No one wants to think about losing a loved one or about a loved one being incapacitated, but situations like these are a fact of life. There’s never a good time to discuss final arrangements and what type of health care a person would or would not want if they become incapacitated. What is certain is that waiting for the time when legal documents are needed for a loved one’s care (or to determine who receives a loved one’s belongings) is too late. If these choices aren’t legally determined in advance, then the laws in each state will govern these choices for you and your loved ones. Preparing in advance for these unwelcome situations will ensure that you and your loved one’s wishes are delivered. Executing a will, a trust, and powers of attorney (estate planning) in advance can give you peace of mind when that time comes.
A will is a legal document detailing how a person wants their assets distributed upon on his/her death. There are many things to consider when creating your will:
- Are trusts needed for a spouse or other dependents?
- Who will you designate as beneficiaries?
- How will you divide your assets?
- Are you planning to give to charitable organizations? If so, what organizations?
- Who will you name as executor?
- Who will be named as successor if the executor can’t perform?
- What are the tax implications?
- Who will be the guardian of minor children or dependent adult children?
An executor is a personal representative who oversees distribution of the assets in accordance with a will. You can choose a family member or someone outside the family to be the executor. An executor who is not a family member is usually paid a fee for this service. Settling an estate can take months and a lot of personal time. Be sure the executor understands the amount of time involved. Duties of an executor include paying off debts, filing taxes, filing the will in probate court, and notifying Social Security, insurance companies, and other agencies of your death.
A trust is a legal instrument that manages property. The person that establishes it is called a donor, guarantee, or settler. Trusts are a way to provide for family members or beneficiaries without giving them direct control of your assets. Trusts can be an effective estate planning vehicle when created by an attorney. They can be elaborate or simple and there are various types of trusts:
- Testamentary trust,
- Living trust;
- Revocable trust;
- Irrevocable trusts;
- Other types of trusts.
A testamentary trust is established as part of a will and comes into existence upon the grantor’s death. A living trust comes into existence before death and assets can avoid probate, if all assets were transferred to the trust before the grantor’s death. A revocable trust can be legally changed or ended by the grantor as long as he/she is legally competent. An irrevocable trust can’t be changed or terminated because it’s similar to giving a gift; the grantor relinquishes ownership. There are other types of trusts such as, discretionary trusts, insurance trusts, support trusts, and spendthrift trusts. Likewise, there are various types of assets that a trust can hold.
If you decide you want to create a trust, you will need to name a trustee to manage it. The person should be honest and able to communicate with you and the beneficiaries. Be sure the person you designate doesn’t have a conflict of interest. Typically, family members are chosen, but friends, attorneys, accountants, banks and corporate trust companies can be appointed to serve as trustee.
There are three types of powers of attorney, conventional power of attorney for finances, durable power of attorney for finances, and durable power of attorney for health. A power of attorney is a legal document that allows another person to act on your behalf for legal or business issues, or healthcare decisions. The person creating the power of attorney is called the principal or grantor. The person designated in the power of attorney is called the agent or attorney-in-fact. When naming an attorney-in-fact, you should choose someone trustworthy and responsible, who is willing and able to spend a lot of time managing your affairs. You can name a spouse, child, or another family member. If distance is an issue, you can name a good friend or an attorney.
A conventional power of attorney for finances can be general or limited. A general power of attorney gives very broad powers such as, paying bills and dealing with household management decisions. A limited power of attorney gives only the duties outlined in the agreement and it ends when the person is incapacitated or dies. The durable power of attorney for finances comes into effect when the person is incapacitated and ends when the person dies. A durable power of attorney for health, also called health care power of attorney or health care proxy, gives a family member or other designated person the power to make health care decisions if the principal becomes incapacitated. A health care proxy is considered an advance directive. Advanced directives communicate a person’s wishes for health and medical care if he/she is incapacitated when the care is needed. There are two types of advance directives, a living will and a health care proxy.
A living will is a legal document that allows a person to specify their medical care wishes, if they should become incapacitated, for a later time when it’s needed. When creating a living will, be very specific with details about treatments and life-sustaining measures you would want or not want. Types of procedures to consider are antibiotics, intravenous hydration, pain medication, feeding tubes, CPR, ventilator, or diagnostic testing.
It’s important to consider your beliefs about external life support machines and medications for specific periods of time or for the duration of your life. State your values and beliefs about quality of life and how you wish your medical treatment to coincide with these values. Specify the type of care you would and would not want. State your feelings about personal dignity during a terminal or irreversible health problem. State if there are any diseases where you would only want treatment for a short period of time. Be very specific in your instructions so there are no interpretation issues.
The health care proxy will make capable decisions about medical care, medical facilities, hiring and firing care givers and healthcare providers, and have access to medical records. Your healthcare proxy should be someone you have great trust in. Copies of your advance directive should be given to your physician, health care proxy, significant family, and friends. A copy should also be kept in a place accessible to family.
Remember that a good time to ask your parents about their plans for the future is when considering yours. Be sure to find out if they already have legal documents in place. Make sure their documents are in order and up-to-date as their medical conditions could have changed since the documents were originally executed. Be sure you know where the documents are stored.
In addition, there are all types of insurance products available that help complete your estate plan. Contact an insurance professional to discuss life insurance, short-term disability, long-term disability, or other types of insurance you may need.
All legal forms needed to create a will, a trust, or a power of attorney can be located online or at any office supply store. While you can create your own legal documents, you may not have the background needed to execute these documents correctly. It’s important to consult with an estate planning attorney to discuss your legal needs when it comes to wills and trusts.
Courtland Building Company would love to help you plan your green home, call us today: (281) 932-4494