At a bare minimum, I believe that every person should execute a will, a durable (financial) power of attorney, and a health care power of attorney. Without these documents, the state government will determine who will make decisions for you if you are ever incapacitated and who will receive your property after you die. Few people would want this result, yet well more than half of all Americans die without a will.

In nearly every case, the cost of administering the estate of a person who dies without a will far exceeds what it would have cost to have had a lawyer draft a will during the decedent's lifetime. More importantly, not having these documents creates uncertainty, which often breeds conflict within a family. These negative results can be mitigated by executing the following documents:

Will:  By a will, you can dispose of property held in your sole name. A will does not dispose of property owned jointly with rights of survivorship; the surviving joint owner automatically takes such property. Furthermore, the distribution of life insurance proceeds, retirement accounts, annuities, and select other assets will be governed by separate beneficiary designations.

In your will, you can also designate the one or more persons that you would like to care for any of your children who are minors at the time of your death. It is crucial that parents designate a guardian (and alternate guardians) in case both die parents together in a common accident. While the Probate Court is ultimately responsible for appointing guardians after considering the best interests of the children, the Court gives great weight to any designation you make in your will. Failure to nominate a guardian will likely increase the costs of the necessary Court proceedings and will certainly introduce greater uncertainty.

You can also designate a personal representative (called an “executor” in many other states) to administer your estate. Your personal representative is responsible for locating and collecting your probate assets and distributing them in accordance with the terms of your will after paying any valid claims against the estate. A properly drafted will should give your personal representative the broad powers necessary to administer your estate, thereby eliminating the need to petition the Probate Court for permission or powers during the estate settlement process.

Durable (Financial) Power of Attorney:  This document will ensure that someone you trust can manage your financial affairs for you if you are ever unable to handle them yourself. The power is “durable,” which means that it remains valid even if you become mentally or physically incapacitated, which is, of course, when it is most needed. Depending upon your circumstances and to whom you are granting this power, the document can be drafted to take effect immediately upon execution or in the future only if and when you become incapacitated. The power of attorney is revoked by your death, at which time your personal representative and/or trustee will begin to manage your financial assets.

If you ever become incapacitated and you have not executed a valid durable power of attorney, your family may have to spend significant funds and emotional energy petitioning the Probate Court to appoint a conservator for you. A simple durable power of attorney can help you avoid this financial and emotional cost.

Health Care Power of Attorney:  By this document, you can appoint a health care agent to make medical decisions for you if and only if you are incapable of making those decisions for yourself. You can also name alternate agents in case your preferred agent cannot serve. Your health care agent is directed to act in accordance with your wishes, or if your wishes as to a particular matter are not known, in accordance with your best interests.

When executing a health care power of attorney, you may indicate whether (1) your agent may consent to donate your organs after your death; (2) you wish to receive life-sustaining treatment if you are determined to be permanently unconsciousness or in a state that is incurable or irreversible and, without the administration of life-sustaining procedures, you would be expected to die within a relatively short period of time; and (3) whether you wish to receive artificial nutrition and hydration after life-sustaining treatment has been withdrawn or withheld. With respect to the last two decisions, you may choose to grant your agent full discretion to make those determinations.

South Carolina also provides for a Declaration of Desire for a Natural Death, which is often referred to as a “living will.” It gives you the opportunity to state that you do not wish to receive life-sustaining treatment or artificial feeding and hydration in certain situations, and it speaks directly to your doctors (as opposed to your health care agent). If it accurately reflects your wishes, it may also be appropriate to execute a Declaration of Desire for a Natural Death.

Depending upon your circumstances and your exposure to estate taxation, use of revocable trusts or other estate planning documents may be appropriate.

To learn more about the U.S. transfer tax system, click here.
To read about more advanced estate planning strategies, click here.