Make Reviewing Your Estate Plan an Annual Event

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Less than half of us have any estate planning documents in place and of those that do, many people have outdated documents that no longer reflect their current situation, needs, or wishes.

Documents drafted 30, 20, or even 10 years ago may need updating. Major life events such as marriage, the birth of children, or starting a new business, all have serious estate planning considerations.


Estate planning is all about five essential documents. In order of importance:

1. The Durable Power of Attorney

The most important estate planning instrument for taking care of you and your family during your life, is the durable power of attorney. This appoints one or more people you trust to step in and handle your finances and legal matters in the event of your incapacity.

In the absence of a durable power of attorney, family members often must resort to going to court to be appointed as a Guardian of Property. This causes delay and expensive and unnecessary legal fees.

While the concept of the durable power of attorney is simple – I appoint you as my agent for financial and legal matters in the event of incapacity – the devil, as always, is in the details.

You have to make decisions about how many agents to appoint, whether to have alternates, whether to allow gifting, when the power of attorney should take effect, and the list goes on from there.


2. Health Care Proxy

Like the durable power of attorney, a health care agent steps in for you to make health care decisions if and when you become incapacitated. Unlike a durable power of attorney, it only takes effect when a doctor determines that you are unable to make decisions yourself. While it is possible to appoint co-agents, Abraham & Bauer recommends appointing one individual to serve at a time. This ensures there will be a single point-person in dealing with medical professionals and no possibility of disagreement or stalemate between co-health care agents. However, you can and should name one or more alternates to the principal-agent should they become unable or unwilling to serve in this role.

The main problem with health care proxies is that agents often have no idea or only a vague idea of what decision the patient would make in a particular circumstance. This can be addressed in one or more of these ways: a medical directive, a conversation between the potential patient and the agent, and a number of available workbooks (see below). A general medical directive can be included with the health care proxy that says either (1) remove life support if I’m in a vegetative state or irreversible coma, (2) balance the potential benefit and discomfort of any proposed treatment, or (3) do whatever you can to keep me alive.

Part of the problem with giving guidance to one’s agent is that it’s hard to predict situations that may occur and treatments that may be available. A number of organizations have developed workbooks to provide more detailed guidance than simply “keep me alive at all costs” or “do nothing.” They include:

  • The Consumer’s Toolkit from the American Bar Association,
  • Five Wishes from Aging with Dignity,
  • and the Maryland MOLST form which covers many of the same situations.

It is important to remember that a Health Care Directive and Power of Attorney are separate documents. While you can name the same person to make both financial and healthcare decisions should you become unable to do so, the documents naming them must be drafted and executed separately.


3. HIPAA Release

While normally a part of a Health Care Directive, this document can be executed in addition to a health care proxy. The HIPAA law bars medical practitioners from releasing medical information to anyone, even to the spouse of a patient, without a release.

All too often, medical providers hide behind HIPAA to avoid having to deal with family members, sometimes to great harm to the patient. Especially in emergency situations, family members often have vital information about the patient, whether it’s the medications he is taking, allergies he may have, or his usual physical and mental health. HIPAA does not say that medical personnel cannot listen to this information, but it can be misconstrued in that fashion. It’s best to eliminate the whole issue by having a HIPAA release signed and available in case it’s ever needed.


4. Last Will & Testament

Your will says who will inherit your assets and possessions titled solely in your name with no named beneficiaries when you die, and who will be in charge of paying your bills, filing your tax returns, and distributing the assets named above according to your instructions.

While the will gets the most of the recognition and there’s a whole set of laws governing the so-called “probate” process, today most assets pass outside of probate. What the will says does not apply in many situations, including: joint accounts that pass to the other joint owners, retirement plans and life insurance policies that go to designated beneficiaries, and property in trust that passes to the beneficiaries named in the trust document. Only what you own in your own name alone passes under the will. In addition, while the will requires a lot of formality – two witnesses and a notary all signing at the same time – these other forms of passing on property usually require only the signature of the owner, or sometimes simply filling out a form online.

That said, wills are important in terms of distributing your tangible personal property – stuff you can touch, such as furniture, jewelry, tools, clothing, boats, and cars. It also allows for the making of specific gifts such as certain amounts to a specific person or charity.

Your will appoints your executor or personal representative who is in charge of carrying out your wishes. Your will can also appoint guardians for minor children. Finally your will can serve as a failsafe in case other means of passing on property fail.


5. Revocable Trust

The documents listed above may be enough, but you may also want a revocable trust, sometimes called a “living” trust. A trust is a construct under which one or more other people, the trustees, manage property or investments for the benefit of one or more people, the beneficiaries.

In a revocable trust, the same person typically acts as the creator of the trust (grantor or donor), as trustee, and as beneficiary. Not much changes in their lives after they set up the trust. But it avoids probate by naming successor beneficiaries that will inherit the trust assets after they pass. While probate is not the worst thing that can happen to people, avoiding it can save heirs time and trouble.

But more importantly, a trust is a terrific tool for intervening in the event of incapacity. Financial institutions that are resistant to accepting durable powers of attorney appear to be more comfortable with trusts when a successor trustee is named. It is an even better planning tool when a parent names one or more adult children as co-trustees. The parent then does not give up any rights or autonomy, but permits the child to begin participating in financial management. Even if the child does nothing, he or she can view accounts and step in immediately if a problem arises. This can be especially important in the event of dementia or scams.

Seniors are the primary victims of scams and having a trusted family member with access to accounts can help identify scams and permit intervention to limit their effect.

In addition to probate avoidance and incapacity protection, trusts are infinitely flexible in terms of how they are drafted. They can state any number of specifics such who receives property, when. For instance, permitting its distribution over time to children and grandchildren. The options and opportunities are limitless which allows for the creation of a document and plan specifically tailored to your needs.


As you can see, most of these documents are about life not death. Of course, they’re still about planning for an unwanted event – incapacity of some sort. It’s like insurance, you don’t always need it, but when you do, you’ll be glad you did.

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Failing to plan is planning to fail.

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