Estate planning, among other things, includes documents to take care of rights and possessions upon incapacity or death.

Typical Basic Estate Planning Documents

1. Last Will and Testament:  Transfers title from decedent to beneficiaries.

First, the “testator” is the person who executes a will, and what the testator owns at the time he or she dies is his or her estate.  That portion of a testator’s estate that does not automatically pass to a new owner ends up in the testator’s probate estate.  An effective will determines who gets what part of the testator’s probate estate when the testator dies.

When someone dies without a will, state law determines who gets the decedent’s property.  While the state rules may not differ a great deal from what a given decedent actually would want, e.g. all community property to the surviving spouse then to the kids (IF all kids are children of the marriage), many times the state rules most certainly do not accomplish what the decedent would have preferred.  Where either spouse has children outside the marriage, where the parents already have distributed a portion of their estate to one child and not another, where the parents would prefer not to give an outright gift to a troubled or disabled child, or where other unique factors are present, the state’s rules might prove entirely inadequate or even unjust.

2. Statutory Durable Power of Attorney:  Grants to agent(s) authority to act in financial matters for the grantor or principal.  Power ceases at death of grantor.

3. Medical Power of Attorney: Grants to agent authority to make medical decisions for the grantor or principal.  Power ceases at death of grantor.

By not giving some appropriate person or persons the financial or medical authority to act, an adult person who does not have the mental and/or physical capacity to manage his or her own financial or medical affairs can increase the burden for loved ones and other care-givers who are trying to help them.  Banks, insurance companies, investment advisors, and similar people and institutions often will not deal with an incapacitated person’s business with family members or others who do not have the legal authority to act.  Similarly, doctors and other medical care providers may not to discuss a patient’s physical status, medical history, or treatment options even with close family members who do not have proper documentation.  Of course, some adults disabled from childhood possibly never had the capacity necessary to authorized others to act for them.  Nevertheless, in the absence of effective powers of attorney, obtaining an expensive and burdensome guardianship may offer to the care-giver the only effective means of helping an elderly or disabled individual.

Clients frequently ask what one thing could they do to make it easier for their family members to care for them as they age, and the simplest answer might be to execute effective and robust financial and medical powers of attorney.  Caring for an aging or disabled person can exhaust a care-giver mentally and physically under the best circumstances; not having the legal authority to act for the person only adds to the difficulties of the care-giver.

4. HIPAA Release: Grants to agent(s) authority to obtain medical information about the grantor or principal.

Privacy laws may prevent doctors and other care-givers from discussing the condition and treatment options of even close family members.  Although a power of attorney may grant one or more individuals the authority to receive information and make decisions regarding a sick or injured person, that person might want to allow other family members or even friends to have the authority to inquire about the person’s condition or treatment.

Interestingly, the HIPAA release can survive the person’s death allowing family members or other legal representatives to seek information to press a wrongful death claim or malpractice claim or to compel an insurance company to pay for covered expenses.

5. Directive to Physicians: Expresses an individual’s wishes regarding end of life medical care if terminal or permanently and completely incapacitated.

In some places called a living will, a directive will let your family and other care givers know what you would prefer if they are faced with a decision to end treatment or to continue treatment that you would have prevented if you were able to communicate your wishes.

6. Declaration of Guardian: Names preferred guardian if needed and/or excludes one or more individuals from consideration as guardian.

If a person becomes incapacitated, a court may have to name someone to care for the person’s physical or financial affairs.  The individual appointed to care for the person is the guardian.  The person needing the care is the ward.

Generally, a person might prefer one or more particular individuals to be named as guardian if ever the need arose.  However, even if a person had no preferred guardian, the person could name one or more individuals he or she definitely would not want to be guardian.  In most cases, a court would prefer the guardian be closely related to the person, for example, a parent, child, or sibling.  Even so, a court considering a guardianship would consider the proposed ward’s preference for someone other than family, but the proposed ward cannot force the court to choose a particular individual.  That being said, the court probably would avoid naming an individual that the proposed ward definitively excluded while he or she had the capacity to do so.

Other Important Estate Planning Issues

Effective estate planning can accomplish far more than the goals implied or stated in the discussion on basic estate planning documents above.  Most people prefer to avoid or reduce federal or state estate taxes, so tax planning probably constitutes the most common reason for estate planning aside from the general need to dispose of one’s property upon death.  Other folks have very particular ideas about how their estate should be distributed and develop intricate plans to put those ideas into effect.  Business owners may wish to provide for smooth management and ownership transitions as they become less involved or less able to participate in day-to-day decision-making.  In fact, there are an infinite number of ends a person might want to accomplish with his or her estate planning besides merely avoiding taxes or passing their property to their descendants.  To illustrate the range of estate planning objectives, a person might want to create or help fund an entity to care for a disabled child, a pet, a charity, a church, or a favored cause.  A person might want to encourage his or her descendants to obtain college educations and may provide both positive and negative incentives to do so.  Some people leave money to construct buildings for colleges or other public uses; some leave money to scholarship funds to assist the less fortunate or to promote research in particular fields of study.  With sufficient imagination – and money – a person can much that he or she might wish with the property that he or she leaves behind.

Importantly, the effects of good estate planning can start long before the death of the planner.  Aside from reducing the stress of uncertainty on family relations or business transitions, strategic gifting and transferring assets into and even participating in entities designed to benefit family or particular causes allows planners to enjoy the effects of their planning while still alive.