The basic estate planning documents include the Power of Attorney and Health Care Proxy, which are in effect during one’s lifetime, and the Last Will and Testament, which has legal effect upon one’s death. In addition to these basic documents, people who own real estate and have other assets (bank accounts, real estate) should be familiar with how Trusts can be used to protect their assets. These planning tools are outlined below.
The Power of Attorney is a document that enables you, as the “principal” to name one or more persons as your representative to make financial decisions and transactions for you. If you are married, your spouse can be your representative. If you have adult children whom you trust, you may want them to be your representatives along with your spouse, or as alternates, so that if your spouse were unable to act for you there would be someone named who could. Be aware that the power of attorney is a very powerful document, and you should not name someone as your agent unless you trust them implicitly. A valid durable power of attorney does, however, preclude the necessity for an expensive, lengthy guardianship proceeding to access an incapacitated individual’s assets. You should have an attorney prepare the Power of Attorney document for you, to make sure it is properly drafted and executed to avoid any delays if your agents ever need to use it. You should be aware, important legislative changes were made to the Power of Attorney in September 2009, and revised again in September 2010. The requirements for completion of the Power of Attorney are much more extensive than in the past.
The New York State Health Care Proxy enables individuals to select one agent and one alternate agent to make medical decisions, and access medical records in the event a person is incapable of doing so for him or herself. This form can also avoid guardianship proceeding, and enables the persons of your choice, to whom you have previously made your wishes known, to make important medical decisions for you. A Living Will is a document that provides specific instructions for your Health Care Proxy in the event of certain circumstances (such as terminal illness with irreversible conditions).
A Last Will and Testament is a written document, executed under the requirements of the laws of the State of New York, that details how you want assets held in your name alone (probate assets) to pass. The Last Will also allows you to pick the person you want to be in charge of carrying out the distribution of the assets. You can name guardians to take care of minor children, and you can name guardians to be in charge of the children’s assets as well. If you die without a will in New York State, your assets pass in a certain order of priority. If that’s not want you want, you can change that order in your Last Will. For example, if someone should die without a Last Will, leaving no close relatives the State of New York could be entitled to the estate. With a validly executed Last Will, that individual could have named more distant relatives, close friends or even charities to inherit. A Last Will has to be executed according to the specifics of the law in New York State – therefore you should have an experienced attorney draft and supervise the execution of your Last Will and Testament. While it’s a good idea for everyone to have a Last Will in place, it’s best if possible to title assets so that probate and the related time and expense can be avoided. Assets can be titled in a variety of ways and avoid probate – it’s best to review your assets and how they are titled at regular intervals with an estate planning attorney in conjunction with your accountant or financial advisor.
Planning Beyond the Basics: In addition to the basic documents outlined above, most clients wish to protect their home and money from the cost of long-term care (either at home with home care, or in a nursing home setting). For those of us in the “middleýclass” real estate may be our most valuable asset, and careful consideration must be taken before jeopardizing one’s interest in the home. The first thing we tell clients is it is never a good idea to transfer the title outright to the children Ð transferring assets to one’s children can jeopardize your hard earned money and the value of your home if the children should ever have financial, marital or legal difficulties. Additionally, as we have seen too many times, the child holding title to the home sometimes predeceases his parents. In that case in-law children have a claim to the title of the home, which is most often an unintended outcome.
Irrevocable “Medicaid” Trusts: Transferring the deed to real property as well as liquid assets to an irrevocable trust has all the advantages we have already mentioned, with some added protections. The trust can be drafted with language to protect the grantors’ lifetime interest, so that if the property needs to be sold during the grantors’ lifetime the trust can purchase another property, or the proceeds from the sale can be held in the trust, and will be protected in the event the grantor should require nursing home care in the future.
For additional information contact Brady & Marshak, LLP, Attorneys at Law, at (718) 738-8500.