Chapter 9 - Legal Issues:
Everyone, Including You, Needs a Living Will

This part of your responsibility can be the most daunting, most expensive and most contentious among the senior's family members. We’ve heard horror stories from our friends who belatedly discovered that their parents had failed to pay taxes for more than a decade. With one parent on his deathbed and the other afflicted with Alzheimer’s, it required 18 agonizing months to untangle the mess. This experience emphasizes the importance of having a conversation that uncovers legal issues that will become increasingly important as seniors continue to age.

When You Need to Have Power of Attorney

There may come a time when it is helpful or even essential for your parents to provide a family member with power of attorney which will enable a trusted representative to act on their behalf. A power of attorney gives the representative access to bank accounts and other assets and the ability to sign documents and deal with insurance companies and the Social Security Administration.

Because individual states may have specific requirements for the execution of a power of attorney we recommend that you check with a local attorney or go to the web for further information. AARP and your local state Bar associations have helpful websites. Two others are the National Academy of Elder Law Attorneys (Naella) www.naela.org or the American Academy of Estate Planning Attorneys www.estateplanforyou.com.

Living wills

I can recall my mother telling me repeatedly that she never wanted to be kept alive by unusual means. She even surprised me by handing me an executed living will during one of our regular outings. The forms in my doctor’s office ask me on each visit if I have a living will. If you find it difficult to ask your parents about this subject you might accompany them on a doctor’s visit and use the sign-in sheet to initiate the discussion.

A "living" will isn't a will in the traditional sense, since it applies during a person's life and doesn't dispose of property, but is often executed at the same time you make your will. A living will is a binding legal document that sets forth a person's wishes regarding the use of life-sustaining treatment in the event that he or she becomes terminally ill or permanently unconscious.

Advance directive

Also called a medical durable power of attorney. This document is similar to, but more flexible than, a living will. While living wills are customarily used in a deathbed scenario, an advance directive can be used to manage a patient’s healthcare even when death is not imminent. The advance directive enables people to make it clear to family members their wishes if, for example, they are afflicted with Alzheimer’s or if they want to prohibit the insertion of a feeding tube to prolong their life.

We caution you in this area of the law as in all others. Don’t simply go to an office supply store and purchase blank documents. They may be too generic or fail in some way to meet the legal requirements of your state or local community. For a few hundred dollars most general practice attorneys can draft these documents.

Last Will and Testament

I am amazed at the number of Baby Boomers who admit that they've never gotten around to preparing a will. Perhaps it's because members of this generation believe they'll live forever. But as the child of an aging parent it's absolutely essential to know whether mom or dad has a will and where it is physically located. If there is no will, make arrangements to have one prepared. This is another area for which individual state requirements are important. Although there are programs available to write a will, we have seen a number of families torn apart by disagreements arising from the lack of a will or one that was poorly drafted. Therefore, we highly recommend that you check with an attorney.

Your parents will be required to name one or more executors of the will. Executors have very specific responsibilities to the estate. They will need to establish an estate account, a checking account into which your parent's funds will be deposited after their death. Checks to heirs will be written from this account. The will needs to be filed with the local probate court and detailed records of disbursements must be kept by the executor.

Six Kinds of Last Wills and Testaments

Here's a brief glossary of terms used in the law for various kinds of wills:

• Simple will. A will that provides for the outright distribution of assets from an uncomplicated estate.
• Testamentary trust will. A will that establishes one or more trusts into which assets are placed for subsequent periodic distribution.
• Pour-over will. A will that "pours" assets into a previously-established trust.
• Holographic will. A will that is unwitnessed and in the testator's handwriting. About 20 states recognize their validity.
• Oral will (also called nuncupative will). A will that is spoken, not written down. A few states permit these.
• Joint will. One document that covers both a husband and wife (or any two people). These are often inadvisable, particularly for large estates.

What is an "estate?"

An "estate" consists of all property that is owned at the time of your death, including:

• Real estate;
• Bank accounts;
• Stocks and other securities;
• Life insurance policies;
• Personal property, such as automobiles, jewelry, and artwork.

All About Estates and Why Estate Need a Plan

Estate planning is the key to ensuring that a person's property and health care wishes are honored, and that loved ones are provided for. Though often overlooked or delayed because of more immediate concerns, a comprehensive estate plan can resolve a number of legal questions that arise whenever someone dies: What is the condition of their financial affairs? What real and personal property do they own? Who gets what? Does a personal guardian need to be appointed to care for minor children? How much tax will need to be paid in order to transfer property ownership? What funeral arrangements are appropriate?

Health care and medications are inevitable concerns for adult children, fearing that parents will over- or under-medicate. There are simple devices that can serve as reminders. You might lay out the week's medication in pillbox compartments or small baggies that are clearly marked with day and time for administration. You can also purchase devices that can be programmed like an alarm clock to remind your parent to take their pills and notify you or others if the dose was not taken.

Regardless of a person's age, or the size and complexity of the estate, an estate plan can:

• Identify the family members and other loved ones whom you wish to receive your property after your death;
• Ensure that your property will be transferred to those you have identified, as quickly and with as few legal hurdles as possible;
• Minimize the amount of taxes that will need to be paid in order for your property to pass to others after your death;
• Avoid the time and costs associated with the probate process by utilizing such estate planning devices as living trusts and "payable on death" bank accounts;
• Dictate the kinds of life-prolonging medical care you wish to receive should you be unable to make your wishes known;
• Set forth the kind of funeral arrangements you would like, and how related expenses are to be paid.

Understanding the estate plan options that are right for you can be a complex undertaking. The resources in FindLaw's Estate Planning Center can help you identify your estate planning needs, recognize potential solutions, and locate an experienced estate planning attorney to help you with the estate planning process.

The first step in planning your estate is to identify your major goals. Here are some typical objectives and preliminary suggestions for meeting them:

• Provide for your immediate family. Couples want to provide enough money for the surviving spouse. They often choose to provide this income through life insurance, particularly for spouses who don't work outside the home. Couples with children want to assure their education and upbringing. If you have children under 18, both you and your spouse should have a will nominating personal guardians for the children, in case you both should die before they grow up. Otherwise, a court will decide without your input where your kids will live and who will make important decisions about their money, education, and way of life.
• Provide for other relatives who need help and guidance. Do you have family members whose life might become more difficult without you, such as an elderly parent or disabled child, or a grandchild whose education you want to assure? You could establish a special trust fund for family members who need support that you won't be there to provide.
• Get your property to beneficiaries quickly. You want your beneficiaries to receive promptly the property you've left them. Options include avoiding or greatly easing probate through insurance paid directly to beneficiaries, joint tenancy, a living trust or other means using simplified or expedited probate available in all states, though sometimes only for very small estates or if all beneficiaries agree; and taking advantage of laws in certain states that provide partial payments to beneficiaries while a will is in probate.
• Plan for incapacity. During estate planning, most people also plan for possible mental or physical incapacity. This planning is especially important for single people. Living wills and durable health-care powers of attorney enable you to decide in advance about life support and pick someone to make decisions for you regarding medical treatment. A number of states now permit you to designate a personal guardian. In addition, disability insurance can protect you and your family if you should become disabled and unable to work.
• Minimize expenses. Everyone wants to keep the cost of transferring property to beneficiaries as low as possible, which leaves more money for the beneficiaries. Good estate planning can reduce these expenses significantly.
• Choose executors/trustees for your estate. Choosing competent executors/trustees and giving them the necessary authority will save money, reduce the burden on your survivors, and simplify administration of your estate. It also will reduce a court's involvement and, in many states, avoid paying for a bond.
• Ease the strain on your family. Many people specify their funeral arrangements when planning their estate, or limit the expense of burial or designate its place. You also can provide for your body to be cremated or given to medical science after you die.
• Help a favorite cause. Your estate plan can help support religious, educational, and other charitable causes, either during your lifetime or upon your death, and at the same time take advantage of tax laws designed to encourage private philanthropy.
• Reduce taxes on your estate. Every dollar your estate has to pay in estate or inheritance taxes is a dollar that your beneficiaries won't get. A good estate plan can give the maximum allowed by law to your beneficiaries and the minimum to the government. This becomes especially important as your estate approaches the magic number of $1 million, the level at which the federal estate tax kicks in under current law.
• Make sure your business goes on smoothly. If you have a small business, the operation might be thrown into chaos upon your death. You can provide for an orderly succession and continuation of its affairs by spelling out what will happen to your interest in the business.

We found some really useful forms on www.estate.findlaw.com that will provide invaluable information to you and will allow your parents to gather their thoughts and state their wishes in writing in preparation for the writing of a will. This will also save time and expense when visiting a lawyer to request that a will be drafted.

On the following pages you will find a series of forms which you may use to consolidate the information that can be used for the writing of legal documents.

Understanding Intestacy: If You Die Without an Estate Plan

We have seen far too many individuals embroiled in the untangling of their parent’s legal and financial affairs while coping with the grief of their passing. We thought it might be appropriate to tell you why a will is so vital.

When a person dies without having a valid will in place, his or her property passes by what is called "intestate succession" to heirs according to state law. In other words, if you don't have a will, the state will make one for you. All 50 states have laws (or "statutes") of this kind on the books.

The purpose of intestate succession statutes is to distribute the decedent's wealth in a manner that closely represents how the average person would have designed his or her estate plan had that person had a will. However, this default can differ dramatically from what the person really would have wanted. Even where it is known what the person intended, no exceptions are made where no valid will exists, nor are there any exceptions made based on need or special circumstances.

Estate Planning & Probate Dictionary

We also know that the definitions of some of the terms used by lawyers may not be familial to the lay person and thought it might be useful to provide a short legal dictionary. Following is an explanation of commonly used words and phrases related to estate planning and probate.

AB trust. A trust designed to make sure the personal estate tax exemption of each spouse (currently $1.5 million) is used to the fullest extent possible, while allowing the surviving spouse to have use of the assets of the deceased spouse during the remainder of the surviving spouse's lifetime.

Administrator. A court-appointed person who manages the estate of a deceased person who has died without a will.

Attorney-in-fact. An individual designated in a power of attorney to act as the agent of the person who executed the document.

Basic will. A will that distributes everything to your spouse, if living, otherwise to your children when they reach the age of majority (18 years old).

Beneficiary. A person who receives funds, property, or other benefits from a will, contract, or insurance policy.

Durable power of attorney for health care. A written document in which an individual designates another person to make health care and health-related decisions in the event that the individual becomes incapacitated.

Durable power of attorney for property. A written document in which an individual designates another person to make his or her property and property-related decisions in the event that the individual becomes incapacitated and is unable to do so.

Estate tax. A tax that is imposed at a person's death, on the transfers of some types of property from their estate to heirs and beneficiaries.

Fiduciary. A person or institution that is legally responsible for the management, investment, and distribution of funds; i.e. the trustee identified in a trust.

Grantor. A person who transfers assets to another, usually into a trust.

Guardian. An individual with the legal authority to care for another, usually a minor child

Incapacity. A person's inability to act on his or her own behalf, i.e., the "sound mind" requirement for drafting a valid will. A court makes a finding of incapacity.

Inter vivos trust. A trust that is created during a person's lifetime, which holds property for the benefit of another.

Intestate. A term used when a person dies without a will.

Joint tenancy with right of survivorship. A title that is often placed on co-owned property. At the death of one owner, the other owner will be legally entitled to sole possession of the property, regardless of what provisions are made in a will. A husband and wife often use this form of ownership.

Living trust. A revocable trust established during a grantor's lifetime that is used for the placement of some or all of the grantor's property. In a situation involving a married couple, a basic living trust does not effectively use the personal estate tax exemption of either spouse (the amount of a deceased person's estate that may pass to his or her heirs without estate taxes, currently $1.5 million). Because of this deficiency of a basic living trust, an AB Trust (discussed above) is often recommended instead to married couples with substantial assets.

No will. A decedent dies without a valid will, so that his or her estate passes to heirs based on the laws of descent and distribution of his or her state.

Power of appointment. A legal right given to a person in order to allow him or her to decide how to distribute a deceased person's property. A "general" power of appointment places no restrictions on the named person, while a "limited" or "special" power of appointment places restrictions on who may receive distributions.

Probate. A process whereby a court reviews a will to make sure that it is authentic, and allows others to make legal challenges to the will.

QTIP Trust. A trust designed to permit a spouse to transfer assets to his/her trust while still maintaining control over the ultimate disposition of those assets at the spouse's death. QTIP Trusts are particularly popular in situations where a person is married for a second time but has children from a first marriage for whom he/she wants to reserve assets.

State death or inheritance taxes. Taxes that may be imposed by the state where a deceased person lived, or where his or her property is located after death.

Trust. A written document providing that property be held by one (the "trustee") for the benefit of another (the "beneficiary"). A trust may be created during the grantor's lifetime or after his or her death.

Trustee. A person named in a trust document who will manage property owned by the trust, and who will distribute the trust income or property according to the terms of the trust document. A trustee may be an individual or a business.

Will. A document that directs how property shall be distributed upon a deceased person’s death.

We have not and cannot give you legal advice regarding your specific situation. However, there are a number of websites which provide forms with step-by-step directions for completion of many of the documents mentioned above. LegacyWriter.com, legalzoom.com, lawdepot.com are three possible sources. The cost of a simple will begins at $19.95. We do offer this advice. Few things are simple in today’s world. Ownership of land and possessions, family relationships, understanding the laws of inheritance can all be fairly complicated. We hope that we have given you some food for thought regarding what you can do and some tools to work with should you decide to move forward.