Estate plans aren’t just for what happens when you’re gone, they provide a clear directive for what you’d like to happen in the event of incapacitation. This takes the guesswork out of your wishes,and gives your spouse an actionable plan.-
Without basic estate planning documents, your state's laws will decide who gets to make your financial and medical decisions when you are unables to do so. Without an established estate plan, your spouse may have to go through a complicated legal process to make decisions on your behalf.
Without a plan, your spouse might be foreced to file a lawsuit to declare you legally incompetent and get a judge to appoint them as your legal guardian. The judge's decision may not align with your wishes, and the lawsuit will present a legal and financial hardship for your spouse. Without a plan, you’re not in the driver’s seat, and your wishes aren’t known. Here’s how to fix that:
Create a durable power of attorney
A power of attorney is a type of legal document that gives someone (your agent) the authority to act on your behalf regarding all of your financial decisions. There are several power of attorney agreements, and most people are unaware of their differences and limitations.
While a general power of attorney is comprehensive, it terminates when you become incapacitated, which is often why people execute a power of attorney in the first place. You don't want your spouse to discover that their powers end at the very moment they need them most — which is why it's essential to create a durable power of attorney.
A durable power of attorney remains in effect even if you are incapacitated and gives your spouse extensive capabilities, including but not limited to:
- Buying and selling real estate
- Handling tax matters
- Creating and funding trusts
- Managing your bank and retirement accounts
- The power to deal with your digital assets
The more express powers you can grant your spouse in the durable power of attorney, the smoother the process will be for them when dealing with third parties.
Make sure your health care legal documents are in order
It is essential to include the appropriate healthcare documents in your estate plan to clarify your wishes and reduce the overall emotional and legal burden on your spouse.
Depending on your state, this may mean you need to sign a healthcare power of attorney or health care proxy (My Advocate will help you determine which one you need.) This document gives your spouse access to your medical records. It also grants them the legal authority to make treatment decisions on your behalf.
While your state's laws may designate your spouse as your health care agent by default — the process will be much smoother if you document your wishes ahead of time.
It is also essential to include a separate HIPAA authorization document that grants your spouse access to any protected health information that the healthcare power of attorney may not cover.
Prepare a living will
A living will, or an advanced health care directive, is a document where you state, in advance, your wishes regarding life-sustaining procedures in the event that you are incapacitated with no chance of recovery.
This critical document helps your spouse and doctors honor your wishes and relieves them of the burden of making difficult decisions without your input. Additionally, it can provide relief to other family members who may have conflicting ideas about managing your care.
Without a living will, families with conflicting wishes may end up in a lengthy lawsuit that puts financial and emotional stress on their spouse and financial stress on your estate. Such a lawsuit would also strain familial relationships.
It's crucial to convey your end-of-life wishes to your doctors and loved ones while you still can. That way, you empower your spouse when they need to make these overwhelming decisions.
Consider a revocable living trust (RLT)
While many people think of revocable living trusts as a way to avoid probate and control the distribution of your assets after you're gone — that's not all they do. Revocable living trusts can also provide a mechanism for managing your wealth during your lifetime.
You can transfer assets into the trust and designate yourself and your spouse co-trustees of your revocable living trust. You will both retain control and access to the assets as you did before creating the trust. You will also be able to move assets in and out of the trust as needed.
If you are incapacitated, your spouse will be able to make transactions using those assets as trustee of the trust. This can relieve your spouse of any legal or financial difficulties regarding your assets if a third party does not honor your durable power of attorney.
Add your spouse to your bank accounts
Finally, an often overlooked part of estate planning is adding your spouse as a signer on your bank accounts. If you become incapacitated suddenly, your spouse may not be able to access those assets.
While a durable power of attorney and trust may allow your spouse access to these accounts, adding them as a signer on the bank account allows for a smoother, more streamlined process.
Whether you're a newlywed or celebrating your golden anniversary, it's never too late (or too early) to start thinking about ways to provide for your spouse during your lifetime. Legal instruments such as a durable power of attorney, revocable living trust and advance health directive will are a good place to start.