Essential Estate Planning Documents

Image shows two people each holding a clipboard, one reads "will-based estate planning: last will and testament, advance medical directive, living will, financial power of attorney" and the other reads "trust-based estate planning: pour over will, revocable living trust, advance medical directive, living will, financial power of attorney", heading reads: "What are the essential estate planning documents?"

Image by Maritsa Patrinos Ā© The Balance 2019

Estate planning is the systematic approach to organizing your personal and financial affairs to deal with the possibility of mental incapacity or death. Depending on your current family and financial situations, your foundational estate plan will include four or five essential legal estate planning documents.

Aside from these essential documents, the laws of your state may dictate the creation of other estate planning documents. Your estate planning attorney will be able to assist you with preparing all of the estate planning documents that you will need for your situation.

Will-Based Estate Planning

If your current family and financial situations do not warrant the need for a revocable living trust, then your foundational estate plan should include the following four important legal documents:

  • Last Will and Testament
  • Advance Medical Directive
  • Living Will
  • Financial Power of Attorney

Trust-Based Estate Planning

If your current family or financial situations warrant the need for more sophistication, then your foundational estate plan should include the following five legal documents:

Last Will and Testament With a Pour Over Will

If you have a will-based estate plan, then your Last Will and Testament will contain a detailed list of instructions for distributing your property upon your death. If you have minor children, it will also contain provisions for designating a guardian for your children.

If you have a trust-based estate plan, then your last will and testament will be used as a safety net to catch assets that you did not transfer into your trust prior to your death. This type of will is referred to as a Pour Over Will and contains minimal instructions since your revocable trust is the main document governing your estate plan.

Revocable Living Trust

A Revocable Living Trust contains a detailed set of instructions covering three important periods of your life:

  • What happens while you are alive and well
  • What happens if you become mentally incapacitated
  • What happens after your death

In addition, assets held in the name of your revocable living trust at the time of your death will avoid probate.

Advance Medical Directive

An Advance Medical Directive, also called a 'Medical Power of Attorney' or 'Designation of Health Care Surrogate', allows you to designate a health care agent to make medical decisions for you if you are unable to make them.

It can also be used to designate someone to serve as your guardian or conservator in the event a court determines that you have become mentally incapacitated.

Living Will

A living will contains a written set of instructions to your physician about your desire to receive life-sustaining procedures if you have been diagnosed with a terminal or end-stage condition, or are in a persistent vegetative state. It also gives guidelines for your family members to follow if you become terminally ill.

The living will is a type of medical directive, but allows for do-not-resuscitate and do-not-intubate orders along with other treatments you prefer not to have.

The living will differs from a last will and testament in that it dictates your health care wishes while you're still alive, while a last will establishes how your assets will be distributed upon your death.

Financial Power of Attorney

A financial power of attorney allows you to delegate to the person you choose the ability to manage assets that are titled in only your name. If you have retirement plans or assets titled in joint names they have the ability to manage those for you. It can also be used to transfer assets into your revocable living trust if you become mentally incapacitated before the trust has been fully funded.

Financial powers of attorney come in two forms:

  • A Durable Power of Attorney, which goes into effect as soon as you sign it.
  • A Springing Power of Attorney, which only goes into effect after you have been declared mentally incapacitated.