While no one wants to think about death or disability, establishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones. Proper estate planning not only puts you in charge of your finances, it can also spare your loved ones the expense, delay and frustration associated with managing your affairs when you pass away or become disabled.
If you become incapacitated, you may not be able to manage your own financial affairs. Many are under the mistaken impression that their spouse or adult children can automatically take over for them when they become incapacitated. If you do not properly plan, in order for others to be able to manage your finances, they must petition a court to declare you legally incompetent. This process can be lengthy, costly and stressful. Even if the court appoints the person you would have chosen, they will have file annual accountings and reports annually. If you want your family to be able to immediately take over for you, you must designate a person or persons that you trust in proper legal documents so that they will have the authority to withdraw money from your accounts, pay bills, take distributions from your IRAs, sell stocks, refinance your home, or perform other duties.
In addition to planning for the financial aspect of your affairs during incapacity, you should establish a plan for your medical care. The law allows you to appoint someone you trust - for example, a family member or close friend - to make decisions on your behalf about medical treatment if you are not able to decide for yourself. Finally, you will want to have documents in place to state your desires regarding whether you want extraordinary measures taken should you become permanently unconscious or terminally ill.
Particularly if you have young children, it is very important to at least have a simple Will to name a Guardian for your children should something happen to you and your spouse. You also need a simple Will to ensure that everything you own goes to who you want it to. If you should die without a Will, the Probate Court decides 1) who receives your "stuff" (which in some cases can prevent your spouse from controlling your "stuff") and 2) who will take care of your children, should something happen to you and your spouse.
The most basic "estate plan" for a couple should contain at least simple Wills, Durable Power of Attorneys (which give someone authority over your financial affairs should you become incapacitated), and Health Care Power of Attorneys (which give someone authority to make health care decisions for you should you become incapacitated). In Health Care Power of Attorneys, you can also make decisions for yourself regarding whether you want extraordinary measures taken to prolong your life or not, as in Living Wills.