FAQ – Estate Planning

What is a Living Will?

A living will is your written expression of how you want to be treated in certain medical conditions. Depending on state law, this document may permit you to express whether or not you wish to be given life-sustaining treatments in the event you are terminally ill or injured, to decide in advance whether you wish to be provided food and water via intravenous devices (“tube feeding”), and to give other medical directions that impact the end of life. “Life-sustaining treatment” means the use of available medical machinery and techniques, such as heart-lung machines, ventilators, and other medical equipment and techniques that will sustain and possibly extend your life, but which will not by themselves cure your condition. In addition to terminal illness or injury situations, most states permit you to express your preferences as to treatment using life-sustaining equipment and/or tube feeding for medical conditions that leave you permanently unconscious and without detectable brain activity.

A living will applies in situations where the decision to use such treatments may prolong your life for a limited period of time and not obtaining such treatment would result in your death. It does not mean that medical professionals would deny you pain medications and other treatments that would relieve pain or otherwise make you more comfortable. Living wills do not determine your medical treatment in situations that do not affect your continued life, such as routine medical treatment and non life-threatening medical conditions. In all states the determination as to whether or not you are in such a medical condition is determined by medical professionals, usually your attending physician and at least one other medical doctor who has examined you and/or reviewed your medical situation. Most states permit you to include other medical directions that you wish your physicians to be aware of regarding the types of treatment you do or do not wish to receive.

What is a Health Care Proxy?

A “health care proxy,” sometimes called a “health care surrogate” or “durable medical power of attorney,” is the appointment of a person to whom you grant authority to make medical decisions in the event you are unable to express your preferences. Most commonly, this situation occurs either because you are unconscious or because your mental state is such that you do not have the legal capacity to make your own decisions. Normally, a single individual is appointed as your health care proxy, though quite commonly one or more alternate persons are designated in the event your first choice proxy is unavailable. As with the living will, medical professionals will make the initial determination as to whether or not you have the capacity to make your own medical treatment decisions. The health care proxy is a durable power of attorney specifically designed to cover medical treatment. As with living wills, depending on your state of residence, it may be a state-determined form or may be drafted individually by your estate planning attorney.

Why Have Health Directives?

Regardless of the name your state gives to these documents, their purpose is to allow you to express your preferences concerning medical treatment at the end of your life. By expressing such preferences in a written legal document, you are ensuring that your preferences are made known. Physicians prefer these documents because they provide a written expression from you as to your medical care and designate for the physician the person he or she should consult concerning unanswered medical questions. Rather than the physician having to obtain a consensus answer from your family as to your treatment, the physician knows your preferences and knows who you want to provide decisions when you cannot do so.

These documents provide your expressed wishes, rather than making the family guess your desires. Making your wishes known in advance prevents family members from making such choices at what is likely one of the most stressful times in their lives. Further, providing such information and designating a health care proxy means that the physician knows whose direction is to be followed in the event your family disagrees as to what medical treatment you would want.

How do you obtain and Maintain Living Wills and Health Care Proxies?

Your personal estate planning attorney can provide you with each of these documents. Generally, these documents require at least two witnesses. It is the policy of some hospitals and other medical institutions not to permit their employees to witness the signing of such documents. In most states there are other restrictions as to who may witness such documents. Generally, the persons who act as witnesses are not permitted to be individuals entitled to any inheritance as a result of your death, either by will or by state law. Often the law does not permit a person to witness such documents if they are related to you by blood or by marriage, or if they are responsible for payment of your medical bills. In any event, the witnesses must be adults as defined by your state law.

While all states recognize these advance health care directives, the law varies as to recognizing a document prepared in another state. It is not necessary to prepare additional documents in case you might vacation in another state. However, if you spend a considerable amount of time living in more than one state, you should consider having advance directives prepared in each of the states in which you spend significant periods of time.

Should you change your mind as to your living will decisions or your choice of health care proxy, you can simply destroy the document you have and create a new one. Once you have a living will, health care proxy, or advance health care directive, you should keep it among your important papers. Make sure a responsible adult, such as the named health care proxy or your estate planning attorney, knows where you keep these documents. If you have a regular physician who keeps your medical records, you should provide a copy of the documents to him or her for your medical records. In the event you are admitted to a hospital you should take these documents with you at the time you are admitted and permit the hospital to place copies into your medical files. It is also a good idea to discuss the decisions you have made in your documents with family members so that they may better know and understand your wishes concerning these matters.

What about Organ and Tissue Donation?

In many states you can include in your advance directive your preference to become an organ or tissue donor at the time of death. State law varies, and you should check with your estate planning attorney. Even if your state is one in which your driver’s license contains an organ or tissue donor statement, you need to express this by letting your health care proxy, your family, and your physician know your desire to become a donor. In some states you also need to be registered as an organ and tissue donor.

What is estate planning?

Estate planning is a process to consider alternatives for, to think through, and to set up legally effective arrangements that would meet your specific wishes if something happens to you or those you care about. Good estate planning is more than just a simple Will. Estate planning also typically minimizes potential taxes and fees, and sets up contingency planning to make sure your wishes regarding health care treatment are followed. On the financial side, a good estate plan coordinates what would happen with your home, your investments, your business, your life insurance, your employee benefits (such as a 401K plan), and other property in the event you became disabled or if you die. On the personal side, a good estate plan includes directions to carry out your wishes regarding health care matters, so that if you ever are unable to give the directions yourself, someone you select would do that for you, and know when you would want them to authorize heroic measures and when you would prefer they pull the plug.

Should I have an estate plan?

You should have an estate plan if:

You are the parent of minor children
You have property that you care about
You care about your health care treatment.

If you do not have minor children, do not care about your property, and have no concerns about your health care treatment, then you do not need an estate plan. But if you meet any of these categories above, you should have an estate plan.

When should I start my estate plan?

The only time that you can prepare and implement an estate plan is while you are alive and have legal capacity to enter into a contract. If you are unable to manage your own affairs or suffer from some other disability which affects your legal capacity, your estate plan may be effectively challenged by those who assert that you lacked capacity at the time the documents were created, that you were subjected to fraud, coercion or undue influence during the creation and implementation of your plan.

What sorts of instructions are made as part of an estate plan?

An estate plan consists of one or more documents that set forth instructions. Some documents are used to control health care decisions, others control your property in the event of your incapacity, and still other documents will control the distribution of your property in the event of your death.

Does it make sense to use an attorney? Is it expensive?

Only an attorney who regularly practices in the fields of wills, trusts, probate and estate planning is able to provide you with really sound legal advice as you put your estate plan into place. Attorneys are subject to regulation by state bar organizations, many of which have continuing education requirements and mandatory liability insurance in case the lawyer makes a mistake. When you speak with an attorney, you can get answers to your questions –including how much it would cost. Often the expense incurred in retaining an attorney to prepare and help you put an estate plan into place is worth hundreds of times what you and your family would pay with no planning or poor planning. It would also avoid the financial and emotional nightmares that can occur with a poorly drafted (or improper) plan.

What about books on estate planning?

As you begin the process caveat emptor (let the buyer beware). There is a lot of information out there; while some of it is very good, some is misleading at best. There are many over-the counter guides to estate planning available at bookstores. Some are pretty decent, most are awful. If you are planning to do it yourself, be prepared to spend a fair amount of time on this project.

What are some typical estate planning documents?

Several of the following documents are typically used as part of the estate planning process:

A Will, sometimes called a Last Will and Testament, to transfer property you hold in your name to the person(s) and/or organization(s) you want to have it. 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.
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.
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.
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.
A Living Trust can be used to hold legal title to and provide a mechanism to manage your property. You can select the person or persons you want — often even yourself — as the Trustee(s) to carry out the instructions you want in the Trust and name one or more Successor Trustees to take over if you cannot. 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 sometime impossible), although such Trusts often carry some tax benefits.) Trusts also help you avoid or minimize the expenses, delays and publicity of probate.
A Family Limited Partnership can be used to own and manage your property, in a similar manner to a Trust, but allowing additional tax planning techniques to be employed. Family Limited Partnerships are typically used for those who have large estates and thus have a need for specialized estate planning in order to minimize federal and state estate/death/inheritance taxes as well as provide elements of asset protection.

How can an estate plan prevent a conservatorship proceeding?

An estate plan uses several tools that can prevent the court from gaining jurisdiction over your affairs.

A Living Will or Directive to Physicians is used to determine if artificial life support systems are to be used or withheld.
A Durable Power of Attorney for Health Care is used to provide authority to a person, in whom you have the utmost trust and confidence, to make decisions regarding health care treatment when you are unable to provide informed consent.
A Durable Power of Attorney for Property enables you to authorize a person to act in your place and stead in the event of your incapacity; this attorney-in-fact can manage your financial affairs without the need to have intervention by the courts.
A Trust or Family Limited Partnership is used to hold property; the Trustees or Partners manage the property held by either of these entities.
Both the Trust and the Family Limited Partnership continue to manage the property even if you are incapacitated.

Thus, a properly prepared estate plan can enable you to avoid a Conservatorship proceeding over your estate. Compared to the cost of a Conservatorship proceeding, an estate plan can be very attractive.

How can I reduce my Estate Tax upon my death?

Federal Estate Taxes are only charged against Estates with assets exceeding $1 million in value (2002 and 2003). If you think your Estate will exceed $1 million at the time of your death (or $2 million if you are married), the following general tips can be used to reduce death (estate) taxes by lowering the value of your Estate at the time of your death. This amount that is exempt from Federal Estate Tax increases to 1.5 million in 2004 and 2005 (3 million if you are married); 2 million in 2006 through 2008 (4 million if you are married); 3.5 million in 2009 (7 million if you are married) and then in 2010 there is no federal estate tax. However in 2011 the Federal Estate Tax is returned to the 2002 level.

What is a final arrangements document?

It is a way to express your death and burial preferences in writing. What you choose to include in your final arrangements document is a personal matter. A typical final arrangements document may include:

The name of the mortuary or funeral home that will handle burial or cremation
How your remains will be transported to the cemetery/memorial park and gravesite
Whether or not you want to be embalmed
Details of any ceremony you want before the burial or cremation
Who your pallbearers will be (if you want any)
Type of casket or container in which your remains will be buried or cremated, including whether you want it present at any after-death ceremony
Details of any marker you want to show where your remains are buried or interred
Where your remains will be buried, stored or scattered
Details of any ceremony you want to accompany your burial, interment or scattering.

Can I include my final arrangement preferences in my Will?

A will is not a good place to express your death and burial preferences because it probably won`t be located and read until several weeks after you die. The Will should be reserved for the purpose of dictating how you distribute your assets. It`s best to prepare a separate final arrangements document before you die. Preplanning some of your final arrangements not only can spare your survivors the difficulty of making these decisions while they are grieving, but it can save a great deal of money. For many people, death goods and services cost more than anything they bought during their lives except homes and cars. Wise comparison-shopping in advance can help ensure that costs will be controlled or kept to a minimum.

What happens if I don`t prepare a final arrangement document?

If you die without leaving written instructions about your death and burial preferences by preparing a final arrangements document, state law will determine who will have the right to decide how your remains will be handled. In most states, the following people (in this order) have the right to decide and the responsibility of paying for the reasonable costs of disposing of the remains:

Child or children
Parent or parents
The next of kin, or
A court-appointed public administrator

Disputes may arise if two or more people share responsibility for final arrangement decisions, such as whether the body of a parent should be buried or cremated. These disputes can be avoided if you are willing to do some planning and express your wishes in writing.

How can I prepay for my final arrangements?

Shopping around and prepaying for the most suitable and affordable funeral goods and services is a wise idea. By preplanning, your survivors can be spared from having to make these decisions while they are grieving. You can also spare your loved ones from the financial burden of having to entirely pay for your funeral arrangements-which can be quite costly. The following are typical ways to prepay for final arrangements.

Have a licensed funeral director at your local funeral home or mortuary establish a regulated Trust fund. If you choose this method, be sure you go to a funeral home that you expect will stay in business at the time of your need. There are times when funeral homes have gone out of business and the consumer finds him/herself without funds and without recourse. Also, be sure that you can transfer or withdraw funds without incurring a large financial penalty. While there are laws that regulate prepayment plans, it`s best to be careful because there are cases of Trust fund abuse and theft by funeral homes and mortuaries which could be quite devastating to your survivors.

Purchase a life insurance policy that approximately equals the projected value of your funeral.

Go to your bank or savings institution to set up a Totten Trust or Payable Upon Death (P.O.D) account earmarked for your final arrangement expenses. Most financial institutions will set one up for a small fee. Unlike money applied to traditional funeral prepayment plans, these funds are easily transferred or withdrawn, and you have complete control over the money while you are alive.

What services can I expect to receive from a mortuary or funeral home?

Most mortuaries or funeral homes are equipped to handle many of the details related to disposing of a person’s remains. These include:

Collecting the body from the place of death
Storing the body until it is buried or cremated
Making burial arrangements with a cemetery or memorial park
Conducting ceremonies related to the burial
Preparing the body for burial, and
Arranging to have the body transported for burial

The costs of these services vary, depending on which mortuary or funeral home you choose. It is essential that you shop around if cost is an important part of your decision. Ask for the General Price List whenever you visit a funeral home or mortuary. The General Price List must, by law, contain identifying information, itemized prices for the various goods and services that each funeral home/mortuary sells, and other important disclosures. The General Price List enables consumers like you to comparison shop and to purchase, on an itemized basis, only the goods and services you want. By law, if you request to see the General Price List, the funeral home/mortuary MUST, by law, comply.

What is a guardian?

A guardian is a person who is designated to make legal, financial, and health care decisions for you if you become incapacitated or incompetent and can no longer make these decisions for yourself. A guardian can be any competent person, including a spouse, a friend, a relative, a non-profit agency, or a public or private corporation. If a person is considered incompetent and a relative, agency, or corporation cannot be found or considered as a guardian, then a public agent guardian will be appointed.

In some states, guardianship is known as custodianship, conservatorship, or curatorship. In each case the guardian may be called a custodian, conservator, or curator. The person whom the guardian is appointed to is called the ward.

Guardians can be appointed to:

Decide on the ward`s living arrangements
Assure that good health care is provided to the ward
Approve needed medical, legal, dental or other services for the ward
Take care of the ward`s personal belongings
Take legal protective action on behalf of the ward
Handle the ward`s financial affairs
Maintain the ward`s personal records

What types of guardians are appointed for a ward`s care?

There are two types of guardians appointed for a ward’s care:

Guardian of the Person. The guardian may provide for medical care services and determine the place and kind of residential setting best suited for the ward. The guardian must also present a detailed plan of the ward`s care to the court every year for review.
Guardian of the Property. The guardian takes an inventory of the ward`s property, invests it prudently, uses it for the ward`s support, and accounts for the ward`s property by providing detailed annual reports with the court. The guardian must also obtain court approval for certain financial transactions. In most cases a single guardian is appointed to handle all responsibilities of both the ward`s property and health care. You may appoint a guardian of the person, the property or both for limited time periods and for limited purposes. Generally, this is the case only for individuals who request a guardian while they are still competent. Normally, guardianship is the last resort for people who are incompetent and can no longer do things for themselves. In these cases, guardianship remains in effect for the rest of the ward`s life.

Are conservators paid?

Typically a conservatorship allows the conservator to be paid for his or her services. The conservator is also entitled to attorney fees to seek legal advice. In addition, the court will require a conservator to purchase a type of insurance policy known as a surety bond to protect the conservatorship estate. The costs and expenses of a conservatorship are paid from the property of the person.

How long does a conservatorship last?

Jurisdiction of the court in a conservatorship continues while the incapacity exists but ends at death. The conservator has to make periodic reports to the court and petition the court for additional authority under certain circumstances.

My close relative is losing it and doing bizarre things. What can I do?

If a person has truly lost mental competence, and is unable to exercise rational control over his or her property, the courts may appoint a conservator in a conservatorship proceeding.

Just because someone is acting a bit eccentric is not likely to be sufficient to justify the appointment of a conservator. The courts are likely to respect a person`s wishes to control his or her own affairs unless convinced that the person really needs to be protected against him or herself. A very careful determination of mental capacity must be made, and this typically involves at least one physician, often a psychiatrist, and a lawyer familiar with elder law matters.

What is a Power of Attorney?

Powers of Attorney are governed by the law of agency, a branch of common law concerned with the delegation of power from one person, generally called the principal, to another, called an attorney-at-fact or agent.

When a person becomes incapacitated, the government or the court often steps in and appoints someone to represent and make legal decisions that the person would have to take. One of the ways to avoid government or court intervention, and the appointment of a stranger to act as your guardian, is to use a Power of Attorney. A Power of Attorney is a written document stating that one person gives to another the full power and authority to represent him or her. It must be signed by both the attorney and the principal, witnessed by two people and notarized.

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 in some states under certain circumstances, provided the principal executed the document before losing capacity. There are two types of Durable Power of Attorney: Financial Durable Power of Attorney and Healthcare Power of Attorney. The difference between the two is the authority granted to the agent, as described below:

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. However, there are a few powers that the principal may not delegate. For example, the agent cannot prepare a Will, vote, or seek a divorce on the principal`s behalf. If the agent has a financial interest in the subject matter of the power of attorney, the power is generally irrevocable. Most senior citizens who execute Durable Powers of Attorney are getting assistance with their day to day personal affairs and their agents do not have an ownership interest in the senior`s property which would preclude revocation. In addition, revocation can be by implication, in addition to, destruction of the document or express revocation by the principal.
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.

In preparing a Financial or Healthcare Durable Power of Attorney, the principal must sign the document in the presence of two qualified witnesses, and it must be notarized. As laws vary from state to state, it would be in your best interest to consult an Estate Planning attorney in your area if you want more information about Powers of Attorneys.

What options do I have in assigning Power of Attorney?

There are many ways to designate a decision-maker for you with a Power of Attorney document. You can assign a General Power of Attorney that covers all of your financial and personal decisions, or a Limited Power of Attorney that only covers decision-making in areas that you specify. You can make your Power of Attorney Durable, which means that it stays in effect if you become incompetent. Or, a Power of Attorney can be springing, which means that it becomes effective only when you become incompetent. Another option is to delegate a Health Care Proxy or Durable Health Care Power of Attorney, a person designated to make health care decisions for you.

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, and
Manage your retirement accounts.

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.