Monthly Archives: March 2019

Disability Legal Planning for All Ages

A life-altering disability can strike at any time, regardless of your age. From a complicated pregnancy to a serious automobile accident to a cancer diagnosis, these situations can have a significant impact on your life and the lives of your loved ones. Because one-in-four working-age adults may become disabled before they retire, there is a chance you may become disabled. Prior legal planning is essential to reduce the legal hardships caused by a debilitating illness or injury. Here are a few tips to help you make proper disability legal plans.

Create Powers of Attorney

If you were disabled due to an injury or illness, who would make your personal, health care, and financial decisions? Would you rather it be someone you know and trust, perhaps a family member or friend, or would you prefer someone appointed for you by a judge who likely knows nothing about you, your family and your circumstances? If you are like most people, you would choose the former alternative over the latter. Unfortunately, without proper advance legal planning, the latter is the default and more common result.

Since none of us knows when to expect the unexpected, you need to create a durable power of attorney for health care decisions and a durable power of attorney for financial decisions. The word “durable” means the authority that you give the person appointed in your power of attorney, will continue in force should you become disabled. After all, that is when you would need them to act for you, right? This is an important point to remember.

Health Care Matters

Creating a durable power of attorney for health care decisions is truly a matter of life and death. Who better to advocate your health care needs than someone selected by you, who knows you better than the doctors and nurses treating you? As a result, you should share with your agent the nature of treatments you would want (or not want) under a variety of scenarios.

A health care treatment directive is a document commonly completed with the durable power of attorney for health care decisions. Its purpose is to provide written evidence and guidance regarding your end-of-life medical care. Be as general or specific as you wish. While you are at it, do not forget to include a HIPAA authorization as part of your health care disability planning. Such an authorization is necessary under federal law to allow your health care providers to disclose otherwise confidential and protected information to your agent.

Financial Matters

If the durable power of attorney for financial matters is “general,” then your agent (also known as an “attorney in fact”) may have very broad authority to act on your behalf. For example, the agent may be able to sell your home, sign and file your tax returns and pay ongoing bills from your account. On the other hand, if the durable power of attorney is “special or limited,” then your agent will have authority restricted to the acts you specify in the document. The scope of the authority you authorize is worthy of careful reflection. There have been cases where agents have exceeded the intended authority.

In addition to controlling the extent of authority you are authorizing under your general durable power of attorney, you may control when it becomes activated. If you want the authority to begin only when you become disabled, then you will want to create a “springing” power of attorney requiring some specific proof of your disability defined in the document itself. Otherwise, the authority of your agent may become effective immediately.

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Will or Revocable Living Trust?

Most estate planning attorneys will tell you that one of the most commonly asked questions they are asked is “Should I plan my estate with a last will and testament or a revocable living trust?” The most common answer? It depends.

Not all of life’s decisions are binary. For example, if you are willing to risk certain unintended consequences, beneficiary designation planning may be all you need to transfer most (if not all) of your assets at death without probate. Even this decision, however, should be made only after consulting with an estate planning attorney regarding the risks and rewards in light of the applicable law.

That brings us to the choice between a will or a revocable living trust. The decision really depends on whether you want to avoid probate, given your unique circumstances. What is probate and why would anyone seek to avoid it?

“Probate” and Wills

The word “probate” actually comes to us through the Latin word “probare,” which means to test or to prove. In the context of the probate process, this includes proving that the will submitted to the court on behalf of its decedent author truly is the “last will and testament” and not the “second to the last will and testament.” Ultimately, the probate process in most states determines whether the nominated guardian for any orphaned minor children and the executor are not otherwise disqualified from serving under the will; ensures that lawful debts, taxes and expenses of the decedent are paid; and that the inheritance is distributed as directed. One major benefit of probate is the oversight of an independent judge, who dispassionately ensures that the estate is administered, according to the lawful wishes of the decedent maker of the will.

There are three commonly cited downsides to probate, often in the context of celebrity estates. These drawbacks are delay, expense and privacy. Since probate is a court process, the time it takes from beginning to end, may depend on the court’s backlog of cases. The expense in some states is directly due to how the executor and attorney are compensated, let alone if multiple probates must be opened in multiple states where real estate is owned. When it comes to privacy, probate is a public process. This means that all you own, owe and love may be laid bare to the public record. By the way, contrary to common urban legend, having a will does not avoid probate. In reality, a will has no “life” until its maker dies, and the will is admitted to the appropriate court within the time required by statute.

Revocable Living Trusts

If you would like to avoid or at least minimize one or more of these commonly cited probate downsides, then a revocable living trust (RLT) is a proven alternative. Simply stated, think of a RLT as a three-party contract and you are all three parties: the trust maker, the trustee and the beneficiary. Since your RLT is “revocable,” you may change its terms at any time while you are “living” and have the mental capacity to do so. As a “trust,” any assets titled to the RLT while you are living or by beneficiary designation upon your death will avoid probate, even real estate in multiple states. Thereafter, your RLT continues under the management of your named successor trustee for the benefit of your remainder beneficiaries, according to your specific instructions.

The “Secret Sauce”

Regardless how thoughtfully crafted and properly executed your legal documents are, the secret sauce determining the success or failure of an estate plan has nothing to do with technical legal planning. No, the key is organization. This is because when the estate plan must be activated, the person who created it is unavailable for guidance. As a result, the more detailed the who, what, when and where information you leave behind, the better!

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