Essential estate planning documents

Today on CityTV, Ryan and Wendy asked me about the bare miniumum that people should have in terms of estate planning documents. I replied that everyone should have a Will, Enduring Power of Attorney and Personal Directive prepared by a lawyer with a specialty in estate planning.

A Will appoints somebody, known as your executor, to look after your estate when you pass away. The executor handles funeral arrangements, finds your original Will and reads it to understand your instructions, finds out what bills need to be paid, makes an inventory of everything you own, arranges with a lawyer to apply for probate, sells property, gets an accountant to prepare tax returns, sets up any trusts you direct in your Will, gives the beneficiaries the gifts directed in the Will, and dozens of other tasks.

People often mistakenly think that the executor named in their Will can also look after things if the Will-maker is alive but is losing mental capacity. This is simply incorrect. A Will has no effect at all until you have passed away, so it does not give anyone any legal authority to deal with your assets while you are alive.

Our population is aging. These days, people live longer. Living longer, however, doesn't necessarily mean that you are living your entire life with your full mental capacity. To deal with potential incapacity, you should prepare an Enduring Power of Attorney and a Personal Directive. Without these documents you might not have anyone with the legal authority to act as guardians for minor children, run your business, or pay your bills.

An Enduring Power of Attorney (EPA) is a document that you sign while you are healthy that names someone to look after things if you should lose your capacity. It deals only with property and finances (not health care). It's incorrect to think that EPAs only need to be signed by older people. Any one of us could have an accident leading to incapacity at any time. EPAs are usually signed by people in their 40s and older.

A Personal Directive (PD) is a document that you sign ahead of time that names someone to make health care and personal decisions for you if you are unable to do that for yourself. It's not the same as a Living Will because it includes more and covers more than a Living Will does.

All three of these documents are intended to make sure that your wishes are carried out in the long term when you cannot do that yourself. In the short term, they will bring you peace of mind, knowing that you've protected yourself, your family and your assets as much as possible.