In addition to insurance, a will is a necessary part of good financial management. If you do not have a will, a state court finalizes your affairs upon your death and charges your estate for the expenses. Your remaining assets are divided among your relatives according to state law. If you are unmarried and have no blood relatives, the state may take your property.

With a will:

You designate who receives your property when you die.
You can appoint a guardian for your minor children.
You can provide financial security for your spouse and children.
You can leave money to a worthy cause.

You should update your will at regular intervals and whenever a significant life event occurs, such as marriage, the birth or adoption of a child or moving to another state. Financial planning professionals recommend you use an attorney with estate planning knowledge and experience to prepare a will for your specific needs. Legal expenses for estate planning vary. Remember to review and update your will and estate plan periodically, especially if your family circumstances change because of births, deaths or divorce.

Powers Of Attorney

You can give another individual the legal authority to act on your behalf for a purpose you designate, such as paying your bills, managing your personal affairs or handling your finances.
You must be of sound mind and not under mental duress to prepare and execute any of these documents.
Unless it is a durable power of attorney, a general power of attorney expires if you become incapacitated.
You have several options for authorizing another individual to act on your behalf.

Durable Power Of Attorney For Financial Transactions

Continues to operate even if you become unable to manage your own personal and financial affairs.
As long as you are mentally competent, you can revoke a durable power of attorney whenever you wish.
Consider executing a new durable power of attorney every 3 to 5 years to confirm your intention.
Take your durable power of attorney to your financial institutions while you remain competent to confirm they would accept it.

Health Care Directive, Living Will Or Directive To Physicians

Designates medical procedures you want taken if you become too ill to state your preferences.
You can specify types of treatment you would reject or accept, such as no cardiac resuscitation, but maximum pain relief.
You determine when your instructions apply, such as when your diagnosis is a terminal condition.
Consult with your physician to determine your options.
Leave a copy of your living will with your physician.
Review your options periodically. Revise your health care directive to reflect changes in your preferences. New medical discoveries could alter your decisions.

Durable Health Care Power Of Attorney Or Health Care Proxy

Allows you to appoint someone to make health care decisions on your behalf should you become incapacitated.
Have it prepared by an attorney who specializes in the field to ensure it conforms to your state’s laws.

Health Insurance

Without health insurance, just one trip to the emergency room could put serious financial strain on your family or deplete your savings. It is one of the most important ways you can protect yourself and your family, not only because of the significant debts you could incur without it, but also because you are less likely to seek preventive care or timely diagnosis of an illness without it. If your employer offers subsidized group health insurance coverage as one of its benefits, taking that coverage is usually a better choice financially than buying a private medical insurance policy. If private health insurance is your only choice, you will need to include it in your budget.

Disability Insurance

If a severe injury or illness prevents you from working, disability insurance can help you keep sufficient income coming into the household. The policy replaces a portion of your income after certain requirements are met. You may be able to get some disability coverage through your benefits plan at work that will cover as much as 60 percent to 70 percent of your income. Premiums vary depending on the type of plan you choose.

Life Insurance

When you are single and have no dependents, life insurance may not be a necessity, unless you have significant debt. When you marry and someone depends on you and your income, life insurance is an important consideration. Life insurance is designed to cover debts and replace the income lost to your beneficiaries when you die. Talk to a financial planning professional about what kind of life insurance policy is best for you.

Long-Term Care Insurance

A long-term care insurance policy can help safeguard your savings from the high cost of long-term care services such as home health care, rehabilitation or nursing home care. If you are in your 20s or 30s, you should regard long-term care insurance as a future expenditure. As you move into your 40s and 50s, purchasing the coverage may be a consideration. Research the options that long-term care insurance offers and review specific policies available to find the one best suited to your needs.

Next: Prenuptial Agreements

Updated Thursday, January 10, 2008

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