Personal planning in these uncertain times

By Elizabeth W. Abel, J.D., LL.M. (Taxation)

I always encourage my clients to consider what they have provided in their estate planning documents whenever a major life change occurs—birth, death, marriage, divorce, moving to a new home or state, etc. Our current situation during the COVID-19 pandemic would certainly qualify as a major life change. Therefore, I think it is important to consider whether your estate planning documents need to be changed, or if you need to establish one or more of these documents if not previously done.

You may ask, “What are estate planning documents?” The basic ones are a will, a trust, a durable power of attorney, and an advanced directive for health care. I will give a general overview of each in this article, and then provide more extensive discussion of each in later articles.

Last will and testament

A will is a written document that details who will receive your assets after your death, what amount of your assets each such person will receive, and when they will receive those assets. A will allows you to direct who will get your assets when you die. If you have no will, then each state has laws that direct who will get your assets when you die and what amount they each receive. It is important to remember a Will only applies once you die. You can change a will as many times as you want while you are alive, provided you are fully capacitated, at least age 18, and not being forced to sign the will or being manipulated into signing it.

Durable power of attorney (DPOA)

A DPOA allows a person (the principal) to appoint another person or persons as the agent or attorney-in-fact of the principal in order to make decisions about and to take actions to handle the principal's assets and financial affairs. A DPOA can allow the agent the ability to take very broad actions, or the agent's actions can be very limited with only specific actions permitted. The DPOA is quite useful during times when you are not able to handle your assets, perhaps due to a disability or incapacity, due to your inability to be where the asset is, etc. A DPOA and the powers granted in it end when the principal dies.

Advance directive for health care (ADHC)

An ADHC contains two parts: a “living will” and an appointment of a healthcare proxy. The living will allows you to state whether you do or do not want life-sustaining treatment in the event if you have been diagnosed by two physicians to have a terminal illness or injury or are in a permanently unconscious state. The healthcare proxy appointment allows you to name one or more persons to make medical decisions for you when you cannot communicate those decisions (similar to a medical POA). The proxy can only make medical decisions. The ADHC and the powers granted in it end when you die.

Trusts

A trust is a relationship established when one party (the grantor, trustor, or settlor) transfers assets to a second party (the trustee) who must use those assets solely for the benefit of a third party (the beneficiary). A trust is usually established in a written document-either in a trust agreement for a living trust, or in your will for a testamentary trust. A testamentary trust does not come into existence until you die. A living trust, on the other hand, starts when the grantor signs the trust agreement and may continue for the period of time specified by the grantor in the trust agreement, and may even continue for some time after the grantor's death. The terms of the trust only govern the assets which are titled into the name of the trust. Trusts are ideal for holding assets for many years, or holding real estate located in another state, or for holding assets for a person who is unable to manage the assets due to his or her incapacity or minority (under age 19).

I hope this short summary of needed estate planning documents has helped you understand them better and to see why planning in these uncertain times should be a priority. If we can assist you, please This email address is being protected from spambots. You need JavaScript enabled to view it. me or call me at 256-535-1100.

Copyright 2020