Whether an estate is large and complicated or of the most modest scale, everyone over 18 should have five basic estate planning documents:
- A Will
- Durable Financial Powers of Attorney
- Health Care Powers of Attorney
- An Advance Directive for Health Care Decision Making (Living Will)
- A HIPAA Medical Records Release.
These documents are a gift to loved ones, offering guidance at a time when your loved ones are struggling to act in a way which is consistent with your beliefs and values.
Most people know that a Will is a legal document which directs distribution of property after death. However, even if one has few assets, a will may be important. A will also identifies who will manage end of life affairs such as bill paying and distributing belongings in an orderly fashion. As with all advance planning documents, the will is a gift to those you love at a time when they may be grief-stricken and confused.
Durable Financial Power of Attorney
A Durable Power of Attorney appoints a person to manage your financial affairs at a time when you cannot. Whether you are physically compromised and just cannot make it to the bank, or suffer from cognitive impairment, someone else may have to step up to the plate and help with your affairs. Where no Durable Financial Power of Attorney has been executed prior to incapacity, guardianship proceedings may need to be instituted. Guardianship is far more expensive and will require the assistance of an attorney to navigate the legal requirements of court oversight.
Health Care Power of Attorney
A Health Care Power of Attorney names a person to make health care decisions when you are unable. This document can prevent confusion and emotionally difficult disagreements among those you love. Under Pennsylvania law, if no Health Care Powers of Attorney exist medical care providers will look, in descending order of priority:
- First, to a spouse and, if there are adult children who are not children of your spouse, then the spouse and children have equal say in medical treatment;
- Second, to an adult child;
- Third, to a parent;
- Fourth, to an adult brother or sister;
- Fifth, to an adult grandchild;
- Sixth, to an adult who has knowledge of the principal’s preferences and values, including, but not limited to, religious and moral beliefs, to assess how the principal would make health care decisions.
You should be aware that medical care providers may be hesitant to allow someone to make decisions for you without clear legal authorization. It is strongly recommended that you identify your decision maker in a Health Care Power of Attorney to avoid confusion at a critical time.
Advance Directive for Health Care Decision Making
Also known as a Living Will, this document allows you to control the kind of intrusive treatment you receive when you are either in a state of permanent unconsciousness or an “end-stage medical condition.” Living Wills have been much more widely used since the sad and widely-publicized Florida case of Terry Schiavo. She was in a state of permanent unconsciousness from 1990 to 2005, during which time her husband and parents fought a painful court battle over whether she should be kept alive with artificial feeding. Her husband believed that Terry would not want to be kept alive on a machine when there was no chance of recovery. Her parents argued that she was a devout Roman Catholic and it would violate her faith to withhold food. Many observers realized the value of a Living Will to preserve family harmony, and help loved ones to make decisions at a very difficult time.
Placing assets in a trust gives heirs immediate access to the assets of a decedent, keeps the details of an estate private and saves money because probate fees are not paid on trust assets. Trusts can be revocable living trusts – set up during the lifetime of the grantor with the grantor reserving the right to control the funds, or can be irrevocable where the grantor cannot control the funds. Other trusts are testamentary trusts, meaning that the trust is established in a will. Not everyone needs a trust, but trusts can be a useful planning tool under some circumstances for even those with modest estates.
Special Needs Trusts
For a disabled person dependent on public benefits, a special needs trust can create a better quality of life. Even a small gift or inheritance can jeopardize medical and cash benefits. Placing funds into a special needs trust will protect public benefits while allowing funds to be spent for the benefit of the beneficiary.