LIFETIME MANAGEMENT

 

 

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TRANSFERRING PROPERTY AT DEATH

  

PLANNING FOR LIFETIME PROPERTY MANAGEMENT

AND

HEALTH-CARE PROTECTION

 

 

QUESTIONS TO CONSIDER:

 

bullet What will happen if I become unable to take care of my own personal and health needs?

 

bullet What will happen if I am no longer able to manage my property?

 

bulletINCAPACITY is the contingency to be planned for.
If no planning is done and either event occurs, state law by default will provide its own solution: GUARDIANSHIP.  Guardianship has two aspects:

bulletGuardianship over your person and health care decision-making

bulletGuardianship over your property

 

bulletWHY GUARDIANSHIP SHOULD BE AVOIDED:

 

bullet Public proceeding in Orphans' Court regarding sensitive matters such as your mental incapacity

 

bullet The Court will appoint the guardian, NOT YOU

 

bullet A bank typically will be chosen as the guardian of your property if enough money involved, or if there is family disagreement.

 

bullet If an individual is appointed, he or she will have to post a bond and pay yearly premiums.

 

bullet The Court strictly supervises guardians.

 

bullet Court approval will also usually be required for any expenditure for your living needs.

 

bulletExpenses and delays will be incurred each time Court approval is needed.
 

 

TECHNIQUES FOR EFFECTIVE LIFETIME PLANNING

 

  FINANCIAL DURABLE POWER OF ATTORNEY

 

bulletIn the Durable Power of Attorney you appoint someone you trust to act as your agent to hold and manage 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.

 

bulletIn addition to protecting your property for your own benefit, you can also authorize your agent to make gifts of your assets to family members or any other third parties you specify. This gifting power may be helpful in reducing potential death taxes, and to accelerate your eligibility for Medicaid.  The gifting power may be defined either as a power to make:

"Limited gifts," in which event the amount of a gift cannot exceed the federal gift tax annual exclusion amount (currently $12,000 per year per donee), or

 

bullet"Unlimited gifts," but in this event you must define the agent's authority as to permissible donees and the amounts that can be gifted.

 

bullet The Power of Attorney can be amended and revoked at any time.

 

bullet The Power of Attorney can be effective immediately upon its signing, or only if and when a doctor has determined that you are incompetent to handle your own financial affairs.

 

bullet Make sure that your Power of Attorney for financial management is updated to reflect recent amendments to the Pennsylvania statute.

 

 

ADVANCE HEALTH CARE DIRECTIVE 

 
bullet Under a new Pennsylvania statute that became effective in 2007, you can sign an Advance Health Care Directive that contains both a: 

 

DURABLE HEALTH CARE POWER OF ATTORNEY , where you can appoint one or more agents to make health care decisions on your behalf if you become incompetent to make your own decisions.

 

LIVING WILL,  in which you can give instructions that all life-sustaining medical treatment should be withheld or withdrawn in case you are in an "end-stage medical condition" or state of "permanent unconsciousness"; and

 

bullet Artificial Nutrition and Hydration. Your Advance Health Care Directive should specify if you do not want artificial or invasive forms of food and water; otherwise they will have to be provided to you, even if you are in an end-stage medical condition or permanently unconscious.

 

bullet Advanced-Stage Dementia. Likewise, you must indicate if you want Alzheimer's disease or other forms of advanced-stage dementia to come within the definition of an "end-stage medical condition" that will trigger the Living Will. If you do not so indicate, they will not be so defined.

 

bullet If properly drafted, the Advance Health Care Directive will have binding legal effect on doctors and other health care providers.
 
bullet A copy of your Advance Health Care Directive should be given to your attending physician (or PCP) for inclusion in your medical record.

NOTE:  See the Article on Advance Directives and new Act 169 on this web site.

 

 

REVOCABLE LIFETIME TRUST

 
bullet A trust is a legal arrangement whereby you (either by yourself or jointly with your spouse) 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.

 

bullet The Trust is established by your signing a written instrument called a "trust agreement" or "declaration of trust."

 

 

bullet Advantages of a Revocable Lifetime Trust -- The advantages of a Revocable Lifetime Trust are 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 for the choice of trustees. You could appoint an individual and a corporate fiduciary to serve as co-trustees, or you could authorize an individual trustee to act alone but be required to use a professional money manager as agent to ensure prudent investments.

 

 

COMPARING THE FINANCIAL DURABLE POWER OF ATTORNEY AND THE REVOCABLE LIFETIME TRUST

 
bullet The Trust is more flexible than a Durable Power of Attorney, and will better ensure that distributions will be made to meet your needs.

 

bullet The Trustee's authority will be more likely recognized and honored by banks and other institutions than that of an agent.
 
bullet The Revocable Lifetime Trust ideally should work together with the financial Durable Power of Attorney.
 
bullet The Trust does not need to be funded all at once.

Your agent can fund the Trust from time to time  as your assets (residence, business interests, items of tangible property, etc.) are converted to cash.

 

bullet In any event, the Trust cannot cover all of your financial management needs.
 

 

JOINT OWNERSHIP - 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 lifetime needs, when compared to the Durable Power of Attorney and Revocable Lifetime Trust.

 
bullet Joint ownership with right of survivorship will allow only for probate avoidance at the time of your death, and perhaps a partial savings in Pennsylvania inheritance tax.  However, it does not ensure property management or protection during your lifetime, and may well do violence to your underlying estate plan at death.

 

 

DON'T WAIT TOO LONG TO PLAN FOR LIFETIME NEEDS!

 

bullet Once you lose mental capacity to make decisions, all planning opportunities will be lost.

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DISCLAIMER

Martin J. Hagan is licensed to practice law in the Commonwealth of Pennsylvania. This website is intended solely for informational use and is not intended to solicit clients. Likewise, any information contained in or obtained from this web site is for informational purposes only and is not intended to be used as legal advice.

IRS CIRCULAR 230 DISCLAIMER:   Pursuant to Treasury guidelines, any tax advice contained in this website (or any link from it) does not constitute a formal opinion. Accordingly, any tax advice contained in this website (or any link from it) is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be asserted by the Internal Revenue Service. You should seek advice based on your particular circumstances from an independent tax advisor.

Send mail to mhagan@haganlaw.net  with questions or comments about this web site.
Copyright © 2008 Martin J. Hagan, One Gateway Center - 8 South; Pittsburgh, PA 15222-1435
Last Updated: 05/28/08