Make Reviewing Your Estate Plan One of Your New Year's Resolutions
The beginning of a new year is a good time to take a look at your estate plan to make sure it is up to date. Less than half of people actually have any estate planning documents in place and many of those people may have outdated documents. Documents that were created when your children were born may need updating 20, 30, or 40 years later, after your family and financial situation have changed entirely. 1. The Durable Power of Attorney The most important estate planning instrument for taking care of you and your family during life, as opposed to after death, is the durable power of attorney. This appoints one or more people you trust to step in and handle your finances and legal matters, generally in the event of your incapacity, whether through illness, dementia, or an accident, and whether the incapacity is temporary or permanent. In the absence of a durable power of attorney, family members often must resort to going to court to be appointed guardian. This causes delay and expensive and unnecessary legal fees. It can also cause infighting by family members since you have not chosen who should step in. While the concept of the durable power of attorney is simple – I appoint you as my agent for financial and legal matters in the event of incapacity – the devil, as always, is in the details. You have to make decisions about how many agents to appoint, who you trust to have as your agent, whether to have alternates, whether to allow gifting. Your attorney can help you with these details. 2. Health Care Proxy Like the durable power of attorney, a health care agent steps in for you to make health care decisions if you are unable to make such decisions yourself. Unlike a durable power of attorney, it only takes effect when a doctor determines that you are unable to make decisions yourself and you can only appoint one individual to serve at a time. This is so that there will be a single pointperson in dealing with medical professionals and no possibility of disagreement or stalemate between co-health care agents. You can and should name one or more alternates to the principal agent. The main problem with health care proxies is that agents often have no idea or only a vague idea of what decision the patient would make in a particular circumstance. This can be addressed by way of a medical directive or a conversation between the potential patient and the agent. A general medical directive can be included with the health care proxy that says either (1) “pull the plug” if I’m in a vegetative state or irreversible coma, (2) balance the potential benefit and discomfort of any proposed treatment, or (3) do whatever you can to keep me alive. Part of the problem with giving guidance to one’s agent is that it’s hard to predict situations that may occur and treatments that may be available. A number of organizations have developed workbooks to provide more detailed guidance than simply “keep me alive at all costs” or “do nothing.” 3. HIPAA Release In addition to a health care proxy, everyone needs a HIPAA release. The HIPAA law bars medical practitioners from releasing medical information to anyone, even to the spouse of a patient, without a release. You may well ask why a heath care proxy isn’t sufficient. There are a few answers: First, the health care proxy is “springing” in that it doesn’t get activated until or unless the patient is declared incapacitated. Second, while the health care proxy may only name one person at a time, you may well want a much broader group of people to communicate with medical providers. The agent may not always be available or may not be the first person on the scene. All too often we have seen medical providers hide behind HIPAA to avoid having to deal with family members, sometimes to great harm to the patient. Especially in emergency situations, family members often have vital information about the patient, whether it’s the medications he is taking, allergies he may have, or his usual physical and mental health. HIPAA does not say that medical personnel cannot listen to this information, but it can be misconstrued in that fashion. It’s best to eliminate the whole issue by having a HIPAA release signed and available in case it’s ever needed. 4. Your Will Your Will says who will get your stuff when you die and who will be in charge of paying your bills, filing your tax returns, gathering your stuff and distributing it according to your instructions. But here’s the irony: although the Will gets all the recognition and there’s a whole set of laws governing the so-called “probate” process, these days many assets pass outside of probate. What the Will says does not apply in many situations, including: joint accounts that pass to the other joint owners, retirement plans and life insurance policies that go to designated beneficiaries, and property in trust that passes to the beneficiaries named in the trust document. Only what you own in your own name alone passes under the Will. In addition, while the Will requires a lot of formality – two witnesses and a notary all signing at the same time – these other forms of passing on property usually require only the signature of the owner, or sometimes simply filling out a form online. Your Will appoints an executor or personal representative who is in charge of carrying out your wishes. This can be very important in avoiding squabbling among children. And your Will can be used to appoint guardians for minor children. A Will permits you to make charitable or other specific bequests. Finally your Will can serve as a failsafe in case other means of passing on property fail. As you can see, most of these documents are about life not death. Of course, they’re still about planning for an unwanted event – incapacity of some sort. It’s like insurance to make sure that you and your family are taken care of if an unfortunate accident occurs.