Crafting the perfect estate plan requires conscious thought along with a careful analysis of your future healthcare needs and financial situation. Where does one begin on what first appears to be a daunting and difficult task? That perfect plan might include numerous legal documents and multiple contingencies for “what if” scenarios. Each step seemingly more complicated and confusing than the last. There are wills, trusts, directives, and more! Every one of those can be tailored to suit individual needs and wishes. What is this all for and where does it end? Now toss in some long term health care planning, such as Medicaid, and you can be thoroughly overwhelmed in a hurry.
Now, let’s take a step back. You can create a foundation upon which all your future estate planning can be based. Not everyone needs a complicated estate plan. Once you turn 18, it’s time to consider the four essential planning documents (plus a fifth if you’re married). If you have special circumstances, such as a disabled child, you will still need these basic documents for yourself, but a tailored plan can to carry out your long term goals more effectively.
Durable General Power of Attorney. There’s an argument to be made that powers of attorney are the most important estate planning documents you can prepare. You can create one for financials and a second for health care. Each one allows you to appoint and designate an agent(s), also called an “attorney-in-fact” who has the legal authority to act on your behalf. Your financial power of attorney can be made effective immediately, or if you prefer, not until your incapacity or disability. In any event, your agent should be someone you trust implicitly to act in your best interests. We encourage you to talk to your agents, let them know your wishes (financially & medically). Your agents will be most effective if they are familiar with your desired financial goals and understand your medical treatment preferences. Naming agents doesn’t remove your ability to act for yourself, but ensures someone you trust is there to act on your behalf should you no longer have the ability to do so yourself. Your agent must always fulfil his or her fiduciary duties, and act in your best interest while also striving to make decisions that they believe you would have taken yourself. If you don’t have a trusted friend or family member, you could name a professional fiduciary. Not having named agents to act on your behalf could prevent your loved ones from helping you obtain Medicaid benefits.
Health Care Directive. This document supplements your health care power of attorney, but remains distinct and serves a specific purpose during the very end of life. The document will specify the types of treatments you consent to, such as comfort care and whether or not you want artificially provided hydration and/or nutrition. Having this document in place allows your doctor to carry out your wishes and simultaneously providing your agent (under the health care power of attorney) written guidelines on what treatments to consent or refuse on your behalf, in the event you are unable to articulate your own wishes at that time.
Last Will & Testament (“Will”). When you pass away, your estate consists of all your assets after your debts are paid. What happens to it? If you don’t have beneficiary designations on your assets, then preparing a will keeps you in control of deciding who gets your estate and in what proportions. If you don’t prepare a validly executed will, then Washington State will make that decision for you, starting with the closest family members first. This can be particularly problematic for blended families or cohabitating partners.
Community Property Agreement. For married spouses or registered domestic partners who wish to leave their estate to each other before naming contingent beneficiaries, a community property agreement simplifies and expedites the transfer of assets into the surviving spouse name.
This wraps up the essential four (plus one) documents. But what about trusts and why we don’t cover this as a basic document? It’s a common question when discussing ways to avoid probate or how to make management of their lives simpler for loved ones. The simplest answer is that a trust doesn’t replace basic documents, but it can build upon your foundation. You can’t cook the holiday ham without first turning on the oven! In truth, a trust is only good if it serves a purpose, benefits you in some way, and is properly managed. Let’s take one example: You prepare a revocable living trust to avoid a probate and save on taxes. You carefully list out your beneficiaries and transfer all your property and assets into the trust. It’s a valid estate plan. Years later, you sell your family property in an effort to downsize and buy a condo to replace it. But you put the title to the condo in your name and forget to transfer it into the trust. When you pass away, who gets the condo? Back to basics, you better have prepared a will which allows assets in your name to be “poured-over” into the trust after your death. If you never prepared a will (or forgot to update it), then the trust will never serve its purpose and your beneficiaries will have to open a probate to transfer the property, exactly what you tried to avoid in the first place. Even worse, it could completely change or cut out beneficiaries you intended to receive your estate.
While everyone over 18 should consider obtaining these basic documents, it behooves you to keep them updated as we age and experience significant life changes. We often think about our families and the benefits and burdens that aging and disabilities bring upon them. A common concern for the vast majority of our population is long term care and how it has become increasingly complex and exponentially more expensive. For many people, Medicaid helps cover the rising cost of nursing home or assisted living facilities. In order to be eligible for Medicaid, the state requires an individual to have less than $2,000 in assets each month. However, there are some changes you can make to your finances to help preserve your assets before you spend down to $2,000. These changes can be particularly beneficial for spouses, partners, and disabled children. If you have the proper documents in place and keep them updated as your health declines, you and your agents can effectively make the necessary changes without undue delay and minimal hassle. If you do not have documents in place and you lose the capacity to make your own decisions, then a court-appointed guardian may have to be appointed to make those very same decisions. Such a proceeding can result in many months or more of ineligibility for benefits, dramatically and unnecessarily increasing costs.
The point of emphasis is to impress upon you how vitally important it is to learn about basic estate planning documents and to keep them updated. Planning ahead can avoid the headaches of crisis planning and the heartache of not being able to carry out your true wishes. A good rule of thumb is to review your estate plan whenever considering big financial decisions, or if you and loved ones have increased health care needs, or at minimum, every 5-10 years to ensure your documents keep up with changes in law and technology.
As always, thanks for reading.
Barry M. Meyers
David M. Neubeck
Sara LC Hulford
Elder Law Offices of
Barry M. Meyers, P.S.
DISCLAIMER: The content of this newsletter is: for information purposes only, subject to change by government agencies, should not be relied upon as current, and, does not constitute legal advice. Reading this newsletter does not establish an attorney-client relationship.