LEGAL FYI: The Often Neglected Piece of Estate Planning

INTRO: When the term “estate planning” is used, most people immediately think about Wills and Trusts. But the “poor step-children” of estate planning – Durable Powers of Attorney and Advance Health Care Directives – should not be forgotten. The article describes these two important documents and identifies questions that may be useful to ask about your documents. The answers will help you determine whether or not it would be prudent for you to review and/or draft new documents that best suit your wishes and needs.

Estate Planning is largely about providing for the smooth succession of management of your personal and financial affairs to those you trust. The bulk of discussion about estate planning focuses on Wills and Living Trusts.

Wills and Trusts are extremely important; however, in many ways, two other documents are more fundamental. They govern who will handle your affairs during your life if you become unable. These two documents are: a Durable Power of Attorney – sometimes called a “General Power of Attorney” or Durable Power of Attorney for Property Management (“DPA”); and an Advance Health Care Directive (“AHD”).

In my opinion, every adult – irrespective of one’s circumstances – should have a DPA and AHD. In short, a DPA and AHD enable you to appoint someone you trust who will have legal authority to make financial and health care decisions for you if you are ever temporarily or permanently unable to do so. The potential consequences of not establishing both of these documents can be harsh.

These consequences may include incurring substantial, ongoing legal fees, costs, delay and inconvenience in connection with a court conservatorship proceeding – in which a court appoints a conservator to act on your behalf. Tragically, the judge could appoint someone as conservator whom you would never choose nor want to make these critical personal and financial decisions for you.

When I review an existing estate plan for new clients, in many instances I find a Will and Living Trust in place, but either missing or outdated DPAs and/or AHDs.

If you do not have appropriate, up-to-date DPAs and AHDs, it’s not overly cumbersome or expensive.

In any event, hiring an experienced estate planning attorney to assist you is worthwhile if: a) you are unsure about whether or not your DPA and AHD are currently compliant with the law and appropriate for your situation; or b) if your wishes have changed since your documents were executed; or c) if you answer “no” to any of the following questions:

DPA:

1) Do the express terms render it “durable”, meaning that the agent’s authority extends beyond the date you become incapacitated? Although instinct would dictate that all forms include language making the Powers of Attorney “durable”, many forms do not.

2) Is the primary agent (aka “attorney-in-fact”) you named still the trustworthy and responsible person you’d prefer to transact financial business for you in your stead?

3) Have you appointed at least one suitable alternate agent in case your primary agent is unwilling or unable to serve when needed?

4) Are the powers broad and appropriate? It’s important that the powers do not unnecessarily impede your agent’s ability to manage all of your financial affairs?

5) If your DPA is “springing” – your agent’s powers are triggered by your incapacity – is the definition of “incapacity” reasonable and practical? The method by which your agent is required to prove your incapacity may be looser or stricter than you may wish.

AHD:

1) Is the primary agent you appointed still the person you’d prefer (trustworthy and responsible) to make health care decisions for you in your stead?

2) Have you appointed at least one appropriate candidate to serve as alternate agent in case your primary agent is unwilling or unable to serve?

3) Did you appoint only one primary agent and only one alternate at a time, in order of priority? Note that if co-agents disagree or reach an impasse, it can cause family heartache, compromise your health care decisions, and could even result in litigation.

4) Is the AHD still valid? In or before the early 90’s, AHDs (then called “Health Care Powers of Attorney”) automatically expired after seven (7) years; so some people have older documents they don’t realize have expired.

5) Is a HIPAA release included in the body of the document or attached? Note that current HIPAA (federal privacy law) provisions render this specific release necessary to ensure that a copy of your medical records will be given to your agent when he or she needs them.

6) Does your AHD have provisions that direct your agent carry out your wishes as you desire, such as those governing: “heroic measures”; organ/tissue donations; and disposition of remains?

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

ESTATE LEGAL SERVICES: Need to find an estate planning attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Revocable Living Trust, Wills, Durable Power of Attorney, Advance Health Care Directive, Special Needs Trusts, and Irrevocable Trusts & Advanced Estate Planning, including Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Defective Grantor Trust (IDGT), Grantor Retained Annuity Trust (GRAT), “Crummey Trust”, and various types of Charitable Trusts.