It’s another new year. Many of us will enter resolutions with ourselves—either spoken or unspoken—things we want to accomplish in the new year. I thought I would take this time to go over some legal to-do’s that I believe people should accomplish in the new year.
People who come to me for a consultation often ask, “Are we doing everything we should be doing?” Most people are uncertain as to what other people are doing, and they want to be assured that they are doing everything they should be doing, everything that other people are doing.
For most people, having a last will and testament, a comprehensive financial power of attorney, and an advanced health care directive are the only estate planning documents that a person needs. Through a last will and testament, a person can nominate an executor of her estate.
Once the surrogate—an elected official in every county—officially appoints the person nominated to be the executor in the Will, the executor has complete access to the assets that the decedent owned; however, unlike the decedent, the executor merely holds those assets as a fiduciary for the benefit of the beneficiaries of the estate. In many instances, the executor is also a beneficiary of the estate, though he need not be a beneficiary. The executor is not personally responsible for the decedent’s debts, though he must use the assets of the estate to pay those debts if the debts are legitimate. The executor must account to the beneficiaries of the estate and distribute the net assets (net of any debts) to the beneficiaries in accordance with the terms of the Will.
A financial power of attorney is a document through which the person making the power of attorney—called the principal—authorizes another person—called the agent—to make the financial decision for her that are outlined in the power of attorney document. The agent can only manage those financial matters specified in the power of attorney document, so you want the document to be very comprehensive because the agent may have to act on your behalf for years. If a person never signed a power of attorney, then no other person (not their spouse, not their children) can make financial decisions for them.
An advanced health care directive is a document through which the person making the directive—called the principal—authorizes another person—called the agent or the proxy or the health care representative—to make health care decisions for her. Typically, a directive is not the final word on your health care decisions. The agent makes the final decision based upon what he believes to be the appropriate health care decision in the moment given the circumstances and given the advice of the health care professionals. It is not as if health care providers read the directive and say, “We aren’t going to treat her because she signed this directive.” The doctors ask the agent what he believes the principal would have wanted based upon their advice, and the agent makes the decision based upon what he believes the principal would have wanted in that situation.
Through a directive, a principal can also permit the agent to access the principal’s health care information. This is important given the health care privacy law because no one can access your health care information without a release from you.
Finally, many of my clients are aged seventy or older. People of this age are often thinking about potential long-term care costs. Care in an assisted living residence or nursing home can cost in excess of $13,000 a month now.
For many of my clients in this age group, I suggest transferring their house to an irrevocable trust of which their children are the beneficiaries. The client reserves the right to live in the house for the remainder of her life and the obligation to pay all the costs associated with the house, but ownership of the house is transferred to the trust, starting the five-year lookback for purposes of potential Medicaid eligibility. The trust protects the house from any of the children’s potential problems (divorce, lawsuits, death), but gets the house out of the parent’s name.