.

1.  Advance Medical Directive (Living Will)

If you are just starting out your career and you are single, I urge you to write an advanced medical directive or living will. An advance directive allows you to write down your wishes concerning medical treatments at the end of life. In other words, if you are in an end of life situation as a result of an accident or debilitating disease, your directions will be honored for how medical care will be provided at that time.

People who are seriously or terminally ill are more likely to have an advance directive. For example, someone who has a terminal disease might write that she does not want to be put on a respirator if she stops breathing. This action can reduce her suffering, increase her peace of mind, decrease costs, and increase her control over her death. However, even if you are in good health, I urge you to write an advance directive. An accident or serious illness can happen suddenly, and if you already have a signed advance directive, your wishes are more likely to be followed.

Generally under state law two physicians must certify that you are in the medical condition specified in the state’s living will law (such as “terminal illness” or “permanent unconsciousness” or “persistent vegetative state”) before your advance directive can guide medical decision-making. In these instances you are no longer able to make decisions on the medical care you receive. By creating an advance directive, you are making your preferences about medical care known before you’re faced with a serious injury or illness. This will spare your family and friends the uncertainty of making decisions about your care.

Here is an advance directive form from the DC Bar Health Lawyers if you are in the DC/Maryland/Virginia area. I like the form because it details how the end of life care would be applied and in what situations. Many of the other forms on the web are very general and ask you to tell them your wishes. But because most folks don’t know the types of medical treatments available, I find those forms difficult to use.  Of course, you may also work with an attorney who can draft an advance directive for you as well.

A few kek points worth mentioning about advance directives.  One state’s advance directive does not always work in another state. Some states honor advance directives from another state; others will honor out-of-state advance directives as long as they are similar to the state’s own law; and some states do not have an answer to this question. The best solution is if you spend a significant amount of time in more than one state, you should complete the advance directives for all of these states.

One other point is that advance directives do not expire. An advance directive remains in effect until you change it. If you complete a new advance directive, it invalidates the previous one. You should review your advance directives periodically to ensure that they still reflect your wishes. If you want to change anything in an advance directive once you have completed it, you should complete a whole new document.

Finally, if you don’t have an advance directive and you are in a condition in which your advance directive could be honored if you had one, your parents and/or spouse would have the power to decide medical treatment approach. This default position varies by state.

2.  Medical Power of Attorney

A medical power of attorney is different from an advance directive. A medical power of attorney (or healthcare proxy) allows you to name a person you trust as your healthcare agent (or surrogate decision maker), who is authorized to make medical decisions on your behalf if you are temporarily unable to make decisions. If a person regains the ability to make decisions, the agent cannot continue to act on the person’s behalf (in other words the power ends). So this document is different from the advance medical directive in that it ends when you regain decision-making ability.  The link above to the DC Health Lawyers site also contains a medical power of attorney sample document.

One thing to keep in mind is that emergency medical technicians cannot honor living wills or medical powers of attorney. Once emergency personnel have been called, they must do what is necessary to stabilize a person for transfer to a hospital, both from accident sites and from a home or other facility. After a physician fully evaluates the person’s condition and determines the underlying conditions, advance directives or medical power of attorneys can be implemented.

If you don’t have a medical power of attorney, parents are the medical power of attorney if one is not specified under state law. Husbands and wives have them for each other.

3.  Last Will and Testament

The third key document is your last will and testament. If you have minor children, a mortgage and life insurance coverage, then a will is a critically important document. It will provide who will be the guardian of your minor children in the event you and/or spouse are deceased. Importantly it will also discuss how life insurance proceeds should be used and disbursed while your children are minors and afterward. People have different ideas for when children should have full access to any life insurance proceeds after they reach age 21. Sometime the proceeds are available to the child once reaching age of majority. In other instances, the parents seek to provide more control and only allow for a phased distribution starting at, for example, age 25 and going to some later point.

Of course, if you have wishes for how your personal property can be handled or you have specific bequests you’d like to name, then a will also is very important to get these in writing.

If you don’t have a will, then your estate will be distributed according to your state’s probate law. If you are single, first priority goes to your parents and, if they are deceased, to your brothers and sisters. If you are married, then you spouse will inherit everything.

One note to make sure to name beneficiaries on any retirement plan or Individual Retirement Account. These assets pass to your heirs outside of the probate process. In addition, designate a “payable on death” designee on your savings accounts or money market account. These accounts will also pass outside of the probate process.

4. Durable Power of Attorney

A durable power of attorney (POA) enables you to appoint an “agent,” such as a trusted relative or friend, to handle specific legal and financial responsibilities. The second document above, the medical power of attorney, is a form of durable power of attorney with specific authority to make health care decisions on behalf of the person. The durable power of attorney for finances gives a designated person the authority to make legal/financial decisions on behalf of the person.

Durable power of attorneys, like the medical power of attorney, are temporary in nature. In that once the person recovers, their appointment ends and the agent has no more power.

The POA is important if you have bank/brokerage accounts on which you are the sole owner. The POA will give the agent the power to write checks, etc. during the period of incapacity.  If you have joint accounts (e.g., with your spouse), then it is not as important to provide this power to anyone else, because the joint account owner has access to the account in the case of your temporary incapacity.

In sum these four estate documents (along with beneficiary / payable on death designations) can eliminate many of the issues of settling an estate and obtaining end of life medical care according to your wishes.

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