Is Your Family
Prepared If You Become Incapacitated?
By TaraLynn T. Velting, Esquire - Garan Lucow Miller, P.C.
Incapacity, or the inability to make decisions on our own, is something we hope
never happens to us. Unfortunately, we have all seen it happen to family
members or loved ones. Aging can be difficult, or as my grandpa once said:
"Getting old isn't for wimps!" So while we all hope we do not
have to face incapacity issues for ourselves or loved ones, what can we do to
prepare ourselves in the event we do face these issues? Executing estate
planning documents ahead of time can address your concerns about what will
happen in the event you face incapacity.
DURABLE POWER OF ATTORNEY
The first document you should consider signing to address incapacity issues is a
Durable Power of Attorney. A Durable Power of Attorney appoints someone to
act on your behalf to make business and financial decisions for you if you are
unable to make decisions yourself. You can decide whether you want the
Durable Power of Attorney to become effective upon your signing or at such time
as you become disabled or incapacitated. Because it is a
"Durable" Power of Attorney, it remains in effect even if you are
incapacitated. Most people appoint their spouse or a trusted family member or
friend for this role. Planning for this ahead of time will insure that
your family does not have to petition the probate court to appoint a conservator
for you to handle your business and financial affairs should you ever become
incapacitated.
HEALTH CARE POWER OF ATTORNEY
You should also sign a Health Care Power of Attorney, which is sometimes
referred to as a Patient Advocate Designation or Living Will. This
document appoints someone to make health care decisions for you in the event you
are incapacitated. You can state your wishes regarding life support and
life sustaining treatment in this document. And this document should also
be compliant with the Health Insurance Portability and Accountability Act (HIPAA),
which insures that your medical records are kept private. Most people want
their Patient Advocates to have access to their medical records so they can make
informed decisions regarding their health care. A copy of your Health Care
Power of Attorney can be kept in your medical file at your doctor's office.
Your spouse does not automatically have the authority to make health care
decisions for you. The only person who has authority to make health care
decisions for you is the one you designate ahead of time by signing a Health
Care Power of Attorney or the person the Probate Court appoints to you.
So by preparing and executing these two estate planning documents ahead of time,
you have addressed incapacity issues you may face while you are living.
But while incapacity is an event we may or may not face, ultimately, all of us
will eventually face death. There are documents we can put in place that
will help our families and loved ones through this difficult time.
INTESTATE SUCCESSION
If you die without an estate plan, the State of Michigan's plan for you is
called "Intestate Succession." The probate court, pursuant to
the Estate and Protected Individuals Code, will control who will receive your
assets, who will be in charge of distributing your assets and who will care for
your minor children. Many people are surprised to find out that their
spouse will not automatically receive everything they own and that the probate
court will have to be involved in appointing a guardian for their minor
children. Fortunately, you can ensure that your goals and plans for your
family are set down in writing as a part of your own estate plan and avoid the
cost and confusion of intestacy.
LAST WILL AND TESTAMENT
You should consider signing a Last Will and Testament ("Will") to
control the distribution of your property at your death. Your Will
provides direction to the probate court for the distribution of your property.
Probate is the process through which your assets are transferred to your heirs
or named beneficiaries. Many people make the mistake of assuming that
because they have a Will, their estate will not be subject to probate court
jurisdiction and proceedings. The purpose of the Will is to tell the
probate court who is your personal representative (the manager of your estate)
and who is to receive your property.
REVOCABLE LIVING TRUST
Increasingly, more and more people are choosing to execute a Revocable Living
Trust, rather than simply a Will. There are many reasons you may prefer to
have a Revocable Living Trust. First, you can avoid probate court
proceedings if the trust is properly funded (your assets are put into the trust,
instead of your own name). This can save you money and time. The
AARP reports that on average 5% of the value of your gross estate is lost in
probate and the average amount of time for an estate to go through probate court
is 12 to 24 months. In Michigan, that average time is probably closer to
12 to 18 months. Second, a trust provides privacy for your family.
Wills are public documents and anyone can find out what you gave away at your
death and to whom you gave it. In Michigan, there is no requirement that
trusts be registered or filed at the probate court.
Your successor trustee handles the distribution and closing of your estate in
accordance with your wishes as set forth in the trust. Third, a trust can
be designed to allow your estate to be managed after your death. Perhaps
you have minor children or you do not want your beneficiaries, regardless of
age, to be given a lump sum distribution. You can direct how and when your
beneficiaries will receive your assets. And finally, you may need a trust
if you have a federal estate tax problem. Currently, the federal estate
tax exemption is $2 million, so if you and your spouse have assets in excess of
that you should consult an attorney regarding the benefits of having separate
trusts to take advantage of two federal estate tax exemptions.
CONSULT AN ESTATE PLANNING ATTORNEY
Without proper planning, your family is not protected in the event of your
incapacity or death. And, proper planning can best be accomplished by
consulting an estate planning attorney who can help you plan for incapacity
(i.e., Durable Power of Attorney and a Health Care Power of Attorney) and
achieve your estate planning goals. You, and not the State of Michigan,
should be in control of your estate plan and determine what will happen if you
face incapacity.
Tara Velting is an associate attorney at Garan Lucow Miller, P.C. and is a
member of the firm's Estate Planning & Settlement Group. She is a
member of the National Academy of Elder Law Attorneys and the Michigan Bar
Association. Ms. Velting earned her J.D. from George Mason University
School of Law in Arlington, VA, and her B.A. in History and Political Science
from Hillsdale College. You can reach her at 1-800-494-6312; email at
tvelting@garanlucow.com.
Garan
Lucow Miller, P.C. is a full-service law firm founded in 1948 with offices
throughout Michigan. Areas of practice are diverse and include civil
litigation defense in municipal law, intellectual property, corporate law,
admiralty workers' compensation, auto no-fault and real estate transactions.
For a complete list, please visit our Web site at www.garanlucow.com.