Essential Estate-Planning Documents

Having some key estate-planning documents lets you control what happens to your assets and health-care decisions if anything happens to you. These documents are particularly important if you've been divorced or remarried. If you're helping elderly parents with their finances, you may also want to make sure they have these documents up to date, too.

Make sure you have a will. Without a will, the state determines who receives your assets — and that person may not be who you had expected. If you've been remarried, for example, the state laws may pass everything to your new spouse and leave any children from your first marriage with nothing. Having a will lets you decide who receives what and also gives you an opportunity to pass assets to grandchildren or a charity, too. If you have young children, also specify who you would like to be their guardian if anything happens to you, and set aside money in your will to help them financially.

Update your beneficiary designations. Your retirement-savings accounts and life insurance proceeds go to the beneficiary you designated, no matter what your will says. Check on your beneficiary designations and make sure they're all up to date, especially if you get married, divorced, or have kids or grandkids.

Create a health-care proxy and living will. A health-care proxy lets you designate someone to make medical decisions on your behalf if you're incapacitated. A living will lets you specify your wishes for end-of-life care. Some states combine these two documents together in an "advance directive for health care." See the American Bar Association's Giving Someone Power of Attorney for Your Health Care guide at www.americanbar.org.

Consider a durable power of attorney. This gives someone else the authority to make financial decisions on your behalf if you're unable to do so yourself, such as dealing with banks and other financial institutions. You need to be very careful about whom you appoint as your power of attorney because he or she will have access to your finances. You can specify that the power of attorney doesn't become effective unless you are incapacitated under certain conditions.

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