The term “estate planning” is an often used, but sometimes misunderstood term. We use it to refer to a complete suite of documents that work together to take care of your needs when you are unable to communicate your own wishes. The core set of documents in an estate plan are the Last Will and Testament, the Living Will (with a Healthcare Power of Attorney) and a financial Power of Attorney. Different jurisdictions have variations on the exact terms used, but in essence these are the three key documents.
The Last Will and Testament is the document that everybody must have, no matter what. It only comes into effect after you have passed away, can be updated as many times as you wish while you are alive, and only the most recent (the “Last” Will) describes how your assets will be distributed once you pass away. It is true, that even without one, your assets will be distributed, but this will not be based on your wishes, but on pre-defined laws that vary slightly from jurisdiction to jurisdiction. We’ll talk a little about what happens when you don’t have a Will in a future post. But, everyone will die, so everyone needs a Will.
A Living Will gives you some say in the way you will be treated before you die, in a situation where death is otherwise inevitable. This can be used in two ways — to put a swift end to intolerable suffering, or to endorse the use of experimental treatment to try to save your life if at all possible. Most people die in hospitals and often this is after receiving treatment administered in an effort to prolong a person’s life. Medical staff are duty bound to use everything within the powers of modern medicine to keep a patient alive as long as possible, and within those powers there are regulations to be followed. Medical staff are obliged to preserve a patient’s life without necessarily considering the financial or emotional concerns of the patient and loved ones. The most common use of a Living Will is to express your desire for a voluntary passive euthanasia. Simply put, this means that medical staff should not artificially preserve your life under specific circumstances which are determined by you. In addition, your Living Will or “healthcare directive” can express your views on the health care that you wish to receive if you were ever in a permanent coma.
With the Living Will comes a Healthcare Power of Attorney. A Power of Attorney for Health Care allows you to nominate a Health Care Representative who can make health care decisions for you when you are incapacitated and unable to make decisions for yourself. It can be used to complement your Living Will. Together the Living Will and Healthcare Power of Attorney are known as your “Advance Directives“.
Finally the Financial Power of Attorney. Again, this is only in effect when you are alive and is immediately cancelled when you pass away. It is a more complicated document as it has a number of variations as to when it comes into effect and how long it lasts. Essentially though, it allows somebody to take control of your finances if you were even unable to do this for yourself e.g. in a coma. This person would be able to pay bills, perform banking transactions or buy and sell assets on your behalf.
These three documents are your estate plan. The Last Will and Testament will definitely be used if you have one, the Living Will (and Healthcare Power of Attorney) and Financial Power of Attorney will only come into effect if the appropriate situation arises. It is however prudent to have all of the documents in place and stored together in a safe place.