Episode 6 – Making Law Easy Show: Where there’s a Will there’s a Way
Episode 6 – Making Law Easy Show: Where there’s a Will there’s a Way
Hi, this is Karl Schieneman, a Partner with 1-2-3 Law Group, and you’re listening to the Making Law Easy Show. Today we’re going to delve into estate planning and some critical documents that encompass estate planning. I have an estate planning attorney who works with 1-2-3 Law Group and Cheryl thanks for coming on the program and why don’t we dive right in. Cheryl what’s an estate plan.
An estate plan is not exactly what you might think it is. A lot of times you think of an estate plan as something that involves their current financial situation. That is the type of estate plan that you would prepare with your financial planner or accountant. A financial planner is concerned with the administration of your estate while you are able and living. The estate plan that we are here to discuss prepares your estate for the contingencies of illness and death. The necessary elements for this type of estate plan are a living will, a power of attorney and of course your last will and testament.
And this is actually very interesting stuff. We had Marty Madigan on a recent show talking about what happens in the administration of these documents. So why don’t we dive into some of these documents. What is a Will and what does it contain?
Well, a will is essentially a financial document which is actually a mistake that people make. They think that they can put a lot of other things in the will. But it’s good to know exactly what the will does do and what it should contain. So being that it is essentially a financial document a will essentially decrees how you want your monetary assets and worldly possessions to be divided up and distributed. It is also used to provide for the special needs of certain beneficiaries such as minor children, or persons who have spendthrift tendencies or physical or mental disabilities that make them incapable of handling their own financial estate. This is most commonly done through a tool called a testamentary trust. These protect and control your assets, or the assets that are inherited by a beneficiary with the special needs that I just discussed. A testamentary trust will instruct your executor how to set up a financial trust according to your specifications and to hold the inheritances of these special needs beneficiaries for that beneficiary’s use as controlled by that appointed trustee and according to your direction and until such time as you specify. These things protect your beneficiaries’ inheritances from things like guardian appropriation and maturity improper influence and legal problems until the beneficiary is able to handle the assets on her own. The trust is also a useful tool for people who are trying to transfer business properties. Your will also provides for the day to day care of your minor children. In your will you will appoint a guardian to live with and care for your minor children in your absence. Without a will the court will appoint a trustee or guardian for your children. And last but not least your will allows you to name your executor. An executor is a very large and important job. He or she is in charge of hiring an attorney to file the necessary paperwork with the state. They find your assets, pay your debts, pay your taxes, and then they have to distribute whatever is left over. They work close with the attorney to do these things. And it’s not all the attorney, the executor has a lot to do with it. Therefore it is very important that you choose your executor and that your executor should be someone that you trust, and is in a good position to handle your estate in a responsible and hands on way.
Well what happens if you don’t have a will Cheryl?
If you don’t have a will you are governed by what the court calls intestate law. The court will appoint someone first to act as your executor. This will usually be one of the beneficiaries of the estate, or if no one is available or willing the state may appoint an unrelated attorney. Unfortunately, the problem with this is that it may often cause discord among family members who disagree with the court’s decision. Assets will then be distributed according to who survives you, of course after all of your debts and everything is paid out. For example, your parents, your spouse, your children, your grandchildren, your cousins, your nieces and your nephews will inherit. Each beneficiary then receives a pre-appointed share of your estate according to their relationship to you and according to who else has survived you. For example, your spouse will receive 100% of your estate only if no parents or issue that is your children survive you. Otherwise your spouse receives only a percentage of your estate which is usually the first 30,000 plus one half the remaining balance. The rest goes to the remaining parents or children. And that is actually something people are surprised when they hear about because they think that their spouse automatically inherits everything and that’s not the case. When you create a will that’s what most people want to have done, but that’s not the case if you don’t have a will. If you have children under the age of 18 and you are survived by a spouse, the spouse will automatically be assumed to be a guardian of the children. No big surprises there. However, a separate person will be appointed by the court to administer the inheritance of those children until they are age 18. So if you have that situation, you don’t have a will, your spouse may be the day to day guardian of the children but she may not be in control of any of their inheritances. And remember if you don’t have a will, the spouse only receives the first $30,000 plus half the remaining balance of your estate. Therefore she may lose control of a large part of the estate that was inherited by her children.
And actually that was on our third show, when Marty Madigan who is deputy of the register of wills talked about how important it was to have the wills, or else he had to make a lot of decisions on the executor and these are all good points. Another document that is always mentioned in the estate planning is the Power of Attorney, so Cheryl what is a power of attorney and what does that do.
Well it appoints another person to act on your behalf in the event you are unavailable or incapacitated. The person that you appoint is called your agent. Now you’re alive, so this is a reason to smile because we’ve been talking about testamentary wills in which you are dead. But now you are alive, because testamentary wills have no effect whatsoever, no legal affect whatsoever while you are still breathing. That’s why a power of attorney is so important. There are two types of power of attorneys. The first one is the general durable power of attorney. And this is the part that is usually included as part of your comprehensive estate plan. This gives all powers to the agent that is allowable by law. That is the power to make all financial and medical decisions that you would have been able to make were you there and would have been able to make them. This lasts for an indefinite period of time, or until the power is revoked or until the ground for that has died. This is usually included as part of your comprehensive estate plan. Now there is another type of a power of attorney called a limited power of attorney. These documents appoint an agent to act on your behalf and they limit the power the agent is given, the circumstances in which the power can be used and or the amount of time for which the power of attorney is valid. For example, if you are going away, you are going out of the country or something, and you are leaving your minor children in the care of your relatives, you may wish to give your relatives the power to make certain financial and medical decisions for your children while you are gone. This may be a reason to make a limited power of attorney. That will say that let’s say you left the kids with your mother, this gives your mother the right to make financial and medical decisions for your children while you are gone, and usually what you will do is you will give an expiry date on your power of attorney, generally your expected return date. Therefore if something should happen to your children where they need to have financial or medical decisions made in your absence, your mother has the right to make them and things don’t have to wait until you come back from wherever you are. Sometimes they can’t wait. Medical decisions have to be made immediately. And that gives your mother the right to make them.
So why is a power of attorney important.
Because life is unpredictable. At any given time and accident or a sudden illness can leave us alive but unable to think or communicate clearly. A will is only effective upon death. Therefore if you have an executor named in the will that person does not automatically have authority in the case where you are incapacitated. An executor has no authority until you have died. Therefore if you are incapacitated but still living there is no one designated to make important decisions on your behalf. This results in delay confusion or confrontation among friends and family members all of whom have different opinions on what needs to be done and who should do it. And none of them have the immediate power to do anything. If you wait until you are in the hospital until you sign the power of attorney, assuming it’s even possible, you know that you are physically able to sign. Someone who is not content with your choice of agent may contest the power of attorney in the court claiming that you are either not legally competent to sign that document, or that the named agent took advantage of your weakened state to force you to sign that document, and that the document was not your true wishes. Even if such a contest is ultimately unsuccessful, it can cause a great deal of mental and financial hardship on the agent and delay making of important decisions.
The third document that you always hear when estate plans are discussed is a living will. Cheryl what is a living will and why is a living will important.
A living will is a type of limited power of attorney, and this limited power of attorney specifically deals with medical decisions in regards to life sustaining treatments and resuscitation once you have been considered to be in a terminally in position. Usually this form that is often available at hospitals doctors offices, attorney’s offices and notary’s offices sometimes have them as well. The forms can vary in the degree of detail and description according to various situations. A more detailed form is more comprehensive and leaves less room for doubt however, it should be gone over with a doctor or attorney so that you know exactly what you are agreeing or not agreeing to. But of course, no matter how detailed your form is, no form can cover all possible situations. So you appoint one person to act as your agent and make any decisions that do not fall specifically into the provisions of the living will. And you should discuss with this person ahead of time what your feelings in general at least are so they are able to articulate your wishes.
What happens if you don’t have a living will.
Family members with different opinions on what course of action may take may battle each other out for the right to make the final decision. These battles if they are taken to court may cause delay for several months and even some years to settle, during which time you are kept artificially alive in a terminal state awaiting the court’s decision on your fate. Meanwhile your family is being torn apart often irrevocably by their differences. I mean just look at the Terry Shivo case.
Yes another one is the Ted Williams case where one of the kids wanted him frozen and the other one wanted him cremated. Those are really both ends of the spectrum.
And since he didn’t say who he chose his agent to be, they all had equal rights to make that decision. They could not decide. So ultimately it’s the courts decision.
What are the main reasons of having an estate plan in place.
Having an estate plan in place is important so that you can ensure that you are able to (1) direct your assets where you want them to go, to protect your spouse and minor children from the decision making power of the estate. Also you want to ensure that important decisions are made by someone you trust in your absence. You also need to protect your family and friends from having to make difficult and painful decisions. Of course that’s the living will coming into play. And you need to protect your agents and executors from challenges to their rightful authority and that’s why it is so important to have these things done while you are capable and living and able and in your right mind and well. You also want to give yourself the peace of mind that you have provided to your family and have done everything in your power to make your passing as smooth as possible. You don’t want your family broken up over your passing.
Let’s say a listener wanted to prepare their estate plan, what advice would you give.
Preparing your estate plan is easy. There is no need for lengthy discussions regarding your current assets. Too many people put this off because they think they are going to have to drag out all of their investments and all these things. I don’t need to know that when I discuss an estate plan. A living will is a long term document and is not tied down to specific assets because those assets are expected to change many times during your lifetime. At 1-2-3 as you know everything is done electronically. You’ll start with easy forms to fill out at home after which you will have a brief meeting. A few days later you may be asked to review some drafts of your documents over the web based management system so there’s no need to even come in for that. You can do that from your home. Once the final documents are drafted then you just come into the office to have them signed and notarized. The whole process can take less then two weeks and only a few hours of the clients’ time.
Well what advice can you give to someone who doesn’t have an estate plan.
Having an estate plan is one of the single most important things that you can do to protect yourself and your family. That understood it amazes me how many people have not done it. You wouldn’t think about going through life without home insurance, health insurance, or life insurance. That is just what responsible people do. But an estate plan is no different. In fact by determining who else has the right to make decisions for your estate before and after your death, you are protecting the very thing that all these other planning tools are based on. Your financial and medical well being. Having insurance but not an estate plan is like owning a house but not the land that it sits on. Unless you secure the base you could lose it all. It is just what responsible people do.
Cheryl, I want to thank you for joining us on the Making law easy show. I think we covered a lot of information in just over 15 minutes. It’s impressive. I want to also let the listeners know if they want more information they can contact us at 1-877-7-123-Law5 or they can listen to this show and other shows like it on our website at www.makinglaweasy.com.
That’s about it, and thank you for your time and we’ll talk again in the future I’m sure.
Sure, it’s a pleasure.