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Four Must-Have Documents for Healthcare and Estate Planning

It’s not just about a will. Consider how these four vital documents can help ensure your wishes are met.

The number 4 on a brick wall near the entrance to a house.

For most people, a will may be the first document that springs to mind when they’re asked about estate planning. But a will is only one of four documents that can outline your wishes for your care now and for transferring your assets when the time comes.

“The purpose of completing these four basic estate planning documents is to minimize confusion if someone has a health emergency, becomes disabled, or passes away,” says Ted Williams, Senior Fiduciary Advisory Specialist for Wells Fargo Private Bank. “Without having all these documents in place, confusion could arise, which could result in litigation and unintended consequences. It’s something everybody wants to avoid, particularly in already stressful times such as family emergencies.”

Thoughtful planning and consultation with your tax and legal advisors are required when determining the appropriate wealth transfer strategy and tactics for your needs. To help you get started, Williams outlines four estate planning documents that everyone should consider having in place—and why.

Revocable living trust

A trust is a legal arrangement involving a grantor, who places assets in a trust; a trustee, who administers the trust; and a beneficiary or beneficiaries, who receive assets from the trust. For a revocable living trust, the same person can play all three roles; the details of the trust specify how and when assets pass to beneficiaries. The grantor has control over the assets held in a revocable trust. Successor trustees can be named to oversee the trust assets in the event the grantor can no longer act as trustee.

“The revocable living trust is a basic foundational document that is widely used for managing and administering assets during life and upon death,” Williams says. “For clients with complex assets or large estates, it also has the added benefit of being a much more private and efficient way to manage and distribute wealth rather than relying only on a will and the probate process.”

The ability for a successor to seamlessly take over the management of assets at a time of incapacity or death is a fundamental difference between a revocable living trust and a will.

Will

A will is a document that directs what should happen to assets that are part of a decedent’s probate estate. A will appoints an executor or personal representative to administer the decedent’s assets and carry out that person’s last wishes. Estate settlements through the probate process are lengthy, expensive, and subject to public scrutiny. Public notice must be given of an impending probate hearing. Creditors then have a period of time to file claims against the estate. Wills are examined for their validity during the probate process, and may be challenged.

“One important aspect for our clients who have a revocable trust is for wills to contain pour-over provisions, which can serve as a catchall,” Williams says. “If somebody fails to title assets properly in a revocable living trust, the pour-over provisions in a will ensure that all assets are distributed according to the trust.”

Financial Power of Attorney

A financial power of attorney authorizes whoever is appointed (known as an agent) to act on your behalf for financial matters. Like the will, a financial power of attorney addresses aspects of your finances that fall outside the revocable living trust, including personal taxes, certain bank accounts, investments, business ownership interests, and types of insurance. The agent’s power to manage your accounts ceases upon your death.

“It’s important to have a sufficient amount of powers listed in the document that will allow your agent to effectively step in and take on your financial matters,” Williams says. “For example, someone running a business or managing real estate might need to include more specific powers in the document to effectively manage those assets.”

Advanced Healthcare Directive

This document does two things: it appoints an agent who can make medical decisions on your behalf when you are unable to do so and gives directions for the care you want to receive in different situations. Some states use a combination of different documents to appoint an agent and state your directions, including healthcare power of attorney, healthcare proxy, and/or living will.

A healthcare directive may address topics such as the level of pain management medical staff should use, instructions not to resuscitate (also referred to as DNR), and whether your organs should be donated, if so desired.

According to Williams, a healthcare directive is important: “The absence of clear direction could cause conflict between family members if they disagree on what the end-of-life care should be.”

Additional considerations: Storage and updates

Estate planning is complicated, so it’s a good idea to consult professionals, including an estate-planning attorney, before you finalize your estate plans.

Once your estate planning and other documents have been drafted and signed, you’ll want to keep both print and digital copies in more than one location. A commonly chosen option is to store the originals with the drafting attorney’s firm, if it offers that service. Other options include:

  • A fireproof home safe
  • A trusted friend or family member
  • A bank safe deposit box

Documents should be easily accessible and their locations known to the people you direct in your documents to act on your behalf. When an institution like Wells Fargo Bank is named as successor trustee or executor, the institution can store digital copies for clients. You also may want to consider exploring secure ways to have a scanned copy available online, or from your phone.

With all directives and estate planning documents, it’s important to remember that you’re not done once the ink dries. “We recommend that these documents be reviewed every two or three years,” Williams says,  “because of factors such as changing family dynamics, changes in the family’s wealth, goals that may have changed, and changing tax and inheritance laws.”

Mark Caskie is a writer and editor who covers topics including business and finance.

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Wells Fargo & Company and its affiliates do not provide legal or tax advice. Please consult your legal and/or tax advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.

Trust services available through banking and trust affiliates in addition to non-affiliated companies of Wells Fargo Advisors. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.

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Wells Fargo Bank, N.A. offers various advisory and fiduciary products and services including discretionary portfolio management. Wells Fargo affiliates, including Financial Advisors of Wells Fargo Advisors, a separate non-bank affiliate, may be paid an ongoing or one-time referral fee in relation to clients referred to the bank. The bank is responsible for the day-to-day management of the account and for providing investment advice, investment management services and wealth management services to clients. The role of the Financial Advisor with respect to Bank products and services is limited to referral and relationship management services.

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