An estate plan is an important and necessary protection for your family, but it doesn’t do you much good if it is a dusty binder on your basement bookshelf. You need a plan for how to activate this plan and make it work for you when you need it. The whole point of your estate plan is to care for your family in a disaster, so you want to be able to utilize it when you need it.
Having safety nets such as life insurance, proper savings, disability insurance, and your estate plan are important steps to protecting your family’s security if either you or your spouse are disabled, suffer illness, lose employment, or die. However, once people have these protections in place, they often neglect the practical side of things.
You have life insurance, but have you made a plan for someone (your personal representative) to contact your life insurance company and activate those benefits for your family in the case of death? You own a house, but do you have a plan for how the mortgage, power, and water will be paid? You have a guardian appointed, but what will it look like to make sure they are contacted and your children are settled in with them?
What you need is a practical plan to execute your safety nets. This applies not only to death, but should also account for extreme illness, absence, or temporary or permanent incapacity. And this should go without saying, but it should account for these events to occur suddenly and unexpectedly.
Over the next two posts, I will cover practical considerations for making your well-laid estate plan work for you when you need it to. In this first post, I will address how to ensure your children’s safety and well-being in the case of a tragedy and crisis.
For most of us, the people we are most concerned for are our children. How are they going to be taken care of in a crisis? In the event that something happened to you and your spouse, your children may be in school, or with a babysitter, who may have no idea who your children’s guardian is. The faster the names of the people fulfilling roles in your will such as guardian, personal representative, attorney in fact can be communicated to care-givers, authorities, or emergency personnel, the easier the transition is for the children, and the less likely the chances they will have to spend time in the custody of the state while things are being sorted out.
Here are 5 practical steps to make your estate plan work for you when you need it to:
All of these steps hinge on communication. Taking a little extra time and effort to go the extra mile with communication can make a huge difference in the effectiveness of your estate plan, and helping your family through a crisis.
If you are over 18, and have no other estate plan, at the very least, you must have a living will or healthcare directive (also called advance directive). Even if you do not have children, even if you do not own a house, even if you have not saved a dime, you are legally responsible for your own life and health.
Living wills surged into American consciousness with the infamous Terri Schiavo case from 1998 to 2005. In that case, there was prolonged debate over whether feeding tubes should be removed from Terri Schiavo, who was in a persistent vegetative state. Ms. Schiavo’s husband wanted to suspend her feeding tube, and her parents contested that decision. In the absence of a living will to determine Terri’s own wishes, the argument waged on for 7 years. Since there was no advance directive regarding end of life care and cessation of life support, Schiavo’s actual desires could not be determined, only her husband’s and parents’ interpretations of what they thought her wishes would be.
So what exactly is an living will, and what difference would it have made in the Schiavo case?
A living will gives specific directions to family members, the attorney-in-fact (the person legally designated to make healthcare decisions) and physicians/caregivers about what the principal (person making the living will) desires to happen in the event of an irreversible coma or lack of brain function. The principal has the right to indicate what his or hers desires are regarding ending life support.
It is worth noting that a living will does not allow for removing life support in the event of any coma. State law in Idaho and Washington dictates certain standards for the removal of life support, regardless of what an advance directive may say. For example, state statutes require that a person may not be removed from life support unless that person is in an irreversible coma, or a persistent vegetative state (a vegetative state lasting longer than 4 weeks), requiring complete support.
However, the principal may choose to make the standard stricter than the state laws, as many people are uneasy with the statutory definition, on personal or religious grounds. The principal may choose to limit his terms to a complete lack of brain function (life support may not be removed unless there is no activity in the brain or brain stem, whereas in a persistent vegetative state they may still be brain activity); or he or she may say that they never wish to be taken off life support, under any circumstance.
One thing worth noting is to distinguish between a living will and a healthcare power of attorney. Both are useful and important documents for protecting you and the end of life care you receive. However, while a healthcare power of attorney delegates healthcare decisions to a trusted attorney-in-fact, and gives that person the authority to make judgment calls, a living will contains explicit directions concerning the principal’s wishes.
Many people point out that often people’s wishes when they are critically ill or dying are different than when they are stoically writing a living will in perfect health. That is true, but it always helps bring more clarity to have talked about these decisions before a crisis. However, this is also a valid point, and for that reason, I recommend having both a living will and a healthcare power of attorney. That way you can draw the fence around the issues that matter most to you, but if there are any issues concerning which you feel that you may change your mind, you can leave those to the wisdom of a trusted attorney-in-fact.
I always recommend as much correspondence as possible with your attorney-in-fact. If you have thoughts or concerns about various medical treatments or ethical issues you are concerned about with regarding healthcare, the more you communicate with your attorney in fact before a crisis arises, the better that attorney in fact will be able to discern and implement your desires.
Conversations about medical catastrophe and end of life care are never easy or pleasant, but the Schiavo case can be a lesson for all of us. If she had had a directive, then there would not have been a 7-year legal battle over what her wishes might have been, which is something we all want to spare our loved ones. Writing an advance directive gives your family the gifts of both clarity and confidence, and helps ease additional mental and emotional burdens in an already difficult time.
Do I need a power of attorney? If so, when would I need a power of attorney? If I get a power of attorney, what can be done with it? When is it effective? What happens to it when I die?
These questions are fairly common, and I will try to address them as we walk through a discussion of the power of attorney.
Q; What is a Power of Attorney?
A: Simply put, a power of attorney (or POA) is a document in which you appoint another person, called the attorney-in-fact, or agent, to make decisions on your behalf, such as managing financial matters for you or making choices regarding your medical care. There are two types of POA, general and limited. There are several distinctions between a general power of attorney and a limited power of attorney. A limited power of attorney grants authority to the attorney-in-fact for a specific duty (such as selling a specific house), whereas a general power of attorney would grant authority to perform any financial decisions and tasks on your behalf, not just the one specific task. A limited power of attorney may also contain an expiration date, after which point your attorney in fact is no longer authorized to act on your behalf.
Q: Who needs a POA?
A: Everyone who has has reached the age of majority (has turned 18 and is no longer a minor) needs to have a POA. If you are over 18, your parents can no longer legally make decisions for you, so you need to have a document entrusting that task to someone. That person can be a parent if you wish; but they will not have that authority unless you grant it to them.
Q: When are some examples of when a POA is necessary?
A: A POA is necessary whenever you need an agent to be able to make decisions, such as signing documents, making investments, engaging with banks, discussing and approving medical treatments, and more. This can be either because you are incapacitated, or simply that you want a trusted person to whom you can delegate important decisions. Some examples of times when a power of attorney can be useful:
Q: When will my power of attorney take effect?
A: It depends on the type of power of attorney you select. There are two types: springing and durable powers of attorney.
Springing Power of Attorney: this POA takes effect only upon the incapacity of the principal (the person making the POA). The agent is only authorized to act when you are incapacitated, which means that that the agent will have to prove your incapacity before the POA will be honored.
Durable Power of Attorney: this POA is effective immediately upon signing. Your agent will be authorized to act on your behalf as soon as you sign the document. An advantage over the springing POA is that it is easier to exercise on the agent’s side of things, and this is the type I almost always advise. While this is a sizable amount of authority to give right away, your selection of an agent should be based on your trust in the agent’s character and judgment, and if you don’t trust someone to act on your behalf while you are fully competent, how can you trust them to act when you are disadvantaged and incapacitated?
Q: Who should I choose as my attorney in fact?
A: Your attorney in fact should be someone whom you trust, both in integrity and honesty, and in wisdom. This person has a duty to act in your best interest, so make sure to choose someone you trust to be able to discern your best interest and act in such a manner. You also should bear in mind making updates to your power of attorney as situations change. Someone whose wisdom you previously respected, may eventually become less sharp through age or accident. Make sure to update as needed. I recommend reviewing your power of attorney (and estate plan in general) every year to make sure that what is written still reflects your wishes and realities.
Q: Is an attorney in fact the same as the personal representative for my estate?
A: No, they are two different roles. You can select the same person as both your attorney in fact and your personal representative if you wish, and if you believe they would do a good job fulfilling both roles.
Q: What happens to the POA when I die?
A: POAs do not survive the death of the principal, meaning, when you die, the POA is no longer effective. At that point, the personal representative/executor or your estate will step in and take over.
Those are some of the most common questions I hear concerning the power of attorney. Please feel free to let me know any other questions you have, and I would love to answer them!
What does someone mean when they say “basic estate plan”? What documents are included? And why are they important?
There are four key documents included in a basic estate plan: the Last Will and Testament, the Financial Power of Attorney, the Healthcare Power of Attorney, and the Healthcare Directive (also called a Living Will).
Over the next several weeks, I will be writing a series of posts on the basics of estate planning. Most people have little knowledge of what all is involved in estate planning, other than a basic will, so I will be giving an introduction to each document involved under the umbrella of an “estate plan”, and explaining why each of them are important.
I will be beginning with the most basic and well-known document in any estate plan, the Last Will and Testament, commonly known as the Will.
What Is A Will?
We are commonly familiar with a Will as the document that bequeaths our belongings to others upon our death. However, this is not the only capacity of a will. Depending on who you are and what your assets are, it may not even be the most important function.
First, a few definitions. A decedent is the person who dies. If a decedent dies with a valid will, they are said to have died testate, and their property will be distributed as outlined in the will. If the decedent does not have a valid will, they are said to have died intestate.
In that situation, the intestacy statutes of the decedent’s state will come into play. These statutes lay out a schedule as to how that propertyshould be distributed. Thus, if you have a valid will, you can distribute it however you want; if you do not, the state will do it for you, and possibly not the way you desire.
Three Primary Functions Of A Will
A Last Will and Testament should accomplish several things.
First, it should identify who (family members, friends etc.) will receive your property, and in what proportion.
Second, it should appoint an executor, called the personal representative. This person oversees and directs the tedious, often thankless, but vital task of probate, the administering the estate of the decedent.
Choosing a personal representative is an extremely important part of making a will. This role requires the personal representative to file the appropriate court documents, gather all the property of the decedent, notify creditors, pay debts, put together an accounting of the property, and distribute the remaining assets according the terms of the will, as well as deal with any complaints of the beneficiaries of the will. The personal representative need not do all the above tasks themselves (they can hire an attorney to help), but they are the one ultimately responsible for the process, so due care should be given to appoint a trusted and competent person to deal with probate.
Third, in the case of minor children, the will should appoint a “guardian.” The guardian will care for the children until they reach majority (age 18). The will should also appoint a “trustee” for the children. The trustee manages the children’s inheritance until they reach age 18, or are deemed old enough or mature enough (as spelled out in the will), whichever comes last.
For families with minor children, this is vital. Otherwise, upon the death of the parents, a guardianship case will commence, and the court will appoint the guardian. This process is expensive and drawn out, and may not reflect the parents’ wishes. A wise parent puts a plan in in place ahead of time, and a valid will insures this plan will be followed.
Clearly, there are a number of reasons to create a will: designating beneficiaries, selecting a personal representative, and providing for minor children. In the absence of a will, state intestacy laws will decide how property is distributed and a judge will decide guardianship of children. Your will insures that you decide these things, not strangers.
In my next post, I will outline and explain the intestacy statutes for Idaho and Washington, as well as both states’ requirements for a valid will.