What Are Other Key Components Of An Effective Estate Plan?
Estate planning should be approached holistically. The entire estate planning field has, over the past decade or so, become a very close cousin to elder law or elder care planning. When I meet with a potential client, it’s important to figure out who they are and what makes them tick. What is their personality like? Who are their loved ones – family, friends? Who and what do they care about – pets, charities? What are their assets? Have they done any estate planning or elder law planning in the past? Do they have a prior Last Will and Testament? Do they have a Power of Attorney, Health Care Proxy, Living Will?
When considering a client’s assets, it’s important to determine if they have assets other than bank and brokerage accounts. For example, do they have retirement accounts (IRAs, 401(k)s, 403(b)s, etc.). Do they own real estate (primary residence, rental property, vacation property, co-op, condominium, timeshares)? Are they expecting an inheritance from a family member or loved one? Are they a beneficiary of a trust set-up for their benefit? In many instances, the above described assets are overlooked, but they are extremely important to consider in ensuring an effective estate plan.
The holistic approach we employ encourages all clients not only to consider the above noted assets and the client’s desired disposition of these assets upon passing, but we always encourage clients to review and perhaps change the beneficiary designation on some of these assets. Estate planning should not only encompass the creation of a Last Will and Testament. Talking about and reviewing these assets, and the beneficiaries named to such assets, is essential, because if a particular asset has a beneficiary designation in place, this beneficiary designation will control and override what is spelled out in a client’s Last Will and Testament, which, in many instances, can often frustrate the whole reason the client created a Will in the first place.
As far as family relationships and other relationships are concerned, it’s extremely important to determine if any intended beneficiary is a minor or a disabled person. If so, certain planning can be extremely beneficial. If the client is married, is this a first marriage or a second marriage? If a second marriage, does the client have children from a prior marriage? If the client has children, does he/she intend to disinherit any child? Are there other special circumstances to consider? Exploring these relationships is not only helpful, it’s crucial to creating an effective estate plan.
Also, besides considering creating a Last Will and Testament, a client should always be informed of the trust planning available, including the creation of Medicaid Asset Protection Trust, if long-term-care planning is desired. In addition, does the client have a current and effective Power of Attorney, Health Care Proxy and Living Will? If so, do these documents still meet with the client’s wishes and desires? Having an appropriate Power of Attorney and Health Care Proxy is a must for most clients. Without these documents, a client’s financial and physical well-being may be at risk, even in the face of the most carefully created Last Will and Testament and trust.
What Are Some Possibilities As Far As Elder Care Planning Is Concerned?
A knowledgeable estate planning attorney should also be very well versed in elder care planning. The two practice areas are closely related. An effective estate plan can quickly amount to a hill of beans if an effective elder care plan is not also considered. Estate planning is primarily concerned with wealth planning during life and asset transfer after death. Elder care planning aims to preserve assets by structuring assets in such a way that a client can qualify for available government benefits, if the need arises for long-term care. As part of our holistic approach, we not only discuss a client’s assets, but discuss possibilities of structuring and planning for these assets to ensure both an effective estate plan and to maximize a client’s ability to qualify for government benefits, namely Medicaid. Depending upon a particular client’s situation, it may be advisable to create and fund a Medicaid Asset Protection Trust. Assets that are deposited into a Medicaid Asset Protection Trust will be Medicaid protected if the client does not require long-term-care prior to the passage of 5 years. Such Medicaid Asset Protection Trust also have numerous other advantages which I’m happy to discuss with any potential client.
Because each client is an individual, any elder care plan and estate plan must be customized to suit the client’s needs and desires. For example, an attorney should always take the time to figure out who the client is: is the client healthy, who are their loved ones, would they rather spend their assets on long-term-care instead of preserving an inheritance for their family and loved ones?
The other major component in elder care planning is creating advanced planning directives, which include a Power of Attorney, Health Care Proxy and Living Will. These documents are intended to ensure that if a client ever loses capacity, he/she has a stand-in of who can make decisions for the client. A Power of Attorney is a document by which the client, in this case referred to as the “Principal”, designates a family member, loved one or trusted advisor, called and “Agent”, to make financial decisions for the Principal. While a Power of Attorney should be custom drafted to meet a particular client’s needs and desires, a typical Power of Attorney will give the Agent the authority and ability to access and manipulate the Principal’s assets so these assets can be preserved for the Principal’s future use or can be saved as an inheritance for those people named in the Principal’s Last Will and Testament. The importance of having a Power of Attorney cannot be overstated. In practice, the Power of Attorney is typically employed when the Principal loses capacity, and the need to pay the Principal’s bills or engage in elder care planning for the Principal is advisable.
A Health Care Proxy is similar to a Power of Attorney, but the Health Care Proxy is used to appoint an Agent to make health care decision for the Principal if the Principal loses capacity. In the absence of an appointed Health Care Proxy/Agent, New York State Surrogacy Law will control, which may lead to undesired results.
A Living Will is a document addressed to a client’s Health Care Proxy/Agent that details a client’s decision as to whether to receive care if the client is in an irreversible coma.
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