Estate Planning Isn't Just About What Happens After You Die
Consider Susan.
Her father suffered a serious stroke and was suddenly unable to communicate or manage his own affairs. Susan assumed that, as his daughter, she could step in and help. But almost immediately, she ran into problems.
The bank would not allow her to access his accounts because she had no financial Power of Attorney. His doctors were limited in what they could discuss with her. There was no clear Health Care Directive explaining who should make medical decisions, and no written guidance about the type of treatment her father would have wanted.
Meanwhile, the mortgage still had to be paid, insurance matters needed attention, and important decisions could not simply be put on hold.
Susan's family was now trying to solve legal problems in the middle of a medical emergency.
Unfortunately, this is when many families discover an important truth about estate planning: it is not just about what happens after you die.
A properly prepared estate plan should also protect you while you are alive.
What Happens If You Cannot Handle Your Own Affairs?
When most people think about estate planning, they think about a Will or Living Trust and who will receive their property when they die. Those are certainly important parts of the process, but they only address part of the picture.
There is another question that deserves just as much attention: Who will take care of your affairs if you are still living but are unable to take care of them yourself?
A serious illness, accident, stroke, dementia, or other incapacity can occur at almost any age. When it does, someone may need the legal authority to manage your finances, deal with your property, communicate with your doctors, or make health care decisions on your behalf.
Being a spouse, adult child, or other close family member does not necessarily give someone automatic authority to handle all of these matters.
That is where proper estate planning becomes extremely important.
Your Power of Attorney Handles More Than You May Realize
A Durable Power of Attorney allows you to select someone you trust to handle financial and legal matters for you. Depending upon the document and the powers you grant, your agent may be authorized to:
Manage bank and investment accounts
Pay bills and expenses
Handle insurance and government benefits
Manage, sell, or otherwise deal with real estate
Address tax and financial matters
Manage certain business interests
Communicate with financial institutions on your behalf
These powers can become extremely important if you are unable to act for yourself.
Without a properly prepared Power of Attorney, your family may find themselves unable to complete even relatively routine transactions. In more serious situations, it may become necessary for someone to ask a court for authority to act on your behalf. That process can take time, cost money, and create additional stress at precisely the time your family is already dealing with your illness or incapacity.
Planning in advance allows you to decide who you trust instead of leaving that decision to circumstances later.
Your Family Should Not Have to Guess About Your Medical Care
The same principle applies to health care. A Health Care Directive allows you to designate someone to make health care decisions for you if you cannot make or communicate those decisions yourself. A Living Will (not to be confused with a Last Will & Testament) allows you to provide guidance concerning the type of medical treatment you would or would not want under certain circumstances. A HIPAA Authorization can also be important because it permits designated individuals to receive medical information that might otherwise be protected.
These documents are not simply legal paperwork. They can provide tremendous guidance to your family. Without them, several family members may have different ideas about what you would want. One person may believe treatment should continue as long as medically possible, while another believes you would never have wanted certain life-sustaining measures. Those disagreements are much harder when they occur in a hospital room during a crisis.
By making these decisions in advance, you are not only protecting yourself. You are giving your family direction when they may need it most.
A Living Trust Can Also Protect You During Your Lifetime
Many people come to my office interested in a Revocable Living Trust because they have heard that a Trust can help avoid probate. That is true when the Trust is structured and funded properly, but probate avoidance is only one potential benefit. A Living Trust can also provide a structure for managing your assets during incapacity.
While you are healthy and able to manage your own affairs, you generally continue controlling the assets held in your Trust. If you later become incapacitated, the successor Trustee you selected may be able to step in and manage Trust assets for your benefit. This can be particularly helpful with real estate, financial accounts, and other significant assets.
This is why I continually emphasize that estate planning is not just about creating documents. The documents and the assets have to work together.
Your Estate Plan Should Work While You Are Living
When I sit down with a family to discuss estate planning, I am not simply asking, “Who gets your property when you die?” A complete plan should consider several different stages of life. It should address who controls your property while you are healthy, who can step in if you become incapacitated, who can make health care decisions for you, what medical wishes you want followed, and ultimately how your property should be handled after your death.
A Will by itself generally does not accomplish all of that. Your Will primarily addresses what happens after your death. A Power of Attorney, Health Care Directive, HIPAA Authorization, Living Will, and, when appropriate, a properly funded Living Trust help address what can happen before death.
These documents perform different jobs, but together they create a much more complete plan.
Do Not Wait Until Your Family Needs the Documents
One of the unfortunate realities of estate planning is that the documents are usually easiest to prepare when you do not urgently need them. If someone has already suffered significant cognitive decline or a serious medical event, questions may arise regarding whether that person still has the legal capacity necessary to sign new documents.
That can dramatically limit the family's options.
I would much rather help a client prepare these documents while everything is fine than have a family contact me during an emergency and discover that some of their planning options are no longer available.
Estate planning is really about preparing for the unexpected while you still have the ability to make the decisions yourself.
I help New Jersey individuals and families create coordinated estate plans designed to protect them during their lifetime as well as provide clear instructions for what happens after death. If you would like to review your current estate plan or discuss creating one, I invite you to schedule a Peace of Mind Planning Session. We can talk about your family, your assets, your concerns, and what type of planning makes sense for your particular situation.
P.S. If you know someone who has been putting off their estate planning, please feel free to share this article with them. Sometimes the best time to have the conversation is before there is a crisis.
