A Will or Living Trust is only one part of a person’s comprehensive Estate Plan. Advance planning for each person’s potential incapacity is important to avoid Court directed (“Guardianship”) proceedings being required should the client become incapacitated. Since a Will only becomes effective upon a person’s death, other documents are needed to provide a means for financial and medical decisions on such person’s being made by others when the person cannot make them which do not require court involvement.
To avoid such proceedings, a number of brief documents are prepared for each client that name family members or friends to make financial and medical decisions in the event of the client’s incapacity or other inability to make such decisions. Currently, these documents are as follows and are used to pre-appoint persons to make decisions covered by such document:
Declaration of Guardian in the Event of Later Incompetence or Need of Guardian, the only individuals a Court is authorized to appoint as guardian of a person’s estate and person upon his or her incapacity or incompetence.
Statutory Durable Power of Attorney, individuals appointed to make all financial decisions for a person at any time without the need to legally prove his or her incapacity.
Medical Power of Attorney Designation of Health Care Agent, individuals named to make all medical or health care decisions for a person who is incapacitated or unable to communicate with his or her health and medical care providers.
HIPAA Authorization, limits disclosure of medical information for an individual to those persons named in this document.
Directive to Physicians And Family or Surrogates (“Living Will”), provides a person’s medical care providers with an individual’s instructions as to whether or not to discontinue medical treatment should the individual, in the opinion of those medical care providers attending to such individual, become “terminally ill” or be “unable to return to a sentient lifestyle”.
Appointment of Agent to Control Disposition of Remains, names individual to make decisions as to final burial or other related plans which a has not made prior to his or her death.
Because the laws governing these lifetime documents change frequently, they should be reviewed periodically and replaced as needed, especially at such time as a person changes his or her Will or Living Trust. None of these documents can be used upon a person’s death. Use of a Living Trust as the central document in an individual’s estate plan also provides benefits to such individual who becomes incapacitated, is of advanced age or has Alzheimer’s, dementia or other cognitive impairment. Planning can also be incorporated into an individual’s Will or Living Trust to avoid loss of governmental benefits otherwise available to “Special Needs” beneficiary under the Will or Living Trust.
Use of certain techniques such as creating a “by-pass” or “tax-free” trust under an individual’s Will or Living Trust to become effective upon his or her death can provide significant estate tax reduction and benefits to the individual’s family upon death. Such planning does not require an individual to part with any wealth during his or her lifetime. These Will or Living Trust techniques are often used in conjunction with the surviving spouse’s “disclaimer” of assets otherwise to pass to such surviving spouse taken within nine months of the first spouse’s death to provide certain income tax benefits to the deceased individual’s beneficiaries. In addition to such Will or Living Trust planning, there are various techniques also available to individuals with substantial estates (those exceeding the exemption from federal tax upon transfer of assets during lifetime or upon death, currently $5.45 million in 2016) for tax planning purposes. These techniques do require an individual to transfer a portion of his or her wealth to chosen beneficiaries during the individual’s lifetime. These gifts are designed to reduce both the current value of the individual’s estate for federal transfer tax purposes, as well as limit the future growth of the client’s estate prior to death. Options range from simple non-taxable annual gifts (of $14,000 in 2016 or less from each individual to another individual from a person (“donor”) to any other person (“donee”) being exempt from using part of a person’s lifetime exemption) which renew each year, to more complex strategies such as gifts into “irrevocable” trusts, charitable gifts and transfers of business interests by way of a gift or sale to an irrevocable trust. Certain income tax consequences also need to be considered when deciding which option best suits a particular person’s situation.
RETIREMENT AND LIFE INSURANCE
For most persons, these benefits account for a seventy percent or more of their overall estate value. Beneficiary designations may already be in place that were completed before marriage, divorce, birth (or death) of a family member and need to be reviewed or replaced during an individual’s estate planning to coordinate such benefits into the individual’s new estate plan. Each of our Client’s estate plan includes customized beneficiary designations to ensure that such benefits are distributed as provided in the Client’s Will or Living Trust plan. Ownership of checking, savings and non-retirement investment accounts are also addressed in each Client’s estate planning to avoid “Survivorship”, “Payable on Death” and “Transfer on Death” accounts from adversely affecting the Client’s estate plan.