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VIII. OTHER ELEMENTS OF THE ESTATE PLAN

·  A. Durable Power of Attorney (POA).

·  B. Guardianship / Conservatorship.

·  C. Living Wills and Other Advance Medical Directives (AMDs).

·  D. The Ethical Will - for leaving a legacy, not just property

VIII. OTHER ELEMENTS OF THE ESTATE PLAN

A. Durable Power of Attorney (POA).

Coupled with a Will, and an Advance Medical Directive (discussed later), the Durable POA is for many people a superior alternative to the simple living Trust in planning for disability or incompetence. These documents are more familiar to folks than the concept of a "Trust," and their total cost is less than to prepare a Trust.

Let us begin with a few general points. A Power of Attorney (POA) is a document in which one person, the "principal" gives authority to his "attorney in fact" (who need not be a lawyer) to act on his/her behalf. The scope of the power can be quite limited - e.g., the purchase of a single real estate investment - or almost unlimited. The principal can even grant the power to make gifts of his/her property, but not to make a Will.  Note that ALL Powers of Attorney - even the “durable” variety described below - end at the death of the principal.

There are two kinds of situations in which POAs are used. First, they can make business or financial transactions much easier, simply by allowing a busy or absentee party to send somebody to act in his/her place. For this purpose, a very extensive POA might be used, reciting a laundry list of specific powers pertaining to every conceivable business transaction. Note that many "do it yourself" forms instead use just broad, general language - "I give authority to my attorney-in-fact to do all things. . .”, with not many more specifics.

Experience shows that if the need for a POA can be seen in advance, it is better to prepare a limited POA, referring only to the matter at hand (i.e, “the purchase of the real estate in Anytown, USA, known as 123 Oak Street”) and specifying precisely the expiration date and full extent of the power. Without this limitation and specificity, the POA might not be accepted by finicky banks or others to whom it is presented. Additionally, some parties require that your signature on the POA be guaranteed by a stamp from your bank.

TIP: This is especially so with regard to real estate transactions. If you plan to use a stand-in at the closing, make sure he/she is acting under a POA that has been OK’d in advance by the other parties.

Secondly, and more important for estate planning, POAs can allow one to delegate broad authority over personal financial affairs even - and especially - in case he/she becomes disabled or incompetent. For this, a Durable POA is necessary. It is a very broad and detailed document that also states: "This POA shall not be affected by my subsequent disability or incapacity, or by the passage of time.” This sentence is what makes it “durable” - even if the principal “takes a licking,” this POA “keeps on ticking.” Without that sentence, state law would probably render the POA inoperative immediately upon the disability of the principal - precisely when it is most needed.

Assuming one has a trusted attorney-in-fact, the Durable POA can easily and inexpensively provide the peace of mind sought by many people contemplating disability. Note, however, that although the DPOA can help avoid the need for guardianship, if a guardian is, in fact, appointed, he/she is usually authorized by state law to terminate the DPOA. In a few states, the law automatically terminates a DPOA if a guardian is subsequently appointed for the principal.

You should understand that this kind of durable POA takes effect immediately - it does not wait until disability. Therefore, it is possible, in theory, for the attorney-in-fact to act independently, behind the principal's back, even if the principal is healthy. Some people find this thought unsettling, but, usually, it ought not be. Presumably, of course, your attorney-in-fact is trustworthy beyond reproach. If there is any doubt about this, perhaps the Durable POA is just not for you.

An alternative to this kind of Durable POA is the Springing POA. This is a type of durable POA that works, and is worded differently - it does wait until disability, and only then "springs" into action. This can pose a big problem: There must be a formal determination of disability before the POA will be considered operative and be accepted. At best, this means at least a short delay and expense. (A springing POA might provide, for example, that two doctors examine the principal and attest to his disability.) At worst, there might be uncertainty, disagreement or squabbling among doctors and/or family over the degree of the principal's disability. Banks or others might balk at recognizing the authority of the attorney-in-fact for this reason. When this situation unfolds, the matter often winds up in court - which was the very thing you wanted to avoid.

The springing POA is apparently used because some people just feel uncomfortable making a delegation of power today, while still healthy. While that sentiment is quite understandable, the potential problems should be considered, too.

For a POA to be valid, the principal must be of sound mind when signing it, even if it is to remain valid during subsequent disability (i.e., durable). The rules for determining adequate soundness of mind for a POA are probably not as clear cut as for establishing testamentary capacity to make a Will. State law might require greater mental capacity to prepare a valid POA than a Will. Even so, a POA should be valid if signed during a lucid interval within a prolonged period of incompetence.

TIP: Although blank POA forms are readily available, this is a document best prepared by an attorney. The trouble with any POA is that it is presented to banks and other third parties who can arbitrarily decline to recognize it for their own reasons. It is important to recognize that the party being asked to accept your POA is doing you a favor. If he/she/it has any reason whatsoever to fear "getting in trouble" for honoring the document, it might be rejected. A stock brokerage, for example, does not want to worry about following the instructions of an attorney-in-fact under a customer's POA, only to have the customer file a lawsuit later, arguing that the document should not have been honored for some reason.

Experience shows that the one page, fill-in-the-blank POA form will simply not be acceptable if the attorney-in-fact is engaging in a transaction involving much money. That is especially so when there are any questions about the principal's mental capacity. (This is also a good reason why it is best not to wait to prepare the POA until it is "needed.")

Note, too, that most "do it yourself" POA forms are not durable. They therefore become invalid precisely when they are most needed - at the time the principal becomes unable to act for him/herself.

Banks and other institutions are concerned, too, over reports in recent years of abuses of discretion and "self-dealing" in the principal's property by persons purporting to act under powers of attorney. Institutions do not want to risk claims by disgruntled account owners that their accounts have been spent down by dishonest attorneys-in-fact, using POA documents that were deficient in some respect and should not have been honored. They might insist that only the bank's own POA form, for example, will suffice. Some states (e.g., California and Florida) have responded to the reported "horror stories" with tough new rules on signing and notarizing POAs. This might become the trend nationally.

In addition to a wide ranging variety of "standard" powers, discuss with your lawyer including the following useful, but often overlooked, provisions in your POA:

- Power to handle tax matters and deal with the IRS. In the past, the IRS has insisted that its own POA form be used. Now, a specific provision in the taxpayer's own document, conferring appropriate authority, will be honored. Many POA forms lack this clause.

- Power to handle retirement accounts and investments. These assets are likely to be substantial. Retirement plan custodians and administrators are appropriately cautious about letting anybody else play with your money. These folks, too, will probably require specific authorization in the POA before allowing your attorney-in-fact to act on your behalf.

- Compensation clause. lf your attorney-in-fact is a family member, instead of an unrelated professional, should he/she be paid?

- Power to make gifts. Larger estate owners often use annual tax-free gifts of up to $11,000 per recipient to gradually lower the taxable estate remaining at death. If the estate is to be administered by an attorney-in-fact under a POA, the principal might well desire him/her to initiate or continue a gifting program. If so, the power to make gifts should be specifically authorized and precisely spelled out.

What if, for example, this large estate owner has two children, who have, respectively, two and three kids of their own (i.e., grandchildren)? If one of the estate owner's children is the attorney-in-fact, should he/she do as much tax-free giving as possible? If so, each child, his/her spouse and each grandchild get $11,000. But because one family has three grandchildren, while the other has only two, optimal gift planning would result in an unequal benefit to the two families. See the potential problem created between siblings?

- Power to create & amend Trusts for the benefit of the principal. This allows flexibility in implementing an estate plan, despite the estate owner's incapacity. It can be particularly useful in some situations, since a POA cannot authorize the attorney-in-fact to write one's Will.

B. Guardianship / Conservatorship.

An unfortunate fact of life for the elderly is the possibility of mental and/or physical incapacity. Guardianship / Conservatorship involves a proceeding in court, and can be the less desirable alternative to advance planning for disability, with a Durable POA or living Trust. Terminology varies among the states, but generally, "guardianship" refers to the overall care and custody of a person who needs protection, as well as his/her property. "Conservatorship" generally refers to custody and control only of the money and property of the protected person.

The relationship of the guardian or conservator to the person in his/her care (the ward) is much like that of parent to child. The law, quite rightly, considers it a very big deal to strip an adult of independence and impose on him/her that relationship.

For this reason, the process of obtaining court appointment as a guardian or conservator necessarily involves some time and money. Details vary by state, but there is probably an office in the local county court that handles guardianship. The first step is a "petition" to the court by someone, asking to be appointed. In some areas, the court clerk's office has blank forms and instructions so that people need not hire an attorney, but usually you will need one.

What happens next accounts for the unavoidable delay, and perhaps, expense. Although most people act with the best of motives, the court must make a serious inquiry into the necessity of full guardianship, or of guardianship limited to either the ward's person or property (e.g., a conservatorship), as appropriate. Sometimes, for example, life would be more "convenient" for an adult child care giver if he/she were the parent's legal guardian. That would not suffice, however, if the child sought guardianship and the parent objected.

The court will generally require a hearing, at which some kind of evaluation of the disabled person by medical and/or mental health professionals must be presented. Often, the petitioner seeking guardianship must make arrangements and pay for the examination(s) and reports. Additionally, in most places, a lawyer is appointed by the court to represent disabled persons. This is a further safeguard that no competent person will be "railroaded" just because he/she is too weak or intimidated to speak out.

C. Living Wills and Other Advance Medical Directives (AMDs).

These are documents that address a variety of complicated medical, legal and ethical situations that may confront each of us near the very end of life. Although there is considerable variation among them, every state recognizes the patient’s right to make fundamental choices as to the care and treatment he/she will or will not receive at that time.

In all cases - whether you have signed an AMD or not - as long as you retain the capacity to make and express decisions for yourself, your consent must be obtained for your medical treatment. You remain solely and totally in control. If you have an AMD, it can be revoked or modified at any time, if you are still capable of doing so.

Although many people have heard of the Living Will, few realize that this is often a very narrow form of AMD, in terms of the situations it addresses. For example, the Living Will might only speak about “heroic” life prolonging measures, and might only apply when death is otherwise imminent. Such a directive would be of no use to the patient who is stable, but in a coma with no chance of recovery. Most of us planning along these lines hope to “cover all the bases.” There are two means to do this: Preparing a comprehensive medical directive of your wishes in advance of the need, and appointing someone to speak for you on these matters when you cannot.

In most states, a health care “agent,” “surrogate” or “proxy” can be selected by the patient. The proxy can be authorized to make any health care decision the patient could have made if he/she had decision-making capacity, as long as it conforms with accepted medical practice.

Sometimes this document is called a Health Care Power of Attorney. Note that the proxy need not be chosen only in anticipation of death. He/she can be empowered to deal with temporary incapacity, too. Of course, you do not have to already be a “patient” before preparing one of these documents.

No specific format is required of an AMD in most places, but most states have laws that include a sample form for appointing a health care proxy, and/or for creating a comprehensive advance directive. In many states, the use of these forms is optional, or they need only be “substantially” followed. Because of the simplicity of the document, it should not cost much to have a lawyer draft one for you, especially if it is done at the same time as your Will or Trust.

The AMD can be prepared without an attorney, but you should not just copy an "official" form and sign it unchanged, unless it reflects what you really want. If available, an official form from the statute books of your state is the best place to start. State-specific guides with sample forms are also available to members of the American Association of Retired Persons (AARP), through its office of Legal Counsel for the Elderly. If you are in a nursing home or other institution, there is generally a patient advocate to consult about making an AMD.

Even if you use the form as a reference, reflect upon your own wishes as to the various contingencies it addresses. Then, the form can and should be personalized to reflect your particular values and instructions. If changing the official form creates any doubt about its validity, talk to a lawyer.

Executing the document. Required procedures for signing and witnessing an AMD vary widely. The notarized signatures of you and two witnesses is advisable. This might well be more than necessary in your state, but it is intended to help ensure that your AMD is recognized in other states, too. There should be a clause in which the witnesses recite that they know you personally and declare that you appear to be of sound mind and under no duress or undue influence. Further, you and the witnesses should acknowledge that the document being signed is, in fact, your advance medical directive.

BEWARE ! Perhaps most importantly, keep in mind that under the law of some states, the following people, who might be at your side during a grave illness, might not be valid witnesses: Your treating physician, health care provider, or health facility operator, or even an employee of any of these; Anyone related to you by blood or adoption; Anyone entitled to any part of your estate under an existing Will or by operation of law (this would rule out one's spouse).

Following exactly (or exceeding) the signing and witnessing requirements imposed on AMDs by the law of your state might be more important than the precise words used to express yourself. “Close” may not be good enough. If the execution of the document is not perfect, it might be invalid, and medical personnel might fear a lawsuit if they relied upon it.

Your agent's authority. The scope of your agent’s power usually is intended to be broadly worded, giving him/her authority to make any decision you personally could make to obtain or terminate any type of health care. (Remember that, even with this authority, your agent and doctor still must follow your directions, if you are capable of communicating them in any manner, now or later.)

Most AMDs are worded to become effective upon your incapacity to make health care decisions. That point is determined by your agent and/or your doctor. You may specify other effective dates or other criteria for incapacity, such as requiring the judgment of two physicians. But do not make it too complicated, or your agent might have trouble establishing his/her authority with your health care providers. You can also direct that the power will end at a later date, or upon a particular event, such as release from the hospital after surgery.

Remember that the role of health care agent or proxy is not easy, so give yours some guidance in making what might be extraordinarily difficult and painful decisions. Indicate to your agent any religious or ethical limitations to be placed on your treatment, such as the refusal of blood transfusions, psychosurgery, amputation or abortion.

The document should instruct the proxy that in making any decision, he/she is to first try to communicate the proposed decision to you, to ascertain your desires, if possible. If this is not possible, your agent should be instructed to make a choice for you based upon what he/she believes to be in your best interests.

Under state law, it probably is not possible to compel a health care provider to follow the directions of your agent, especially if doing so would violate his/her own conscientious principles. (In some states, that provider would then be required to transfer you to another who is willing to comply.) To ease their concerns about complying with your wishes, medical personnel and others who rely on your agent should be absolved of legal liability for the consequences of following duly authorized instructions. There could otherwise be situations in which a provider would be reluctant to withdraw treatment, fearing a lawsuit by the family, months later.

Powers to be included in the AMD. The following would seem to be basic powers that must be given to your agent if he/she is to have any meaningful health care decision making authority:

- To consent, refuse, or withdraw consent to any and all types of medical care, treatment, surgical and/or diagnostic procedures, medication, and the use of mechanical or other means to affect any bodily function, including (but not limited to) artificial respiration and cardiopulmonary resuscitation, and

- To authorize your admission to or discharge from any hospital, nursing home or other facility, even against medical advice, and

- To authorize any medication or procedure intended to relieve pain, even though such treatment might lead to bodily damage, drug addiction, or hasten the moment of (but not intentionally cause) your death;

Life sustaining treatment. Perhaps the most critical provision in an AMD is the expression of the patient’s wishes as to “life-sustaining treatment.” If it is your desire that your doctors do employ maximum life-sustaining or prolonging efforts, an AMD should certainly be used to alert everyone. If that is not what you want, let your agent base this most difficult judgment on an expression such as: “I do not want my life to be prolonged, and I do not want life-sustaining treatment to be provided or continued if my Agent believes the burdens of the treatment outweigh the expected benefits. In making this determination, my Agent is to consider the relief of my suffering, the expense involved and the quality of my continued existence, as well as the length of time by which the proposed treatment is likely to extend my life.”

People differ widely on whether “nutrition and hydration” is to be considered “treatment,” subject to being terminated. It is, therefore, very important to make your wishes known. This is especially true if you live in a state where, by law, the withholding or withdrawal of food and water is not permitted unless the patient has given specific written authorization.

“Nutrition and hydration” refers to the introduction of food and fluids into the body through a nasogastric feeding tube and/or intravenous fluid lines. Under all circumstances, appropriate non-invasive care, such as spoon feeding or moistening the mouth should be expected to continue.

There are several other easily overlooked matters of practical importance to be considered. Your agent should be authorized:

- To make contracts on your behalf for any health care related service or facility, and to hire and fire medical or other support personnel for your care, without the agent incurring personal financial liability for such arrangements;

- To have the same access to medical records and information that you are entitled to;

- To make anatomical gifts of your organs, if that is important to you. Without specific written authority, your agent will probably be unable to do so.

Problems to anticipate. If you have made the decision to refuse treatment, medical providers must, by law, honor it. Before imposing this duty, however, the law requires that they know of your instructions. That is where the problem can lie. As a practical matter, it is up to you to ensure that everyone expected to follow your instructions has been given a copy of your AMD. True, under federal law, hospitals and nursing homes are required to ask about your AMD, but there is no guarantee the actual document will find its way into the right hands when needed. So without some extra effort on your behalf, the doctor or hospital might, in fact, not know about the AMD. Have several original documents prepared for signing initially, so they can be taken along on trips, and freely distributed in advance by you or your agent.

People living in the community face practical problems in the event of a medical crisis at home, to which emergency personnel respond. First, of course, the AMD must be handy, to be of any use. The ambulance people are not going to wait to do CPR, for example, while the family rummages through desk drawers.

Secondly, these personnel may be required by law or their own policy to administer life support and stabilize patients for safe transport to a hospital. If this is so, there is little one can do until the patient is at the hospital. Some states are developing procedures that allow emergency medical personnel to refrain from life support efforts under some circumstances.

Finally, for those who have no AMD, some states have laws that authorize family members, in a specific order of kinship, to make some or all health care decisions. Even without such statutes, doctors and hospitals routinely rely on family to make decisions, IF there are close family members around and IF they are in agreement. Problems are likely to arise, however, when the family does not know or cannot agree on what the patient would want in a given situation. This uncertainty can lead to family disharmony and extra unpleasantness at an already stressful time.

D.  The Ethical Will

The ethical will is not a legal document at all, but it can be your spiritual legacy.  It is a way to express and pass on your love, values and beliefs, the lessons life has taught you and your hopes for the future.  

There is no prescribed format for an ethical will.  Most commonly today, people write an ethical will simply as a letter to their loved ones, expressing what they would like their survivors to know – not to have - after they are gone. (Many people, however, are writing ethical wills at significant points in their lives, and sharing them while still alive.) Some people prefer to videotape a presentation along the lines of an ethical will, and creative services have even popped up that can help folks do this.

Don’t be confused by the word “will” in “ethical will.” It is worth emphasizing: The ethical will is not a legally-binding document. It has nothing to do with worldly property. But it can be a priceless gift to others and provide great reward for the maker, as well, in the form of comfort and peace of mind. The ethical will can be an affirmation and reminder of shared family values. It can be a way to reach out to estranged family members, and maybe begin to heal emotional wounds. 

Although an ethical will by design contains a lot of personal history, it is not meant to be a lengthy autobiography.  Rather, it’s a way to get to the “bottom line” – to impart to loved ones some of the wisdom acquired from your life experiences. You can share inspirational stories that might otherwise disappear from the family memory.

The ethical will can also explain estate planning decisions set forth in the formal, legally binding  will and/or trust documents that might not be understood – e.g., why the children’s inheritance is being held in trust till age thirty-five; why certain lifetime gifts were made to one child and not another; why somebody is getting more than somebody else. Very little of this kind of explanation is ordinarily found in formal estate planning instruments. These documents tend to be long and confusing enough as it is, without much room for extra verbiage.

That might be why – for now - neither lawyers nor the public are as familiar with the ethical will as might be expected. The expressions of the ethical will are not legal in nature, so they have not traditionally been included in the formal estate planning process. But that is the logical time for a person to consider this simple tool for leaving a legacy, and attorneys are being awakened to that fact.

One of the people doing the awakening is a physician – Barry Baines, MD. This might seem ironic till you learn that Dr. Baines is a former hospice medical director. Caring for a dying man several years ago, Baines suggested writing an ethical will as a means of alleviating the man’s suffering and anxiety over the significance of his life. The compassionate doctor and his team were profoundly moved by the immediate relief and peace their patient experienced upon completing his document. The man was rich in experience, and realized that his writing had indeed left something of value to the world.

Baines became an advocate of the ethical will from that point on. He maintains a website with  information and suggestions on drafting an ethical will (www.ethicalwill.com). Even better, you can download software Baines has co-developed to help find the right words to express various sentiments and convey certain widely-held values. They even call it “ValueWare” – because you are asked to pay according to the software’s value to you, and what you can afford.

Often, the hardest part is just getting started. That’s why the ethical will writing guide is so useful. It can start you off with a line or two about several things you’d like to share. The text appears on the computer screen and is inserted into a document that can be edited and printed the way you would any other.

For example, there is a category of thoughts regarding the importance of family. Here’s one many of us would find appropriate: “As I've grown older I continue to value the family more and more.” From there, you can add your own thoughts or move to another topic, like “the importance of honesty,” or “learning from mistakes.” Just seeing something in front of you will probably bring to mind your own anecdotes and lessons learned. Even if you don’t consider yourself good with words, this exercise can produce something your survivors will always cherish.

 

Your comments, suggestions and constructive criticism are welcome.