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Bottom line, estate planning is about controlling how your assets are divided up and used after your death. Although some planners discuss estate planning in broader terms, such as how to plan for your retirement, we prefer to simply call that retirement planning. Several of the following documents are typically used as part of the estate planning process:
Last Will and Testament
A Will, sometimes called a Last Will and Testament, is a legal document used to transfer property you own at the time of your death to the person(s) and/or organization(s) you want to own it after your death. A Will also typically names someone you select to be your Personal Representative (or Executor) to carry out your instructions and names a Guardian if you have minor children. A Will only becomes effective upon your death, and after it is admitted to probate.
Trusts
A Trust can be used to hold legal title to property and manage that property. A Trust can be set up during your life-time (a "Living Trust") or in your Will (a "Testamentary Trust"). The trust is managed by one or more Trustees, usually selected by the person creating the trust. The Trustee(s) manage the trust to carry out its purpose (e.g., provide for Mom's care) in a manner consistent with instructions you place in the Trust document. You can name one or more Successor Trustees to take over if your original trustee dies or resigns. If the trust is a Living Trust, you can serve as your own trustee. Unlike a Will, a Trust usually becomes effective immediately, continues in force during your lifetime, even in the event of your incapacity, and continues after your death. Most Trusts are revocable, which allows the person who creates the Trust to make future changes, modifications and even to terminate it. (If the Trust is irrevocable, changes, modifications and termination are very difficult (and sometimes impossible), although such Trusts often carry some tax benefits.) In Georgia and Tennessee, we do not favor creating Trusts just to avoid the expenses of probate. The cost of probating a Will in Georgia or Tennessee is often less than the cost of creating a trust. Reasons for creating a trust include:
- To avoid delay. Trusts may help you avoid or minimize the delays, particularly where assets require regular management or oversight (e.g., a stock account or a business);
- To avoid the publicity of probate if you have an unusually large estate. Trusts are more private than probate;
- To minimize estate taxes;
- To avoid the necessity of opening more than one probate estate where real estate is owned in more than one State
- To provide for the special or supplemental needs of a disabled person;
- To provide protection from creditors where heirs have trouble managing money; and
- To ensure that a gift is used in a particular manner (e.g., for little Johnny's college education).
Trusts are not, however, right for everyone. Trusts can cause problems, particularly where the person establishing the trust later needs nursing home care and is trying to establish Medicaid eligibility. Always talk with a lawyer about your unique life circumstances before creating a trust.
Advanced Directives
A Durable Power of Attorney for Health Care or Health Care Proxy appoints a person you designate to make decisions regarding your health care treatment in the event that you are unable to provide informed consent. It creates a "voice" that can communicate your values to your health care providers when you are unable to do so yourself. A Healthcare Power of Attorney specifically grants authority to the agent to make decisions about and relating to medical treatment. For example, the agent may consent to treatment, refuse to consent to treatment, or withdraw consent to treatment. In addition to these decisions directly about medical treatment, the agent may make all arrangements at any hospital or nursing care facility, employ or discharge care personnel, request, receive, and review any information about the personal affairs or physical or mental health of the principal.
A Living Will or Directive to Physicians is an advance directive that gives doctors and hospitals your instructions regarding the nature and extent of the care you want should you suffer permanent incapacity, such as an irreversible coma.
Powers of Attorney - Finances
A Durable Power of Attorney for Property appoints a person you designate to act for you and handle financial matters should you be unable or perhaps unavailable to do so. Even if you decide to use a trust to manage your property, you should still have a durable power of attorney to handle assets that either need to be removed from the trust, or to place new assets into the trust.
What is a Durable Power of Attorney?
A durable power of attorney is a form of agency. The person who gives the power is the principal, and the person who receives the power is the attorney-in-fact or agent. Durable in this context means that the agent's power will survive the principal's incapacity or disability. As a result, a Durable Power of Attorney can be used as an alternative to guardianship, provided the principal executed the document before losing capacity.
The Financial Durable Power of Attorney is also known as a General Durable Power of Attorney. The agent's authority to act for the principal under a Financial Durable Power of Attorney is based on the powers that the principal gives to the agent. Whether broad, general powers or limited, the specific powers given to the agent are completely determined by the principal. Among other things, the principal may delegate to the agent in the Financial Durable Power of Attorney the authority to make deposits and withdrawals from his/her checking account, to file his/her tax returns, and to sell his/her home.
In preparing a Financial or Healthcare Durable Power of Attorney, the principal must sign the document in the presence of two qualified witnesses, one of which should be a Notary Public. (We generally recommend two witnesses and a notary, although that is not required). If the principal is not able to write his/her name, an additional witness must be present. It would be in your best interest to consult with a qualified attorney if you want more information about Powers of Attorneys. Often, a power of attorney is more important than a Will because the power of attorney is the document we use to help you while you are alive.
What does a financial attorney-in-fact (agent) do?
Many times, people will give an attorney-in-fact broad power over their finances. But you can give your attorney-in-fact as much or as little power as you wish. You may want to give your attorney-in-fact the authority to do some or all of the following:
- Use your assets to pay your everyday expenses and those of your family
- Buy, sell, maintain, pay taxes on and mortgage real estate and other property
- Collect benefits from Social Security, Medicare, other government programs or civil or military service
- Invest your money in stocks, bonds and mutual funds
- Handle transactions with banks and other financial institutions
- Buy and sell insurance policies and annuities for you
- File and pay your taxes
- Operate your small business
- Claim property you inherit or are otherwise entitled to
- Hire someone to represent you in court
- Manage your retirement accounts
- Authorize the creation of trusts, and
- Authorize gift giving and long-term care planning.
Whatever powers you give the attorney-in-fact, the attorney-in-fact must act in your best interests, keep accurate records, keep your property separate from his or hers and avoid conflicts of interest.
HIPAA Release
Since April of 2004, the Health Insurance Portability and Accountability Act (the health privacy law) has curbed access to medical records. Sometimes, it is important for family, friends and others (perhaps your lawyers) to have access to those records. Accordingly, we suggest that you execute a HIPAA release giving access to anyone that you would want talking to your doctors, especially if you have not given that person a Health Care Power of Attorney.
We can assist you in preparing these and other documents designed to carry out your wishes. If you would like to speak with us about any of these matters, do not hesitate to contact us.
© 2004, Law Office of David L. McGuffey, LLC
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