Tag: revocable living trust

Differences between Lifetime and Deathtime Planning… Why a Comprehensive Estate Plan Must Include Both

According to a March 2017 survey by Caring.com, six out of ten Americans have no will or any other kind of estate planning. Many said they’d get around to it, eventually. When they’re old. (The survey did find that the elderly are much more likely to have some plan in place.) It’s all too clear that most of us think “estate planning” is a euphemism for “deathtime” planning. Indeed, in the Caring.com survey, one-third said that they didn’t need an estate plan because they didn’t have any assets to give someone when they’d died.

However, comprehensive estate planning isn’t just deathtime planning. It’s lifetime planning, too. It’s about ensuring that your medical and financial decisions can be made by someone that you trust when you are unable to make those decision for yourself. Lifetime planning can help you address potential tax liabilities, find you benefit programs you may eligible for, and protect your family from costly guardianship or conservatorship court. It can make sure that a trusted party looks after and protects your affairs, if and when you’re not able to.

Lifetime Planning Tools

As estate planners, we have an arsenal of lifetime planning tools to benefit our clients, and we custom-tailor such plans to meet each individual’s needs. Here are a couple of the most common (and necessary) lifetime planning tools you should discuss with us.

Revocable living trusts

When people hear the word “trust,” they may think of “trust fund babies” or think that trusts are something only for the super-rich.

However, a trust is simply a legal tool that can help almost anyone with property – not just the wealthy. In a trust, assets you own are re-titled and transferred into the trust. When this happens, technically, you no longer own your real estate, stocks, bonds and similar properties. Instead, the trust owns them all. But you still control everything in the trust: You can buy and sell these assets as if they were still in your name. In fact, revocable living trusts don’t even change your income taxes while you’re alive. You continue to file your tax returns as you always have, making them very easy to administer while you’re alive. As the creator (grantor or settlor) of the trust, you can continue to make changes to the trust as long as you’re competent to do so.

When you die, the trust becomes irrevocable, meaning its terms can’t generally be changed. At this point, your chosen successor trustee distributes assets to beneficiaries (the people, such as your spouse, children, a church, or other charity, you named to inherit from you). In many respects, the role of the trustee is similar to that of the executor of a will. But, a trustee of a fully funded trust doesn’t have to go through the both public and expensive probate process. Trusts are private, unlike wills, which can also provide valuable privacy to your family and ultimately help preserve your assets for the people you want to benefit from your estate.

Durable power of attorney

Durable powers of attorney come in two forms. With a standard durable power of attorney, a person is legally designated to act on your behalf, in the ways specified in the document. You can make the durable power of attorney broad in scope or quite limited, and it becomes active as soon as you sign it. Under this document, the person may sign checks for you, enter contracts on your behalf, even buy or sell your assets. What they can do depends on what you authorized in the document.

For those who ultimately may need long term care, having a durable power of attorney in place before the need for the long term care arises, can allow for eligibility for Medicaid benefits that otherwise may be beyond reach of the incapacitated person. If the power of attorney is not already in place when dementia or Alzheimer’s Disease, or other debilitating diseases arise, the lack of a durable power of attorney could cost your family thousands of dollars a month.  A properly drafted and signed power of attorney can bring those funds back to the family – legally and ethically.

In the case of a “springing” power of attorney (POA), also known as a conditional power of attorney, the person only has this authority if you become incapacitated. At that point, the POA “springs” into action.  Florida law does not allow the use of springing powers of attorney any longer, but those signed prior to October 1, 2011 are deemed to be legally effective.  However, there is no statutory basis for forcing a third party to honor a power of attorney signed before October 1, 2011, so if you have such a power of attorney you may want to seriously consider having it updated to comply with the statute that became effective on that date.

There is no “best” power of attorney. We’ll work with you to determine which is the best fit for your needs and goals.

Health Care Power of Attorney

In an instant, an accident can change a healthy, vigorous person into someone who can’t make her healthcare decisions. Others face a long decline in mental capacity because of a disease like Alzheimer’s. In either case, you want to empower those you trust to make medical decisions for you. Though health care legal documents vary somewhat by state, the general principle is that, through this document, you authorize someone to make medical decisions for you, if and when you no longer have the capacity to do so. You can also communicate your desired treatment and end-of-life care. However, those instructions may not be valid in every state.

A Holistic Approach

Lifetime planning is a comprehensive approach to estate planning. And while it addresses needs of the living, comprehensive planning may also improve the after-death part of your plan as well, because it can reduce family conflict and preserve assets against court control or interference in the event of incapacity.

Contact an Experienced Estate Planning Attorney

For insight into how to establish a trust, whether it be a revocable trust or an irrevocable trust, and implement other lifetime planning options, call us today to schedule a consultation.

Not Just Death and Taxes: 5 Essential Legal Documents You Need for Incapacity Planning

Comprehensive estate planning is more than your legacy after death, avoiding probate, and saving on taxes. Good estate planning includes a plan in place to manage your affairs if you become incapacitated during your life and can no longer make decisions for yourself.

What happens without an incapacity plan?

Without a comprehensive incapacity plan in place, your family will have to go to court to get a judge to appoint a guardian or conservator to take control of your assets and health care decisions. This guardian or conservator will make all personal and medical decisions on your behalf as part of a court-supervised guardianship or conservatorship. Until you regain capacity or die, you and your loved ones will be faced with an expensive and time-consuming guardianship or conservatorship proceeding. There are two dimensions to decision making that need to be considered when considering incapacity planning: financial decisions and healthcare decisions.  If you are a young couple with small children, an even more important reason for incapacity planning is for you to designate the person or persons you want to provide care and make decisions for your children’s benefit if both you and your spouse are unable to provide care for your children.

  • Finances during incapacity

If you are incapacitated, you are legally unable to make financial, investment, or tax decisions for yourself. Of course, bills still need to be paid, tax returns still need to be filed, and investments still need to be managed.  If you own and operate a small business, you should designate someone to preside over the company’s operations if you have become incapacitated.

  • Healthcare during incapacity

If you become legally incapacitated, you won’t be able to make healthcare decisions for yourself. Because of patient privacy laws, your loved ones may even be denied access to medical information during a crisis and end up in court fighting over what medical treatment you should, or should not, receive (like Terri Schiavo’s husband and parents did, for 15 years).

You must have these five essential legal documents in place before becoming incapacitated so that your family is empowered to make decisions for you:

  1. Financial power of attorney: This legal document gives your agent the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document.

Financial Powers of Attorney come in two forms: “durable” and “springing.” A durable power of attorney goes into effect as soon as it is signed, while a springing power of attorney only goes into effect after you have been declared mentally incapacitated. There are advantages and disadvantages to each type, and we can help you decide which is best for your situation.

  1. Revocable living trust: This legal document has three parties to it: the person who creates the trust (you might see this written as “trustmaker,” “grantor,” or “settlor” — they all mean the same thing); the person who legally owns and manages the assets transferred into the trust (the “trustee”); and the person who benefits from the assets transferred into the trust (the “beneficiary”). In the typical situation, you will be the trustmaker, the trustee, and the beneficiary of your own revocable living trust. But if you ever become incapacitated, your designated successor trustee will step in to manage the trust assets for your benefit. Since the trust controls how your property is used, you can specify how your assets are to be used if you become incapacitated (for example, you can authorize the trustee to continue to make gifts or pay tuition for your grandchildren).
  1. Medical power of attorney: This legal document, also called a medical or health care proxy, gives your agent the authority to make healthcare decisions if you become incapacitated and are unable to communicate with your healthcare providers.
  1. Living will: This legal document shares your wishes regarding end of life care if you become incapacitated. Although a living will isn’t necessarily enforceable in all states, it can provide meaningful information about your desires even if it isn’t strictly enforceable.
  1. HIPAA authorization: This legal document gives your doctor authority to disclose medical information to an agent selected by you. This is important because health privacy laws may make it very difficult for your agents or family to learn about your condition without this release, even for your spouse.

Is your incapacity plan up to date?

Once you get all of these legal documents for your incapacity plan in place, you cannot simply stick them in a drawer and forget about them. Instead, your incapacity plan must be reviewed and updated periodically and when certain life events occur such as moving to a new state or going through a divorce. If you keep your incapacity plan up to date and make the documents available to your loved ones and trusted helpers, it should work the way you expect it to if needed.