Estate Planning Is Not All About Death
Clients often visit my office concerned about one thing: death.
When I pass, who should I leave my house to? My kids? My dog? What about my business and my savings?
These are all valid, valuable questions to ask – and answer – when speaking about estate planning. In fact, if you don’t have answers to these questions, the State of Michigan does –
whether you agree with them or not!
But are these questions the only questions you should be asking?
What happens to your belongs when you’re alive, but can no longer manage your assets? What happens when you’re incapacitated or injured due to Alzheimer’s, stroke, heart attack, or physical weakness?
Estate planning is about more than death. Estate planning is about incapacity and death.
Today’s medical technologies permit healthcare professionals to keep us alive far longer than ever expected. But, this does not mean our quality of life is far better than expected. Debilitating illness is not uncommon.
So then, what options do we have to manage our property and person in the event of incapacity? Would you like to decide who acts on your behalf? Or would you like the courts to decide?
There are several ways to deal with incapacity as it pertains to granting someone legal authority to act on your behalf.
Here are few common ones:
In Michigan, a guardian is a person or organization appointed by a probate judge to care for, and make medical decisions about, an individual who may need extra assistance. Guardians in Michigan do not care for money, just people. The person, as the law calls him or her, is a “protected individual” and is treated as such by the law and governing bodies. The process of appointing a guardian can be cumbersome and expensive.
- It begins with a judge determining whether or not a person (the “protected individual”) is legally incapacitated. This is a very important, series step, as at least two medical professionals must deem a person as legally incapacitated.
- Once a person is deemed a “legally incapacitated individual,” the judge will consider the specific needs of the protected individual and grant guardian powers as they relate to those needs.
- The courts must monitor guardians and make regular (usually annual) inquiries into the legal incapacity of the protected individual, as well as scrutinize the decisions that the guardian has made for his/her protected individual.
But a little planning, as you’ll see below, can eliminate all of this hassle.
A conservator is much like a guardian, but instead of looking after an actual person, the conservator looks after the money and assets owned by an individual. Once appointed, a conservator must keep very detailed records on where the money is being spent and why it’s being spent. Not only must he/she keep detailed records, but he/she must present these records to the court annually. This process has initial costs – just as guardianship does – but also ongoing costs that include legal fees, conservatorship fees, court fees, etc.
Not ideal! So here’s a few alternatives:
MEDICAL DURABLE POWER OF ATTORNEY (MDPOA)
An MDPOA is an alternative to guardianship. It is a written legal document by which a person grants legal decision-making authority to another person or persons regarding medical care, treatment, and more. The person who creates the MDPOA is often referred to as the “patient” and the person(s) who are granted the authority are often referred to as “patient advocates.”
The benefits of this alternative are numerous:
- The “patient” has the ability to choose for themselves who will act if they cannot act on their own and before they have become incapacitated.
- The patient may determine what, specifically, their MDPOA can or cannot do, and can outline those wishes in the document itself.
- The patient can determine what it means to be incapacitated and how that will be determined (for example – “2 doctors” or “my family members”) thereby avoiding the entire court process as in a guardianship.
- This alternative is SIGNIFICANTLY less expensive and cumbersome than guardianship.
FINANCIAL DURABLE POWER OF ATTORNEY (FDPOA)
An FDPOA is an alternative to conservatorship. It is very similar in nature to an MDPOA, but deals only with financial considerations, including paying bills, applying for government benefits, working with investment advisors, CPAs, attorneys, realtors, etc. The creator of the FDPOA is called the “principal” and the nominated person to act on behalf of the principal is called the “agent.” The benefits are also significant and similar to those of the MDPOA. One more thing: when the principal dies, the authority of the agent is terminated. So, a FDPOA no longer works after the principal dies. This is a common misunderstanding. Therefore, it deals with incapacity, but not death.
A living trust is a special legal tool that can accomplish significant planning goals for a family. In its simplest form, a living trust includes a trustee that holds title to and manages the assets and property that the creator of the trust has re-titled into it. It works to manage property both during the life of its creator andafter the death of its creator. Like a FDPOA, a living trust appoints someone to act on behalf of the creator of the trust to manage the property when the creator cannot or is not willing to act any longer. However, a living trust (in most circumstances) does not terminate when the creator of it dies. It lives on and continues to provide for the management and distribution of assets even after the creator of the trust dies.
As you can see, providing instructions before you are incapacitated can save you significant dollars and reduce the stress of loved ones.
Is this overwhelming? Does it make your head swirl?
Our goal is to simplify.
Contact us for a FREE CONSULTATION, and we can help you!