By Michael G. Walsh
A Licensed Michigan Attorney
There is nothing in medicine or law to prevent us from doing things on our own. If you think doing your own appendectomy or kidney transplant will save you time and money – you might want to ask around.
Likewise, you might want to investigate what happens when you use estate-planning documents from the Internet, visit “paralegal services” or create your own wills, trusts, and powers of attorney. Words have legal power, and – misused –can hurt you.
What if you died tomorrow? What would happen to your family, your assets? Life is uncertain and the best we can do is try to plan ahead for the worst-case scenarios – disability and death.
It’s not a procedure we do only once and forget about. It’s something that should be reviewed periodically, say every five years, or upon sudden life-changing occurrences – death of a spouse, marriage, job loss, new job, birth of a child, unexpected income, and so on.
Time and taxes are the two biggest wolves at the door, but their influence waxes and wanes depending on your age and circumstances.
A healthy 35-year-old with a job, a starter home, a spouse, and a child or two is in a far different world than a 65-year-old widow whose children are grown and whose home is paid for. But each needs to ask, “what if?”.
Anyone with assets or children needs a team of experts to assist with estate-planning decisions. Life and disability insurance are necessities while nursing home insurance can be a waste of money. An independent financial advisor and accountant are indispensable as are attorneys to put all the pieces together.
Basic Estate Plan Documents
Your attorney likely would discuss several basic estate-planning documents with you. These include a Will, a Trust, a Trust with a “pourover” Will, a financial power of attorney, and a Patient Advocate Designation. There can be many kinds of trusts and variations of wills, each uniquely written to address your particular situation.
The power you grant to agents for financial or medical reasons also can be varied according to your wishes. That’s why it’s important to contact an attorney to get a document tailored to your needs – not the needs of the hospital you’re entering or the bank you’re dealing with.
Wills and Trusts
1. Last Will and Testament:
A Will is like a letter to the probate judge. “Dear Judge, I’m dead. Here’s how I’d like you to distribute my belongings…”
The Will writer (called the “Testator”) names a “Personal Representative.” In earlier years, this was called the “Executor” [male] or “Executrix [female].” This person carries out your business and your wishes after you’re gone.
- Wills are public documents, filed in the probate court of your county. Anyone can view your will.
- Probate courts charge fees to file an estate as well as fees based on the worth of the estate. These have been reformed since the abuses of earlier decades and “probate” is not as frightening as it once was.
This is like a contract. There are many kinds of trusts, but the most basic ones act like a contract between You and your Trustee – the person you name to handle things after you can no longer act on your own due to disability or death. The person who grants the trust is the “grantor.” The person who agrees to carry out the agreement is the “trustee.”
a. Revocable Trusts. Many trusts are revocable – you may change your mind at any time until either incompetence or death occurs.
b. Irrevocable Trusts. Some, from the start, are irrevocable. Once signed, it’s set in concrete, and law. Revocable trusts become irrevocable upon incompetence or death.
Trusts are private documents. They are not filed in the probate court of your county unless there is a lawsuit or challenge involving it. Thus, there are no probate fees and no one can see your trust unless you share it with them because they are not public documents.
The initial Trustee of a revocable trust usually is YOU. But once you become incompetent (i.e. dementia) or die, the person you named as successor trustee is in charge and the trust is no longer revocable. It can no longer be changed.
The successor Trustee then begins to act to carry out your wishes without involvement of the probate court. Trusts can exist for decades, long after you’re gone.
c. Trusts Oversold. Trusts can be valuable for certain people, or at particular stages of life, but not everyone needs one. Persons with young children might benefit from a trust, as might other individuals with substantial assets or individuals requiring special attention, i.e. making provisions for developmentally disabled persons.
d. Note Well: For most people, a simple will is sufficient. Unless there are family, tax, Medicaid, or other specific issues, trusts should be a secondary consideration. Your attorney will guide you in this decision.
Powers of Attorney
“Agency” is a legal concept meaning we can authorize another person to act for us. In this context, the areas involved are financial and medical.
1. Durable Power of Attorney for Financial Matters:
We can appoint an agent to act for us and carry out our financial business through a Durable Power of Attorney. The power given can be as broad or as narrow as desired and it can go into effect whenever you say.
a. Upon Execution: The appointment of an agent who can do your banking, meet with Social Security personnel, hire accountants for you, etc. can arise as soon as you sign the document.
b. Upon Disability: The appointment arises only upon disability as determined by two physicians.
2. Patient Advocate Designation.
This is a durable power of attorney for medical issues. We may appoint an agent to make medical care decisions for us – up to the power to “pull the plug” on life – but only when we can no longer do so ourselves due to incompetence (dementia) or unconsciousness.
Two physicians - or one physician and a psychologist - must certify the person is no longer competent or able to make such decisions concerning medical care before the power arises. In other states, this can be called a “living will” or “living trust.”
All powers of attorney end at death. That’s when the Will or Trust takes over.
These notes are meant as a beginning for your understanding of the estate-planning process. Rely on your team – insurance, financial planner, accountant, and attorney – to assist you at every stage of your life.
Michael G. Walsh