The Five Documents Every Family Needs

Updated on June 11, 2008.

LIFE IS FULL of surprises — some welcome and some, well, not. Whether your dog bites a neighbor or you get hit by a bus, you need to be prepared — for your family's sake.

Many people with the best of intentions don't know where to start. Here's a list of five crucial documents to help you prepare for the unexpected.

1. Medical Directive
Medical directives, also known as advanced-care directives, aren't only for people over age 50. Anyone who wants his wishes carried out in the event that he can't communicate with a doctor should sign one, says Dr. Anthony Komaroff, a professor at Harvard Medical School. Like it or not, even healthy young people aren't immune to devastating accidents.

A medical directive refers to two documents: a living will and a medical health-care proxy. A living will informs a physician how you wish to receive care in different situations. In the event that an accident leaves you with no brain activity, for example, you might decide not to receive nutrients that would keep you alive. A medical health-care proxy names a surrogate, such as a spouse or parent, who can make decisions on your behalf. Without this, family members could argue over who has your best interests in mind, warns Margaret Lietzke of the Washington, D.C.-based nonprofit Last Acts Partnership.

Advanced-care directives, unlike many other legal documents, don't require patients to seek the help of lawyers, says Lietzke. You can download free forms from the Caring Connections web site. In most states, you'll need a witness, and some states also require the document to be notarized. Then, you should simply make sure it's filed away in a safe place and can be found in the event of an emergency. If you have a regular doctor, ask that a copy be placed with your medical records.

2. Will
What happens if you die before making a will? The court will assign an administrator to divide your assets according to state laws. This could prove particularly troubling for families with small children, warns Stewart Welch, a certified financial planner and author of "10 Minute Guide to Personal Finance for Newlyweds."

In some states, such as Georgia and Florida, assets are split equally among the surviving spouse and children. This could leave a parent strapped for cash, since the children's money is often put into trust until they reach a certain age. That's just what happened to one of Welch's clients. The result: The mother was left with only half of the face value from her deceased husband's term-life-insurance policy to raise her child and provide for her own retirement.

Even single people can benefit from a will. Without one, the state is likely to decide that your parents receive your assets, even though your sibling might benefit more. (For more on wills, read "Good Will Hunting.")