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Archive for January, 2012

Planning Correctly for your Incapacity and Death

Thursday, January 19th, 2012

How to Prepare for Your Incapacity

Understandably, most of us do not like to think about a time in our life when we might not be able to make our own decisions. However, it is important to plan for this event because it is likely to occur to you or to someone you love.  In the event that you do not plan for your incapacity, you will have to have someone appointed to act for you in a public Probate Court case.

In order to prepare for your incapacity, it is important to meet with an estate planning lawyer to execute a Durable Power of Attorney, Healthcare Power of Attorney and Living Will.  The Durable Power of Attorney allows you to appoint an agent to make legal and financial decisions for you, while the Healthcare Power of Attorney allows you to appoint an agent to make healthcare decisions for you.  The Living Will, also known as “A Declaration for a Natural Death,” is a directive from you to your doctor instructing them to remove life support if you are in one of two circumstances:  (1) if you are in a permanent coma or (2) if you have a condition that is terminal and you are likely to die within a relatively short period of time; and that the treatment only prolongs the dying process.

Never use joint ownership as a way to allow someone to act for you.  For example, don’t list someone else as a joint owner of your bank account so that they can sign your checks.  Instead, you should name that trusted person as your Agent under your Durable Power of Attorney.  If you substitute joint ownership, then that checking account will automatically pass to the joint owner at your death.  I also recommend naming one person to act for you at any given time.  Having multiple agents causes confusion and is overly burdensome in most instances.

In addition, you must ensure that your Durable Power of Attorney contains important provisions.  Your Durable Power of Attorney must contain language that states the power survives your incapacity – that’s what makes it “durable.”  Without this language, the power will end when you become incapacitated. It’s also important to think about whether or not your agent will need to provide for your spouse if you become incapacitated.  Without specific language, your agent will not have the power to use your assets for anyone but you.  Another consideration is whether or not it is appropriate for your Durable Power of Attorney to contain gifting authorizations.  Finally, your Durable Power of Attorney must be recorded with the Register of Deeds in the County in which you reside in order to be valid upon your incapacity.

In order to name an agent to make healthcare decisions, you must execute a Healthcare Power of Attorney.  That document is a state statutory form on which you must initial options that provide guidance to your agent.  It is important to review your Healthcare Power of Attorney to ensure that you have given your agent full discretion to make decisions for you.  In addition, it is essential to have a conversation with your agent or agents regarding your wishes in the event of your incapacity.

How to Prepare to Die Correctly

When a person passes away is not the time to discover that they did not have a plan; that time is emotional enough without the unnecessary complications of trying to discover their intentions.  Often, these complications could have been avoided with a little planning.  I recommend that you meet with an estate planning lawyer to execute a Will or Trust and keep it updated by reviewing those documents with your lawyer every three to five years.

Your estate will probably contain assets as large as a parcel of real estate and as small as a set of salt and pepper shakers.  And, perhaps, the salt and pepper shakers will cause the largest problem.  Most families have that one piece of furniture or jewelry in which all of the beneficiaries have an interest.  In order to cause the least amount of strife, I recommend completing a Personal Property Memo, leaving certain items of tangible personal property to specific people.  This memo can include the disposition of assets except for real estate, cash, and stocks and bonds.   In addition, you can complete it without a lawyer once your Will is executed, because it only needs your signature – no witness, no notary.

Another instruction that is helpful is to leave a list of your assets and advisors to give your Personal Representative a place to start.  You don’t have to give your Personal Representative copies of your documents, but it is helpful to tell them where they are located.  It will be very helpful if your Personal Representative can contact your accountant, estate planning lawyer and other agents.

You may also want to preplan your funeral or memorial arrangements to avoid conflict upon your death.  If you do not prepay with a funeral home, I recommend that you at least inform your family of your wishes in a separate document from your Will.  If you put these types of preferences in your Will, it is likely that your instructions won’t be found until after your funeral.

To create a streamlined administration after your death you may want to consider avoiding probate.  Most of the general population believes that probate administration should be avoided at all costs.  While I do not believe that to be true in South Carolina, there are less administrative filings in a Trust Administration than in a Probate Administration.  Please be aware, however, that if you are not careful as to the titling of each asset, you may end up with both a Trust Administration and Probate Administration.  If you truly want to avoid probate, you can do so by creating a Revocable Trust or by titling assets with Payable on Death designations.  If you are one of the few who do not believe probate should be avoided, then you can make it more simple by structuring your Will in such a way as to qualify for a summary procedure in Probate Court.  A summary procedure is shorter and can be fairly easy to qualify for in the right circumstances. 

Living and dying correctly is complicated and requires advance planning. I recommend that you meet with an estate planning lawyer to determine which path is right for you. I would be glad to assist you, please call or email for a free consultation.