There are four basic tools of estate planning. It is imperative to have these documents executed by the care recipient, while they are legally competent. The explanations that follow refer to the care receiver as the principal, that is, the one seeking these documents.

* Durable Power of Attorney: With this document an agent(s) is appointed to manage your financial affairs. This document will prevent the need for a court-appointed guardian to manage your affairs should you become cognitively incapacitated. There are different types of powers of attorney. It is important to speak with an Elder Law Attorney to see which one is best for you.

* Health Care Proxy and Living Wills: This document allows you to appoint someone you trust, for example, a family member or close friend, to make health care decisions for you should you become incapacitated. When appointing a health care agent, speak with them about the type of care you want at the end of life care such as artificial nutrition and hydration (tube feedings).

* Will: In this legal document you direct the affairs of your estate, including payment of debts, the distribution of assets, and estate management.

* Living Trust: This document enables a person to pass property after death to family, friends and others, but unlike a will, the property placed in a living trust avoids probate.

Durable Power of Attorney

The “durable power-of-attorney” is one of the most powerful planning tools that an attorney can recommend to a client, not only for estate planning, but also for Medicaid and other entitlement programs.

When a person (the principal) signs a power-of-attorney, he gives another person (the agent) the power to act in his place and on his behalf in managing his assets and affairs. The agent’s powers may be broad and sweeping so as to include almost any act which the principal might have performed. It should be noted, however, that, in general, acts which are inherently testamentary in nature, such as the authority to make or revoke a will, may not be performed by an agent.

A power-of-attorney can be either a “general” power-of-attorney, where the agent may perform almost any act the principal might have performed himself regarding the financial management of his affairs, or a “limited” power-of-attorney where the agent has one or more specific powers, such as the power to sell a particular property to a particular purchaser at a particular time.

A single principal may name one or more agents who can be authorized to act either “jointly” or “severally” (alone without the signature of the other agent or agents).

The “durable” power-of-attorney is unlike the ordinary power-of-attorney in that it does not become inoperative upon the incapacity of the principal. The durable power-of-attorney provides that those powers granted to the agent will not be affected by the subsequent disability or incapacity of the principal or by the lapse of time.

In drafting powers-of-attorney, care should be given to confer powers with as much specificity as possible in order to avoid the possibility of a court construing a specific omission as an intent to fail to grant that specific power. Such an adverse finding could be a serious detriment to the principal’s assets.

The power-of-attorney for asset management in the case of a seriously ill or disabled person is especially useful in situations where the person’s assets may be modest and, accordingly, do not warrant the expense associated with other planning techniques such as trusts or guardianships.

The great advantage of the durable power-of-attorney is that it remains effective after the principal’s incapacity. The agent, therefore, can act immediately upon the principal’s incapacity to manage his assets or to take various measures without initiating costly and time-consuming guardianship proceedings to obtain the court’s authorization for such transactions.

In a few states, the principal is allowed to delegate to the agent in the durable power-of-attorney various health care powers in addition to control over financial matters. In New York State, however, a health care power-of-attorney or proxy must be a separate document from a power-of-attorney.

Health Care Proxy & Living Will

Health care proxy:

Under New York law, an individual may appoint someone she trusts, for example, a family member or close friend, to decide about medical treatment if she loses the ability to decide for herself. She can do this by using a health care proxy in which a health care agent is appointed to make sure that health care providers follow her wishes. The agent can also decide how her wishes apply as her medical condition changes. Hospitals, nursing homes, doctors and other health care professionals must follow the agents’ decisions as if they were the patients’. The individual can give her health care agent as little or as much authority as she wants. She can allow the agent to decide about all health care or only certain treatments.

What is the difference between a living will and health care proxy?

A living will is a written statement of an individual’s wishes regarding medical treatment. The statement is to be followed if the individual is unable to provide instructions at the time medical decisions need to be made. The health care proxy is significantly different from the living will in that it empowers another person (the agent) to make health care decisions if the patient cannot do so herself. The living will, on the other hand, has no such provision but enables a person to express her own choices regarding medical treatment. It makes sense to utilize both a living will and a health care proxy.

Do you have to write an advance directive?

No. Signing a living will or health care proxy is voluntary. No one can require an individual to complete either directive.

Note: The approved New York State Health Care Proxy is available on the Internet in English, Spanish, Chinese and Russian at New York State Department of Health, Consumer Information.

There are various living wills available. One of the more popular is available through the Partnership for Caring.

The Making of a Will

A Will is a legal declaration of how a person wishes their possessions to be disposed of after death. A Will should be drafted by an attorney. No person should draft their own Will no matter how small their assets.

By a Will a person directs how their property shall be distributed among relatives, friends, and charities. Every person has absolute discretion how and to whom their property shall be distributed after death.

There is however one exception. A person who dies leaving a surviving spouse must leave to such spouse at least one-half of their net estate if there are no children or at least one-third if there are one or more children. If the decedent’s estate is substantial, the surviving spouse’s share may be placed in a trust.

In the Will, the decedent may distribute the estate either in dollar amounts or in percentage shares or by using both methods. For example, $5,000 to each grandchild and of the remaining amount, “one-half to my wife and one half in equal shares among my children.”

In their Will, the decedent will name an executor to collect, administer and distribute the estate. The executor may be a relative, friend, or if the estate is substantial, a bank or trust company. The executor will select an attorney to “probate” the Will.

To probate a Will, the attorney, in the name of the executor, will petition the court for letters testamentary. After the executor receives such letters, all banks, brokers and companies in which the decedent owned stocks will transfer the assets into the name of the executor.

In turn, the executor, after paying funeral expenses, debts and taxes (if any), will distribute to the persons named by the decedent their shares in the amounts provided in the Will.

Many people believe that if you die without making a Will your assets and personal belongings will automatically go to your wife, partner or children. However, this is only partially true. They may actually get less than you hoped because of the laws governing estates. Making a Will, therefore, is an essential step if you want to make sure that your estate is distributed in the way you actually want after your death, and by the executor of your choice.

Some people try to save money by writing their Will themselves. Unfortunately, a badly written Will can cause more problems than having no Will at all!

The Living Trust

There are two types of living trusts: revocable and irrevocable.

A revocable living trust can be revoked by the grantor (creator) of the trust at any time in whole or in part. One establishes a revocable living trust to avoid probate and the ensuing costs of attorney and court fees. Such a revocable trust may avoid additional probate procedures when the grantor owns property in more than one state. A revocable living trust is useful as a management tool in the event that the grantor becomes incapacitated. It may then help preclude the expense and effort of establishing a guardianship.

Revocable trusts may not be necessary if the estate is small because probate costs will be low. Revocable living trusts are also not necessary if the individual’s estate substantially consists of non-probate assets such as jointly held property, Individual Retirement Accounts (IRAs), Tax Deferred Annuities (TDAs), etc.

Note: Revocable living trusts generally are not devices for reducing income, estate or gift taxes, nor will they help in protecting assets for the purpose of qualifying for Medicaid and other such programs with limits on the resources and income of the recipient.

An irrevocable living trust cannot be revoked by the grantor, and the grantor cannot be the trustee. The trust not only avoids probate but is a vehicle for protecting assets while qualifying for Medicaid coverage for nursing homes and home care, adult day care services etc. An irrevocable living trust is also used for establishing a trust for a child, grandchild or other persons.

Defining the Role of the Elder Law Attorney

Elder law attorneys focus on the legal needs of the elderly, and work with a variety of legal tools and techniques to meet the goals and objectives of the older client. Many elder law attorneys also work on behalf of disabled clients under 65 years of age who have long term care needs similar to those of the elderly.

The elder law practitioner handles general estate planning issues and counsels clients about planning for incapacity with alternative decision making documents, such as powers of attorney and health care proxies. The attorney also assists the elderly or younger disabled client in planning for possible long term care needs, including nursing home care, home care and day care. Locating the appropriate type of care, coordinating private and public resources to finance the cost of care, and working to ensure the client’s right to quality care, are all part of this specific practice.

The above information is an excerpt from an article entitled Estate Planning by the NYC Caregiver. The full article can be found here.