In this article I intend to discuss the basic documents of a
good estate plan. Every adult should
consider having a Will, Health Care Power of Attorney document and Financial
Power of Attorney document. These
documents are described in more detail in the following paragraphs.
If you die without a valid Will, state law will control the
distribution of your assets. This may
not be what you want. The court will
appoint a person, usually your spouse or next of kin, to administer your
estate. Normally, in Wisconsin, this
person is called a personal representative, and in other states this person may
be called an administrator, or executor.
Basically, the personal representative collects all of the assets of
your estate, files an inventory of your assets with the court, notifies creditors,
and pays proper claims against the estate.
The personal representative also pays taxes and files tax returns,
distributes the assets to the beneficiaries, and then makes a final report to
the court.
It is important to note that non-probate property will not
be controlled by your Will. Non-probate
property will be distributed automatically to the person named as co-owner, or
to a beneficiary named in a life insurance policy or a retirement plan, or an
annuity, for example. Therefore, it is
important to review the various assets that you own and how they are titled to
make sure they are being distributed according to your wishes.
A Will allows you to control what happens to your property
and enables you to designate a guardian for your minor children. If a minor child was an heir to your estate,
and you did not have a Will, then the court would have to appoint a guardian
for that minor child and the guardian would hold the money until the minor
child reaches the age of eighteen. A
Will allows you to create a trust to hold those assets and designate an older
distribution age, such as twenty-five or thirty, or any other age you may
desire, but still provide for their earlier needs according to your
directions. If you have a disabled
child, it is especially important that you have a specially drafted trust to
meet the needs of your disabled child.
After you have had a Will drafted for you and it has been
signed and properly witnessed, then you should store it in a safe place, such
as a safe deposit box, or your safe at home, or with the local Probate Court,
or wherever you keep your important documents.
It is important to make sure that your family knows where your original
Will is kept and that they can get at it after your death.
If an adult is mentally unable to manage their financial or
personal affairs, then a court needs to appoint a guardian to handle the
affairs for that adult. At times,
obtaining a guardian can be an expensive process. In addition, the court may appoint someone you would not want to
handle your financial or personal affairs.
However, if you have a Durable Power of Attorney for finances, or a
Durable Power of Attorney for Health Care, you are able to appoint someone you
trust to manage your financial affairs and to make your health care
decisions. By appointing a competent
and reliable person as your agent, it may prevent the court from having to
appoint a guardian for you. The
Financial Power of Attorney document can give the agent power starting the
moment you sign the document, or it can spring into effect only after a doctor
states that you are no longer able to handle your financial affairs. A financial power of attorney needs to be a
“durable” power of attorney so that it will continue even after you become incompetent. It is very important that you give serious
thought to who you are going to name as your financial agent because they will
have complete control over your assets.
On many occasions, an agent has acted improperly and taken the money of
the person who entrusted them with the duty of handling their financial affairs
as they have the power to act without court consent or review unless someone
brings them before the court.
The health care power of attorney document is a very
important document because if two doctors state that you are no longer able to
make healthcare decisions for yourself,
it gives your named agent the power to make all health care decisions
for you, including the power to place you in a nursing home or community based
residential facility, if you grant them the power to do so. It also give them the power to discontinue
tube feeding if you allow them to do so.
It is recommended that you add some language into the health care power
of attorney document regarding your end of life wishes. If you have a health care power of attorney
document which states your end of life wishes, then it may not be necessary for
you to also have a “Living Will”. If
you do not have a health care power of attorney, or if you do not grant your
agent power to place you in a nursing home, then it would be necessary to
obtain a guardianship for you, if it was determined that you were unable to
make your own health care decisions and/or if it became necessary for you to be
placed in a nursing home and that specific power was not given to the agent in
the health care power of attorney document.
Other, more advanced estate planning tools include a living,
or revocable trust. A living or
revocable trust is established and maintained during the grantor’s lifetime and
may be changed or terminated during that time.
Oftentimes, a revocable or living trust is used to avoid probate. By creating a trust, the grantor transfers
control of the assets to a trustee. In
the case of a revocable trust, the trustee may be the grantor. The specific powers and duties of the
trustee and when the trust income and principal may be distributed to the
beneficiaries are determined when the trust is initially drafted. In some instances, you may want a trust to
be created to reduce the amount of federal or state estate taxes which may be
due at the time of your death. An
irrevocable trust can also be created to transfer assets out of an individual’s
estate such as an irrevocable life insurance trust. In addition, a married couple may need a marital property
agreement to equalize their estates which may also save estate taxes upon the
death of the second spouse. Second
marriages can provide a need for special planning to avoid disinheritance of
children from the first marriage and still provide for the second spouse.
In conclusion, every adult should consider having basic
estate planning documents put in place for them which, at a minimum, should
include a Will, health care power of attorney document and a financial power of
attorney document. It is advisable that
an attorney be consulted when putting these documents together so that your
wishes are followed and the documents are properly drafted and signed. When calling for assistance in regard to
these documents, a client should not be shy about requesting how an attorney
charges for these services and what the approximate cost will be for these
documents.
Estate/Probate Law 