For a person who is terminally ill, obviously time is of the essence. This urgency creates unique estate planning issues. Planning under these circumstances may involve not only the terminally ill individual but also an estate planning lawyer, CPA, financial advisor, and insurance agent. Family members may also need to become involved to assist the person in getting documents together, transporting the client, and assisting in other ways.
Here are some issues that need to be considered:
1. Does the terminally ill client still have mental competency? If the person has capacity at the present time but there is a risk that he or she may lose that capacity, then the planning needs to be done as soon as possible. Another thing to consider is having the individual execute a power of attorney that specifically includes the power to do estate planning so that an agent can make estate planning decisions for the terminally ill person.
2. Is there a problem with estate taxes? An estate that is likely to have to pay estate taxes raises a number of issues. One way to reduce estate taxes is to have the individual make gifts. The annual gift exclusion is $13,000 per person so the ill client can give up to $13,000 to any one person. If the client makes such gifts in 2009 and then is still living in 2010, he or she can make another series of gifts of $13,000 per person. If the persons receiving the gifts are also beneficiaries under the ill client’s will or trust, there is a substantial savings by gifting instead of the beneficiaries having to pay estate taxes at a rate of approximately 50%.
The ill client may also consider gifting to a charity. The ill client could potentially save on personal income taxes and his or her estate would also benefit by reduction of estate taxes by a charitable gift. Also when estate taxes are involved, an individual could consider creating a foundation, a charitable lead trust, or a generation-skipping transfer.
3. Does the terminally ill person have an up to date Advance Health Care Directive? This document is absolutely necessary for someone suffering a terminal disease. This is the document that allows an individual to appoint an agent to make health care decisions when that individual is unable to. This document can also spell out the specifics about what type of measures you want or don’t want at the end of your life. A Do Not Resusitate Order may also be something that a terminally ill person may want to consider signing.
4. Are beneficiary designations up to date, such as on life insurance, annuities, retirement plans, IRAs, and POD (payable on death) accounts? Sometimes people fail to change beneficiaries on these types of accounts upon a death or change of circumstance. Now is the time to be sure all of these have the designated beneficiaries that the ill client wants.
5. Is the person’s will or trust up to date and fully funded? It should go without saying that a person who is facing a terminal illness should have an estate plan. If one has been created, it needs to be up to date and in the case of a trust, funded by retitling all the trust assts in the name of the trust.
For help with any of these issues, call us at Law Office of Scott C. Soady, A Professional Corporation. We know how important it is to get these matters taken care of and will assist you to accomplish your goals in a timely manner.