This week is referred to by some as the National Estate Planning Awareness Week. It is an opportune time to examine your life and take steps to protect your assets now and in the future.
Each stage of life requires a different type of planning, but through it all it is critical to have the aid of professionals to ensure your work actually protects you and your family. In the San Diego area we encourage you to contact one of our estate planners for help. Every situation is different, but some of the more common planning tools include…
Health Care Proxy
Although medicine has made great advancements in our lifetime, it still doesn’t guarantee that if we reach old age we will do so with our mental faculties intact. For example, according to Forbes one in eight baby boomers will get Alzheimer’s after they turn 65. Watching a loved one decline in mental faculties is heartbreaking, and it also takes away the person’s abilities to make health decisions for themselves. Similarly, if someone you love were to get a stroke suddenly there would be no legal way to know what and how he or she would want their medical treatment directed.
Hence, it is prudent to address this matter while you are healthy and energetic. Regarding your health decisions, you should create what is known as a health care proxy, or a health care agent or even a health care power of attorney. Such a person could make health decisions for you if you become incapacitated. You should consider carefully whom you would appoint in this instance since it can have profound effects on the end of your life and your loved ones.
A living will or also what is called an advance directive is a written statement that explains what your wishes are with respect to the end of your life. For example, a living will usually covers whether or not you will get pain relief and for how long, if you would want surgeries and at what costs or if you put limitations on the number of surgeries, if you would want a ventilator,
a feeding tube or to be resuscitated if it would prolong your life. It would also state when you would want these things removed if there was no hope of returning to normal life.
Who Will Be in Charge of Your Finances
While your medical directives may be taken care of with the appointments listed above, there is still the matter of who will run your financial matters, from paying day to day bills, to directing stock trades. If you’re mentally incapacitated you have to have someone you trust or some mechanism to ensure your financial health.
There are at least two different documents to consider: one is a durable power of attorney and the other is a living or revocable trust.
Durable Power of Attorney: a durable power of attorney is when you appoint a trusted family member or advisor to be your agent in financial and legal matters. This power of attorney could
be immediately active upon signing it or it could be activated if you become incapacitated for some reason. A medical opinion will be necessary to determine if you are incapacitated which will then activate the power of attorney. Depending on how the Power of Attorney is worded will depend on how broad its authority is. It may be prudent to give this type of document to your lawyer with specific instructions on when to turn it over. This does give a great deal of power to someone, and it should be carefully supervised. Finally, make sure you name a second person as your agent in case for some reason the first person you designate cannot or does not want to serve.
Living or Revocable Trust: This trust is set up by your attorney, and it states in specific detail how your finances and assets are to be handled and who gets the property of the trust when you die. You should be aware that these trusts are subject to estate taxes as well. It can also state how to define incapacity and who will be the trustee if you are found to be incapacitated.
Also, you could put all your assets in the trust or just some of them, or you could designate that the trust will be funded only upon the determination that you are incapacitated. A power of attorney is also necessary to go along with the trust, especially since there are other financial matters that the trust cannot do, like pay your taxes and apply for Social Security benefits. See one of our estate planners to discuss this very complex matter.
It is important to note that a trust also works as a substitute for a will when you pass away. In some states, it could even help you avoid the costs of probate. The other benefit is that the trust is not a public record so people can’t find out whom you may have left your assets to as easily.
For help on these and many other planning matters in the San Diego area, please get in touch with the professionals at the Law Office of Scott Soady today.