Everyone Should Have the Basics, at Least

When it comes to creating the legal instruments that make up your estate plan, everyone should have the Basics, at Least.  So, what are the Basics?

First, everyone should have a Health Care Power of Attorney.  This is a legal instrument that is governed by the law of Agency.  It provides your agent with the authority to make medical decisions on your behalf, if you are incapable of making such a decision.  In addition, the health care power of attorney should authorize your agent to obtain your medical records and address HIPAA law.  If yours does not, yours should be updated.  The importance of this instrument can be summed up in two words “Terry Schiavo”.  Having witnessed that case, we all now recognize the importance of such a document.

Second, everyone should have a General Power of Attorney.  This too is governed by the law of Agency.  The person creating the instrument is the Principal and the person(s) named as Agent is the Agent.  It can be effective immediately or take effect only in the event of incapacity.  It can include gifting powers or not.  This instrument can prevent costly proceedings for guardianship or conservatorship from having to be commenced. 

Third, we get it into whether a Will alone plan is sufficient or is a Trust centered plan going to accomplish my objectives better.  In order to answer that, we need to determine the objectives.  When one sets about creating these documents, obtaining a degree of peace of mind is the main objective. After most of our clients learn the benefits of having a Trust centered plan, most opt for that.  The general benefits of Trust centered planning are (1) more privacy, (2) usually less cost to administer, (3) less likelihood of dispute, (4) more flexibility. 

Fourth, in every case, beneficiary designations need to be reviewed to ensure they work as desired for estate tax and income tax purposes.  The importance of this step can not be overstated.  If beneficiary designations are not closely co-ordinated with the Trust document(s), then adverse tax consequences are likely to occur.

Contributed by:

Mark F. Winn

Attorney at Law, PLLC