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PLANNING FOR
LIFETIME PROPERTY MANAGEMENT
AND
HEALTH-CARE PROTECTION
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INCAPACITY
is the contingency to be planned for.
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If no
planning is done and incapacity occurs, state law by default will
dictate the result, which is called GUARDIANSHIP. Guardianship
can include:
 Guardianship over your
person and health care decision-making, and/or
Guardianship
over your property.
WHY GUARDIANSHIP SHOULD BE AVOIDED
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Guardianship is a public proceeding
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Private and possible embarassing matters, such as your weakened mental status,
would be heard in open court.
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The
Court will choose your Guardian, NOT YOU or your
family. |
A bank
or other institution typically will be chosen as the Guardian of your property,
especially if enough money
is involved or if there is a chance of family disagreement.
If an individual is appointed, he or she will have to post a bond
and pay yearly premiums.
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Guardians have limited authority to act.
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Court approval will usually be required for each expenditure for your living needs.
Legal costs and delays will be incurred each time
Court approval is sought.
TECHNIQUES FOR EFFECTIVE LIFETIME PLANNING
FINANCIAL DURABLE POWER OF
ATTORNEY
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In your Durable Power of Attorney
you can appoint someone whom you trust to act as your agent to hold and
protect your property if you later become incapacitated. |
A "Durable" Power of Attorney means that it will remain in effect even if
you later become disabled.
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In addition, you can (but do not have to) authorize your agent to make gifts of your assets to
your spouse, children, grandchildren, or any other persons you may choose. This gifting power may
be helpful in reducing potential death taxes, and in accelerating your eligibility
for Medicaid.
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The Durable Power of Attorney can be amended or revoked at any time. |
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The
Durable Power
of Attorney can be effective immediately upon its signing, or only
if and when a doctor has first determined that you are incompetent to handle your
own financial affairs. |
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Preventing Abuse of Authority by Agents.
To better ensure that the powers you give to your agent in the
Durable Power of Attorney will not be
abused, especially when someone other than your spouse will be acting as your
agent, consider including the following provisions in your Durable Power of Attorney: |
Name two agents
to serve together.
A
"checks-and-balances" approach (e.g., requiring two signatures for
check-writing) will avoid the risk of self-dealing, which can arise when one agent has
sole control over your funds.
Require your agents to send out an annual report of all their financial activities
during the past year, including receipts, disbursements
(including any compensation they have taken), and sales and
purchases of assets.
Pennsylvania law
requires every agent to
keep a full and accurate record of all
"actions, receipts and disbursements" on behalf of the principal.
Why not then have your agent
disclose such information to you (and perhaps
other interested parties, in
the event of your incapacity) on an annual basis?
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Compensation.
Pennsylvania law provides that in the absence of a specific provision to the
contrary appearing in the power of attorney, an agent is entitled to
reasonable compensation based upon the actual
responsibilities assumed and performed.
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DURABLE HEALTH CARE POWER OF
ATTORNEY
AND
ADVANCE HEALTH CARE DIRECTIVE
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You can sign a health-care document that contains
both a:
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DURABLE HEALTH CARE
POWER OF ATTORNEY, where you appoint one or more persons to make
health care decisions for you if you become incompetent to make
your own decisions, and a
LIVING WILL, in which you can
state your directions as to whether life-sustaining medical treatment should
be withheld or withdrawn in case
you are in an "end-stage medical condition" or a state of "permanent unconsciousness."
Artificial or Invasive Forms of Providing Nutrition and Hydration.
Your health-care document should specify the conditions under which artificial or invasive forms of providing nutrition and hydration
(e.g., a surgically implanted gastric feeding tube) can be withheld or
withdrawn.
Advanced-Stage Dementia.
Likewise, you should indicate whether or not you want Alzheimer's disease or other forms of
advanced-stage dementia to be included in the definition of an "end-stage medical
condition" for purposes of triggering your Living Will. If you do
not so indicate, a diagnosis of advanced-stage dementia or Alzheimer's disease
will not be enough to make your Living Will effective.
If properly drafted, your health-care document will
have binding legal effect on your family as well as doctors and other health care
providers.
A copy
of your health-care document should be given to your attending physician
(or PCP) for inclusion in your medical
record.
NOTE:
For more information on this topic, see the Article on
Health Care Powers of Attorney and
Advance Directives
on this web site.
REVOCABLE LIFETIME TRUST
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A trust is a legal arrangement whereby you as "grantor" transfer property to a "trustee" to
hold and distribute for the use of a "beneficiary." |
With a Revocable Lifetime Trust, you can be the grantor, trustee, and
beneficiary of your own trust.
But in that case you should also name a backup trustee to step in if you later become
"incapacitated," as would be determined by your own physician.
The Trust can be
established by yourself acting alone or by you and your spouse acting
together.
The Trust is
established by your signing a written instrument called a "trust agreement" or
"declaration of trust" and then transferring property to it.
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Advantages of a Revocable Lifetime Trust
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The primary advantage of a Revocable Lifetime Trust is that
you select all its
terms:
You define the appropriate standards for distribution of income and
principal to ensure that all of your needs will be provided for.
You choose who will be your backup trustee.
It is important that you name a successor trustee who has both the
time and talent to do a good job
for you.
Many options are available as
to the
choice of trustees.
You could appoint an individual and a corporate fiduciary to serve
together as co-trustees,
or you could authorize an individual trustee to act alone but be required to use a professional money manager as
his or her agent to ensure prudent investments.
COMPARING THE FINANCIAL
DURABLE POWER OF
ATTORNEY AND REVOCABLE LIFETIME
TRUST
The agent's primary job is to conserve and protect your assets. By
contrast, the trustee has a more proactive duty to ensure that distributions
will be made from the trust to meet your
needs as defined in the Trust document.
The trustee's authority
will likely be more readily recognized by banks and other
institutions as compared to that of an agent.
The trustee only has authority over the assets that are owned by the
trust. Thus the trust cannot cover all of your financial management
needs. For example, the trustee would not be authorized to sign your
personal income tax returns or deal with Social Security issues. That
is where the Durable Power of Attorney would come in.
In any event, this is not an "either/or" issue.
The Revocable Lifetime Trust ideally should work together
with the financial Durable Power of Attorney.
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The Trust does not need to be funded all at
once. |
Your agent can fund the trust from time to time as
your assets (e.g., residence, business interests, items of tangible property,
etc.) are converted to cash.
JOINT OWNERSHIP
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Adding the name(s) of children or other family members to your bank accounts
or other assets is usually not an adequate
solution for your estate planning needs, when compared to advantages offered
by the Durable Power of
Attorney and/or Revocable Lifetime Trust.
Joint ownership with
right of survivorship will allow only for probate avoidance after your
death, and perhaps
a partial savings in Pennsylvania
inheritance tax. However, it does not provide for any property management or
protection during your lifetime, and
the survivorship rights may well contradict your underlying estate plan at death.
DON'T WAIT TOO LONG TO PLAN FOR LIFETIME NEEDS!
Once you lose mental capacity to make
decisions, all planning opportunities will be lost.
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