Key Estate Planning Documents

By Daniel Ruedi, CFP®, RICP®

Nobody likes to think about death or incapacity and as a result many people put off estate planning until it's too late. But you can save your loved ones a lot of headaches by having certain documents in place that explain how you would like things to be handled and who should handle them should something happen to you. My experience in financial planning suggests there are four key documents people should have.

A will describes how you would like your assets distributed when you pass away. In addition to making sure assets end up where you want them, a will can also include very important things like who will raise your dependent children should you pass away. In a will you will also name who you wish to take responsibility for distributing the assets, called the executor. This is a big responsibility, so make sure the person you choose is organized and up for the task.

A durable financial power of attorney allows someone to make financial decisions on your behalf should you no longer be able to. A financial power of attorney allows someone to completely take over your financial life; he or she can pay bills, manage your investments, and do really anything else they need to do to manage your financial affairs. Handing this amount of control over to someone should not be taken lightly; make sure you completely trust whoever you choose.

A durable health care power of attorney allows someone to make medical care decisions on your behalf should you no longer be able to do so yourself. You can limit the scope of this authority, but in any case it will be a large responsibility that should be given to someone you trust. You may also want to be careful who you choose, as some of the people closest to you who are emotional decision-makers may not be right for this role.

An advance medical directive states in advance what medical care a person would like to receive, particularly with respect to life-prolonging care. Whether or not you want to be resuscitated, receive a feeding tube, or be put on a ventilator can be explicitly stated so people don’t have to guess what you would have wanted.

These are just four of the estate planning boxes we suggest people check off, but it is by no means a comprehensive list. Many people would benefit from different types of trusts, for example. If you do not have these documents in place, I’d highly recommend you talk to an estate planning attorney.

Daniel Ruedi is a CERTIFIED FINANCIAL PLANNER™ professional with Ruedi Wealth Management in Champaign, Illinois.