A frequent concern people have when they begin to build careers, start families, and think about retiring one day, is what legal documents should they have and when should they have them. Regardless of your stage in life, the most important documents you should have are pretty much the same. That is, whether you are young or old, have many or few assets, it is in your best interest to have the documents outlined in this article.
From a cost-benefit perspective, you can avoid thousands of dollars of potential fees by simply having these documents. Allow me to walk you through the most important legal documents everyone should have and keep current.
1. Last Will and Testament or Living Trust
Cost: A hundred to a few hundred dollars (simple will)
Benefit: Can save thousands in legal fees by simplifying guardianship proceedings.
Once you have children, a last will is crucial, especially one containing a provision naming a guardian for your children. Guardianship proceedings can be costly and can cause additional emotional stress to loved ones, most notably, the children who must go through these proceedings. A simple will with a guardianship provision can reduce the related costs of placing children under the care of another adult as well as simplify the court process.
Even if you have few assets, you still need a will. The total cost of a will is based on the complexity of your needs. But the relative value of this document can be priceless to your loved ones. With a proper will, you can choose your own executor or executrix (the person who will administer your estate) and you can choose to whom you wish your estate to go. Otherwise, impartial state statutes will do this for you and the result may be much different than if you had made these choices yourself. This can also save your family the frustration of having to deal with the court system to determine who your estate is administered by and to whom your estate is distributed.
A Living Trust typically starts at around $1,000 and upward. Just like a will, the cost for a Trust is based on the complexity of your estate planning needs.
2. Durable Power of Attorney (DPOA)
Cost: Minimal, often under $100
Benefit: Can save thousands in legal fees by avoiding costly conservatorship proceedings.
A durable power of attorney (DPOA) is nearly as important as a last will. A DPOA can allow you and loved ones to avoid conservatorship proceeding in case you become incapacitated. Having a DPOA is an inexpensive insurance against costly fees associated with conservatorship court proceedings. A DPOA can eliminate the need for a conservatorship proceeding by naming a family member or trusted friend to act on your behalf as your Attorney in Fact in case you become incapacitated or unable to act on your own.
You should carefully consider who you name as your Attorney in Fact. This is because the person who you name in your DPOA as your Attorney in Fact will have power over your financial assets. A Durable Power of Attorney often becomes active at the time it is signed and gives the person you name as your Attorney in Fact immediate power to act on your behalf and for as long as you are alive, as long as the document is not revoked.
3. Living Will and Health Care Power of Attorney
Cost: Minimal, often under $100
Benefit: Allows you to maintain control over health care decisions that are important to you.
These documents specify the kind and type of medical treatment you would like to receive and names a person to act on your behalf over your medical care. Similar to the DPOA previously mentioned, which gives someone other than yourself the power to make financial decisions for you, a Living Will and Health Care Power of Attorney gives another person the ability to make health care decisions on your behalf.
4. Instruction Letter
Benefit: Priceless to loved ones
This is something that many people do not consider, and it is frankly something that is easy to do and has no monetary cost since you don't need an attorney. You can save your family members a tremendous amount of time and stress by having one. An instruction letter with information about where your important documents are stored, and who should be contacted in the case of your death or incapacitation, such as attorney, financial person, religious leader, etc. This can be tremendously helpful and can be as simple or as detailed as you desire.
In fact, some people may get their wishes across by creating a simple list instead of a letter. And many people take time to express their love and care for their loved ones, even providing reassurance through what can often be an emotionally taxing time as their loved ones deal with saying goodbye.
Lauren L. Sherrell is an attorney with the Chattanooga law firm of O'Shaughnessy & Carter, PLLC