Taking a Fresh Look at Old Estate Planning
Congratulations! You’ve finished your estate planning documentation. One of those once-in-a-lifetime “to do’s” checked off the list, right? Not exactly. Your bucket list isn’t finished quite yet.
Changes to state and federal law, such as the American Taxpayer Relief Act passed 1/1/13, could impact your estate planning documentation. Financial institutions and health care providers also have different rules and guidelines regarding estate planning documentation.
Outdated or improperly crafted estate plans could lead to court action. The court may appoint a guardian to make financial and health care decisions for you. Or, worse yet, your case could be submitted to probate.
In addition to making sure your wishes are accurately reflected in your estate planning documents, you need to keep up to date. You’re not an attorney though. How do you keep track? Competent estate planning attorneys keep their clients informed on the developments in the law to ensure their clients plans are current and accurately reflect their wishes.
Top 3 Necessary Bucket List Documents
The following are the top 3 documents you should already have and that you’ll need to keep tabs on in the future.
Advance Health Care Directive
An advanced health care directive allows you to appoint a trustworthy person (agent) to make medical decisions for you if you’re unable to do so.
In addition to detailing your wishes regarding organ donor-ship and life support, your agent can access your medical records if a medical specialist is needed. This helps avoid a costly and timely court procedure.
“Old” Health Care Directives (HCD) executed in the past cause the following problems.
- HCD executed before 1992 expire in seven (7) years.
- HCD executed before 2000 that have statements concerning life-support are not mandatory. This means that agents have the discretion regarding life support regardless of the provisions contained in the HCD.
- HCD executed before 2004 may not be compliant with the Health Insurance Portability and Accountability Act (HIPAA) or California CMIA law that allows your agent to receive medical information from your provider.
Durable Power of Attorney for Finances
A durable power of attorney for finances allows another person (agent) to manage your financial affairs during life if you become incapacitated. A power of attorney (even if durable) is automatically revoked on death. Having a living trust along with your durable power of attorney as part of your overall estate planning scheme avoids problems by allowing your trustee to act on behalf of the estate in regards to financial affairs.
There’s been an upsurge in elder abuse recently with over six hundred thousand reported cases of elder abuse in California alone last year. This rampant abuse caused financial institutions to reject durable financial powers of attorney that are more than a few years old. Banks may also require confirmation that an older power of attorney has not been revoked. This causes problems if incapacity becomes an issue.
Keeping you estate planning documentation up to date is the key to avoiding these problems.
Transferring your valuable real property and investments to a Living Trust is a no brainer. You retain complete control over the trust during your lifetime, which can be amended or revoked at any time. You can name a successor trustee to manage your property should you become incapacitated.
Unlike the durable power of attorney, a living trust remains in force after death and allows the successor trustee to transfer valuable property to the beneficiaries without probate.
Triggering events necessitating review of your living trust include updating the trust to reflect property bought and sold, change in beneficiary or trustee designations, children born, marriage, divorce, tax law change, and so on…