Who Should Have Estate Planning Documents?
The simple answer is…everyone (every adult, that is). Realistically that doesn’t happen, but it is vital that estate planning documents are in place before they are needed, and one never knows when that might be. Without estate planning documents [MM1] in place, the default rules of the state take over. Here are some reasons why you might decide those default rules are not sufficient, and that you want to be the one to manage your assets and determine who else can make decisions on your behalf:
1. A Will allows you to:
a. Choose your beneficiaries. If you do not have a Will, state statutes will dictate (under the rules of intestacy) who will receive your probate property. While these might end up being the people you would choose, often they aren’t. For example, if a person dies without a will and is married with children (even minor children), their probate assets are divided between their spouse and their children. This can cause significant difficulties if the children are minors or otherwise unready to handle the assets, or if the surviving spouse was relying on what were considered “family assets” to manage the household.
b. Manage payments to younger or disabled beneficiaries. Inheritances to younger or disabled beneficiaries without planning can lead to a host of difficulties, including a disabled beneficiary losing means-based benefits. A well drafted Will will manage these issues properly.
c. Choose who manages your estate. You can name the person who will manage the administration of your probate estate (your Executor) in your Will. (If named in your Will, this person is called an “Executor;” if not named in your Will, they are an “Administrator;” and both Executors and Administrators are “Personal Representatives”). You can also name multiple people to work together as co-Executors and give guidance as to how those roles might be handled. If this is not done in your Will, the state statutes (in conjunction with the Register of Wills) will dictate who can serve as your estate’s personal representative, often leading to someone other than who you would choose, and can frequently lead to intrafamily disputes as to who will serve and who will instead “renounce” the job.
d. Avoid the need for an annual bond payment during the administration of your estate. If the person managing your estate is selected under the state statutes, in many circumstances they are required to post bond, which is an additional annual expense for the estate. Additionally, if your personal representative is subject to a bond, an additional petition to the Orphans’ Court is needed before the proceeds from the sale of real estate can be released.
2. A Durable Power of Attorney allows you to:
a. Avoid a Guardianship hearing. Without a Durable Power of Attorney naming an Agent, if you become incapacitated and need assistance managing your assets , a Guardianship hearing before the Orphans’ Court will have to be initiated to appoint the alternative to an Agent – a “Guardian.” This is an actual hearing in court where a judge decides if you are incapacitated, and if you are, who will serve as your Guardian. It is a process that can be time consuming, emotionally draining, and costly.
b. Name your Agent, and their successors. Choosing the person who can make decisions in your place if you are unable to make them on your own (your Agent) is an important decision – and you are the best one to make it. If you don’t appoint an Agent, the court will step in and do its best to choose a person to serve as your Guardian, but the court lacks the information you have about the people important to you, and who has the skills to best care for you.
c. Avoid the administrative tasks required of Guardians. To ensure that a Guardian – the person appointed to serve by the court - has proper oversight, there are annual reports that they are required to file. These are not required if the person assisting you is an Agent appointed by you.
d. Provide clarity as to the powers you are giving to your Agents. Powers of Attorney can be drafted to include or exclude certain powers that an Agent can have, ensuring that the person you name has the ability to assist you in the way that you want.
3. A Health Care Directive allows you to:
a. Be clear about the way you want to be treated. The Living Will portion of an Advance Health Care Directive states the medical interventions that you do or do not want attempted when your physician determines that you have an “end-stage” medical condition and are unable to communicate your own decisions. You might have a different opinion on this than others in your family, or you might want your family or other important people in your life to be supported by the clarity of your written thoughts when making these difficult decisions. An Advance Health Care Directive can also allow you to be clear as to the additional interventions, such as alternative treatments and special treatments, that may be important to you for comfort.
b. Provide additional or separate guidelines for your treatment if you have severe and irreversible brain disease. Severe and irreversible brain disease (such as severe and end-stage Alzheimer’s) is a condition many of us have witnessed in our loved ones, and often people have strong opinions as to how they would want to be treated in that situation – whether that means the same or different kinds of treatments as when they have an end-stage medical condition.
c. Name your Health Care Agents. Under the Health Care Power of Attorney portion of your Advance Health Care Directive, you can name your Health Care Agents and determine in what order they will serve, or what happens if they are serving together. If not everyone is on the same page about your health care, it is important that your documents are clear as to who is able to make the final decision. If this is unclear and there is disagreement regarding medical decisions, the medical facility may be unable to move forward, leaving your healthcare and family in limbo.
In this brief post, we have provided a basic introduction to the reasons that every adult can benefit from an estate plan – even a simple one. Every client’s situation is unique, and so it is likely that the best solution for your particular situation will require the thought and care of an experienced professional.