4 Documents Suze Orman Says You Need
Written by
John Csiszar
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Jenna Klaverweiden
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Popular financial expert Suze Orman believes that everyone needs four legal documents to protect their financial future. She classifies them as “must have” documents and discusses them at length on her website.
These specific documents are a will, a living revocable trust, a durable power of attorney for healthcare and an advance directive. Here is an overview of what each of these documents does and why Orman feels they are essential for everyone to have.
Will
A will is a legal document that, among other things, outlines where you want your assets to go after you die. If the only estate planning document you have is a will, it will pass to a probate court after you die. Assuming everything is in order, the court will process the distribution of assets according to your wishes.
A will, therefore, protects you from dying “intestate.” In that scenario, your assets would be distributed according to your state’s intestacy laws, which may be the exact opposite of your wishes.
A will serves other important purposes as well. For one thing, it’s a place where you can write down your exact funeral wishes. But according to Orman, one of the most important uses of a will is to appoint guardians for your minor children. If you die intestate, the courts will determine who will be in charge of your kids, and that could leave them in the hands of someone that is ill-prepared or even inappropriate for the task in your eyes.
Living Revocable Trust
Although there are many different types of trusts, Orman believes that the right choice for the vast majority of people is the living revocable trust. This is because the living revocable trust, as the name implies, is effective during your lifetime and can be changed or revoked at any time. In other words, it’s an adaptable, “living” document that can grow and change as your life does.
The trust itself will become the actual owner of your key assets, from your home and any other properties to all of your valuable possessions. You operate as the trustee. This means that while the title of your assets is in the name of the trust, you retain complete control over how to use and manage those assets.
Once you die or become incapacitated, a successor trustee that you have appointed will manage your affairs. One of the most significant benefits of a trust is that none of this has to go through the courts. If your trust is set up properly, your assets will pass in a private manner according to your wishes, without the need for any court approval.
Durable Power of Attorney for Healthcare
A durable power of attorney for healthcare, also called a healthcare proxy, empowers a person of your choosing to manage your healthcare if you ever become incapacitated. This can be important if decisions need to be made about your healthcare and you are not able to give your input.
By providing this information in advance and appointing a legal authority, you can avoid some potentially difficult situations if you find yourself in the hospital. For example, it will make it clear who has the final call when decisions need to be made with your doctors, rather than creating disputes within a family as to who is in charge. This can help doctors take timely action regarding your care rather than waiting around for a decision to be made by a group of people.
Advance Directive
An advance directive is somewhat like a healthcare proxy, except instead of authorizing a person to make decisions on your behalf, an advance directive is a written declaration of your explicit instructions. By its very nature, this makes an advance directive less flexible than a healthcare proxy. It also eliminates any confusion about what your specific wishes are.
An advance directive is generally used to spell out how much medical intervention you want if you are incapacitated. For example, it can state whether you want a feeding tube, whether you want to be put on life support and things of that nature. If you don’t want to put those huge decisions in the hands of a single person — both to avoid confusion as to your specific wishes and to relieve them of the burden of making these choices — an advance directive can solve the problem.
An advance directive is often combined with a durable power of attorney for healthcare, as they serve a related purpose. Orman believes that both documents are essential when it comes to estate planning.
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