Five Documents Every Adult Should Have

Estate planning sounds like something for wealthy people near retirement. In practice, a few basic documents matter for almost every adult, because they decide who can make decisions for you if you are ill or injured, who looks after your children, and where your money and belongings go. Without them, those questions are settled by state law and sometimes by a court, which can be slow, costly and not what you would have chosen.

Laws vary by state and country, so treat what follows as a starting point. An estate planning attorney can draft documents that fit your circumstances, and some employers include legal services as a benefit.

1. A will

A will names who receives your property, who manages your estate (the executor) and, for parents of minor children, who you want as guardian. Without one, your state's intestacy laws decide who inherits, typically a spouse and children in a fixed order, which may not match your wishes, especially in blended families or for unmarried partners, who often receive nothing by default.

Online will services can produce a valid basic will for straightforward situations. Each state has specific signing and witness requirements, and a will that doesn't meet them may be invalid.

2. Beneficiary designations

Retirement accounts, life insurance and many bank and brokerage accounts pass directly to whoever is named on the account's beneficiary form, regardless of what your will says. This catches many families out, for example when an ex-spouse remains named on an old 401(k). Review these forms after marriage, divorce, a birth or a death, and name contingent beneficiaries as backups. Many states also allow transfer-on-death or payable-on-death designations for bank accounts, vehicles and even homes.

3. A durable power of attorney for finances

This names someone to manage your money, pay bills and handle accounts if you become unable to. "Durable" means it stays in effect if you lose capacity. Without one, family members may need to go to court to be appointed, even to access your accounts to pay your mortgage.

4. A health care proxy and advance directive

A health care proxy, also called a health care power of attorney, names someone to make medical decisions if you cannot. An advance directive or living will records your wishes about treatment, such as resuscitation or life support. Together they spare your family from guessing at the hardest moments. Many states have free standard forms, and hospitals can usually provide them. Give copies to your proxy and your doctor.

5. A HIPAA authorization

Privacy rules limit what doctors can share. A signed authorization lets the people you name receive your medical information, which helps your proxy and family stay informed.

Is a trust necessary?

A revocable living trust can let assets pass without going through probate, the court process for settling an estate, and keep details private. It can be useful for people with property in more than one state, complex family situations or a wish to manage how heirs receive money. For many people with modest assets, beneficiary designations and a will achieve much of the same at lower cost. A trust only works if assets are actually transferred into it.

Digital accounts

Email, photos, social media and online banking can be hard for families to access after a death. Several services offer legacy settings: Apple lets you name a Legacy Contact, Google has an Inactive Account Manager, and Facebook allows a legacy contact for memorialized accounts. Setting these up takes a few minutes and avoids much frustration later. Never put passwords in a will, which becomes a public record once it goes through probate. A password manager with an emergency access feature is a safer option.

Keeping it current

Store originals somewhere safe and tell your executor and agents where they are. Make a simple list of accounts, insurance policies and digital logins, or instructions for finding them. Review everything every few years and after major life events such as marriage, divorce, children, a move to another state or a significant change in finances.