One of the goals of estate planning is to keep control over your own property and affairs while you are still able to do so. I work with my clients to ensure that is the case, but we also work together to select good people to take care of the estate if they can no longer manage it. The key triggering events that would lead you to lose personal control would be disability, and of course death. Appointments should be made to ensure that your estate is managed properly in the case of disability or death.
Appointments Dealing with a Potential Disability
The two most common health events causing a client to become disabled for estate purposes are strokes and dementia. If either one of these, or another form of disability occurs, and you have not made an estate plan, a guardian would be appointed by a court to take care of your affairs. This process can be both expensive and time consuming.
Good planning can avoid the need for court intervention. The two primary estate roles in the case of a disability are the power of attorney and the health care agent.
The power of attorney is responsible for making financial decisions for you if you can no longer make them. It seems like obvious advice, but one of the criteria for a power of attorney is that they would be good with money and finances. As your power of attorney, they may be called on to make banking and investment decisions, pay your bills, or enter into important transactions like selling your home. The more experienced they are with financial transactions, the better.
Another key issue for selecting a power of attorney is trust. Your power of attorney will have control over your entire estate. I explain to my clients that there is a difference between a power and a right. The difference can be illustrated by an example. While the power of attorney document may give someone the power to transfer property to themselves, in many cases they would not have the right to do so. What this means is that the power of attorney has the power to do a lot of things, some of which they should not be doing. There are legal actions that could be taken if this happens, but selecting someone that you trust with your property is important.
The other key role in the case of a disability is the health care agent. The health care agent makes decisions about your health care if you cannot do so yourself. The power is broad, and includes the power to make decisions about medications, procedures, life support, hiring and firing medical personnel, and even where you live.
In a surprising number of cases, gender plays a role in the decisions. Whether this is right or wrong, I often see couples select a daughter for their health care agent. There are many articles about the role gender plays in taking care of an elderly adult, so I will not go into that. I do not encourage clients to make decisions based on gender, but I do talk about factors such as medical background, caring, and the ability to make difficult decisions regarding life or death issues.
Another factor to consider is where the person selected resides. Can your power of attorney effectively manage your Minnesota property from California? The answer can differ from situation to situation.
If they are married, my clients often select each other as their power of attorney and health care agent. As a back-up, they often select an adult child, or trusted relative or friend. Taking the opportunity to plan while you are healthy most often leads to good choices being made. By comparison, waiting for a crisis can often lead to poor, high stress decisions, or worse, a court making the decision for you.
Appointments Taking Effect at Death
Your will makes at least one, and sometimes more, major appointments that take effect upon death. The primary selection is for someone to act as the personal representative of your estate. Your personal representative’s job is to gather all of your property, pay your bills, taxes and expenses, and then distribute your remaining property to the people you have selected in your will. This is often done in a court procedure called a probate.
The personal representative should have the necessary skills to manage your property and bills, work with your attorney, and participate and stay informed about the probate action.
If you are a parent, even more important than the personal representative is the selection of guardians for your minor children. The guardians will act as substitute parents if you can no longer do so. This can be a difficult decision, and one that spouses often disagree on. One guide is to try to select people who will not only love your kids, but also people who have the same parenting values as you do.
The Role of Trustees
This piece would not be complete without mentioning the role of a trustee. Depending on the type of trust that you use, a trustee can have a role in both the case of a disability or death. This can include all of the financial and property management aspects of your estate.
A trustee is a person, or a company, that is given power and legal responsibility for your property and financial affairs. Most of the time, my clients who have trusts will act as their own trustee during their lifetime. However, in the case of a disability or death, the pre-appointed successor trustee can step in quickly and make necessary decisions.
Your successor trustee can be an individual, or a professional trustee. Many banks have trust departments and can offer you trust services, but finding a trustee that fits your situation is important, and I would encourage you to discuss this with your attorney.
All of the appointments discussed in this article are critical components of an estate plan. If you have questions about estate planning, you can contact me by email at firstname.lastname@example.org, or by phone at 651-705-6277