Dying Isn't Necessarily the Worst Thing That Could Happen

by Craig C. Reaves

When we think of estate planning, we ask ourselves what will happen to our property when we die. However, while failing to plan for death can cause terrible consequences, failing to plan for disability could be even worse.

Have you ever thought about who will manage your property if you are injured or otherwise unable to manage it yourself? Without proper planning, if you become unable to make decisions for yourself, your family will be forced to go to court to appoint a guardian and conservator to make personal decisions for you and to manage your finances. This is required even if you are married. The guardian and conservator will have to account to the court for everything they do. Not only is this a huge intrusion into your life, it is also expensive. The only way this can be avoided is by having adequate durable powers of attorney.

A properly prepared durable power of attorney is an integral part of a complete estate plan. This document allows you to delegate authority to a person of your choice (your “attorney-in-fact”) to make decisions for you if you ever become incapacitated.

While a living trust is an important estate planning tool, it alone is not enough. A trustee can only manage assets owned by the trust. While you are living some of your assets, such as retirement accounts, cannot be transferred into your trust. Also, the trustee cannot make personal decisions for you, such as where you will live, health care decisions, signing your income tax returns, etc. Only a durable power of attorney or guardianship will allow someone else to step in and do these things for you.

Adding a person to your accounts as a joint owner may allow them to access the accounts and, hopefully, use them for your benefit. But it still does not allow the person to make personal decisions for you. And, worse yet, it makes the accounts susceptible to creditors of the joint owner, and gives the accounts to the joint owner upon your death, which may not be what you wanted.

There are two types of durable powers of attorney that you should have. One is for health care decisions and often also includes authority to stop life support. The other (a “general” or “pro-perty” power of attorney) is for legal and financial decisions.

A durable power of attorney can be effective when you sign it or after you are incapacitated (referred to as “springing”). While health care durable powers of attorney are usually springing, general ones are often made effective when signed so your attorney-in-fact can step in and assist you immediately without the necessity of proving you are incapacitated.

It is not unusual for a financial institution to refuse to honor a durable power of attorney unless it specifically describes the action the attorney-in-fact wants to take. This is why forms from office supply stores and internet sites should not be used. They are usually not specific or broad enough to cover many of the contingencies that may come up. For example, it may be helpful for your attorney-in-fact to be able to give some of your assets away in order to reduce your estate for tax or asset protection purposes, or to pay your child’s college tuition costs. Unless your durable power of attorney specifically authorizes such gifts, they normally cannot be made.

It is also important to review your durable powers of attorney with your estate planning attorney every few years. Not only do your circumstances change, but the laws are constantly evolving. For example, in 2003 HIPAA went into effect blocking access to your health information. All durable powers of attorney should now comply with this law.

Durable powers of attorney are a vitally important document for any adult. Do you have up-to-date durable powers of attorney?

Craig C. Reaves is an elder law and estate planning attorney with Reaves Law Firm, P.C. He can be reached at 816.756.2100 or craig@reaveslaw.com.