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PLANNING FOR LIFETIME
PROPERTY MANAGEMENT
AND
HEALTH-CARE PROTECTION
QUESTIONS TO CONSIDER:
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What will
happen if I become unable to take care of my own personal and health needs?
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What will
happen if I am no longer able to manage my property? |
INCAPACITY 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:
 Guardianship over your
person and health care decision-making
Guardianship
over your property
WHY GUARDIANSHIP SHOULD BE AVOIDED:
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Public proceeding in
Orphans' Court regarding sensitive matters such as your mental incapacity |
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The
Court will appoint the guardian, NOT YOU |
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A bank
typically will be chosen as the guardian of your property if enough money
involved, or if there is family disagreement. |
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If an individual is appointed, he or she will have to post a bond
and pay yearly premiums. |
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The
Court strictly
supervises guardians. |
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Court approval will also usually be required for any expenditure for your living needs. |
| Expenses and delays will be incurred each time
Court approval is needed. |
TECHNIQUES FOR EFFECTIVE LIFETIME PLANNING
FINANCIAL DURABLE POWER
OF ATTORNEY
| In 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.
| In 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
| "Unlimited gifts," but in this event
you must define the agent's authority as to permissible donees and the
amounts that can be gifted. |
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The
Power
of Attorney can be amended and revoked at any time. |
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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. |
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Make
sure that your Power of Attorney for financial management is updated to reflect recent
amendments to the Pennsylvania statute. |
ADVANCE HEALTH CARE DIRECTIVE
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Under a new Pennsylvania statute that became effective in 2007, you can sign an
Advance Health Care Directive that contains both a:
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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
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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. |
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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. |
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If properly drafted, the Advance Health Care Directive will
have binding legal effect on doctors and other health care
providers. |
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A copy
of your Advance Health Care Directive should be given to your attending physician
(or PCP) for inclusion in your medical
record.
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NOTE: See the Article on
Advance Directives and new Act 169
on this web site.
REVOCABLE LIFETIME TRUST
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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.
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The Trust is
established by your signing a written instrument called a "trust agreement" or
"declaration of trust." |
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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
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The Trust is more flexible than a Durable Power of
Attorney, and will better ensure that distributions will be made to meet your
needs. |
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The Trustee's authority
will be more likely recognized and honored by banks and other
institutions than that of an agent. |
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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 (residence, business interests, items of tangible property,
etc.) are converted to cash.
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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.
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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!
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Once you lose mental capacity to make
decisions, all planning opportunities will be lost. |
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