Wills, Trusts, POA and Loss of Capacity
by Thomas Day
Most legal documents must be researched, written and signed while you are mentally capable. Do not wait for onset of illness or take a chance that a stroke or other physical trauma will render you mentally unsound. Some of the documents can be done by you and signed by a Notary Public. We recommend you use an attorney to complete your documents. Elder law attorneys specialize in preparing the types of documents for your long term care plan.
Upon death you have a will whether you want one or not. State intestate laws prescribe the method in which property of the deceased owner passes to his heirs. If a person is satisfied with these rules, he needs no personal will. If you want a different distribution of property, then you must devise a personal will which takes precedence over intestate rules.
Your State law may allow you to draw up a "holographic" will--a document all in the handwriting of and signed by the creator--that is considered a legal document.
Creating a valid will requires attention to detail. It must be in writing. It must be signed by you. Putting your full legal name is best. There must be two witnesses to the signing of the will, applying their signatures also. There does not need to be a Notary Public signature.
If there are a lot of assets and complications it is not a good idea to devise your own will without legal advice. If you make a mistake, it could cause all kinds of unforeseen problems for your heirs or loved ones.
There are countless types of trusts created for myriads of different situations but the most common trust, useful to most of us, is the "living" or "inter vivo" trust. The purpose of this trust is to avoid the cost, public disclosure and the possible 6-month to 12-month process of probate.
Probate transfers title from the deceased to the living, but by definition a trust never dies, thus it is not subject to probate. Most trust arrangements make the trust the owner of the property with the original owner(s) as trustee(s) (caretakers as it were) and beneficiaries(s). As beneficiaries, the property reverts to the estate of the original owners after their deaths.
In some states the probate process has been greatly simplified and the cost is minimal. In these states, the cost and bother of setting up a trust to avoid probate may be more than simply going through the probate process after death.
For Medicaid qualification, living trusts are subject to inclusion of assets and the property must therefore be listed as resource.
Many people put a child's or sibling's name as joint tenants with rights of survivorship on property titles to avoid probate on real property. This works but it's not a good idea. There are at least 3 potential problems.
- If the new person on the title becomes subject to a judgment, even one arising from an accident, then a portion of property may be lost to the judgment and it may force an unwanted sale.
- The new person on the title must consent to any disposition of the property. He or she might not be in accordance with what the other owner(s) wants to do.
- The person assuming ownership at the death of the other tenant(s) has received a gift and loses the step-up in basis at death. Large capital gains taxes may eventually have to be paid when the property is sold thus transferring a portion of the equity to the government in the form of taxes. And if the property was not the principal residence of the new tenant at the time of transfer, the capital gains exclusion can't be used to avoid the taxes either.
Knowing the problems, some people are tempted to have change-of-title documents pre-signed and at the owner's death, file the change at the county recorder's office with a date that precedes the owner's death. Besides the legal implications involved, this transaction still brings on the unfavorable tax implications above. Probate would be substantially cheaper than this solution by avoiding the higher cost of capital gains taxes.
Generally the will specifies the disposition of major assets and such lists are incorporated into it. But, often the disposition of items with little intrinsic value but immense sentimental or historical value is just as important if not more important to most us. These are such things as personal histories, achievement awards, genealogies, favorite ceramics, handicrafts, heirlooms, special furniture, pictures, collections, etc.
It is important to make a list of who-gets-what of your valued belongings and update it regularly. Sometimes in the haste and confusion of arranging long term care, "treasures" end up in the trash or at the local thrift store. Or even more likely, they end up in the wrong hands. The improper distribution of assets can sometimes cause bad feelings or infighting between your loved ones. This contention has even broken apart families.
Usually State law does not require such lists to be attached to the will and the list may not even require the help of a lawyer if you don't have a will. Giving copies of the list to the recipients should be sufficient enough intent for your loved ones to respect your wishes. But, if you are concerned about legal respect for your wishes, you can create the list in your own handwriting and sign it.
Various Forms of Power of Attorney (POA)
A Power of Attorney is a legal instrument that is used to delegate legal authority to another. The person who signs (executes) a Power of Attorney is called the Principal. The power of Attorney gives legal authority to another person (called an Agent or Attorney-in-Fact) to make property, financial and other legal decisions for the Principal.
A Principal can give an Agent broad legal authority, or very limited authority. The Power of Attorney is frequently used to help in the event of a Principal's illness or disability, or in legal transactions where the principal cannot be present to sign necessary legal documents.
There different types of powers of attorney. These are "Nondurable ," "Durable," and "Springing" or Health Care Power of Attorney.
A "Nondurable" Power of Attorney takes effect immediately. It remains in effect until it is revoked by the Principal, or until the Principal becomes mentally incompetent or dies. A "Nondurable" Power of Attorney is often used for a specific transaction, like the closing on the sale of residence, or the handling of the Principal's financial affairs while the Principal is traveling outside of the country.
A "Durable" Power of Attorney enables the Agent to act for the Principal even after the Principal is not mentally competent or physically able to make decisions. The "Durable" Power of Attorney may be used immediately, and is effective until it is revoked by the Principal, or until the Principal's death.
A "Springing" Power of Attorney becomes effective at a future time. That is, it "springs up" upon the happenings of a specific event chosen by the Power of Attorney. Often that event is the illness or disability of the Principal. For a person wishing to retain the most control of his or her affairs, of city a springing power of attorney is best. Some states authorize a special form of "Springing" Power of Attorney called a Health Care Power of Attorney.
The Health Care Power of Attorney is a document that designates someone to speak for the patient when he can = t, and it takes precedence over a living will. This is because health care providers consider a consultation with a proxy a better alternative than relying on a living will, since medical treatment or conditions may have changed since the will was signed.
It's important for the patient to give the health care power of attorney to someone he believes will follow his wishes. The patient can also exclude certain people from making decisions. If the patient can communicate the document has no effect. Also the document can be revoked at any time and is not binding on the patient.
If you're not sure which Power of Attorney is best for your situation consult a lawyer. But do this before the care recipient becomes mentally incapacitated or it's too late.
A living will provides guidance about end-of-life such as whether or not you want ventilation, hydration or a feeding tube. A person can also use the document to reject other life-prolonging measures. In some States, the document takes effect only if the patient is expected to die within six months or is in a persistent vegetative state and is unable to communicate to health care providers. It should be noted that someone suffering from an accident or acute illness will be treated without regard to a living will.
Also if the patient can communicate his or her wishes, the document has no effect. Also the document can be revoked at any time and it is not binding on the patient.
EMS/DNR or Emergency Medical Services-Do Not Resuscitate Form
This directive from you on life prolonging measures and to not resuscitate if death is eminent needs to be on a written, signed form and may also require witnesses.
Each state has a different set of rules and different forms. If this is something you want to add to your plan for future directive to your doctor or care coordinator, you should check with your state and fill out the proper forms.
If you or your loved one wants to die, DON'T CALL 911. Rescue workers are required to try and keep you alive. Only by going through the process described here can you prevent it.
As a source of information to you on what it will most likely read, we have included the state of Utah as an example:
( Utah 's Law) EMS DNR Directive: Section 75-2-1105.5
Attending Physician Responsibility
The attending physician will have the responsibility to determine and diagnose a terminal condition and explain that condition to the patient, and/or family or legal proxy. The physician should explain the alternatives available through the Living Will including DNR. The physician will also have the responsibility to execute the physician determination on the appropriate EMS/DNR form, if the patient should chose this option. The physician should counsel the patient in all options available to the patient.
The patient must make an informed decision concerning resuscitation for cardiac or respiratory arrest due to their terminal condition. The patient will inform their family of their decision and the location of the EMS ?DNR directive. They should make their family aware of the appropriate areas for the directive to be placed. The directive should be hung in an unobstructed view above the patient on the wall or in close proximity to the head of the bed. If the patient is mobile, it is highly recommended they were the approved bracelet/necklace that will be easily recognized by EMS personnel.
They should further inform their family, that the directive can be revoked by destroying both the written directive and the bracelet/necklace. Removal of the bracelet will be considered to be destroying it. This can be done by the patient or their proxy. They can also verbally state to the EMS personnel their desire to be resuscitated should they arrest.
The family should be aware of the EMS/DNR directive, its location and the revocation process. they should further realize that emergency medical services personnel will respond should they be called either by calling 9-1-1 or the local emergency number. But most importantly they should know and respect the wishes of the patient, regardless of their own personal feelings. The family should also make a decision as to whether or not they will want the patient to go to the hospital if they call the EMS personnel.
Medical Treatment Plan
The medical treatment plan lets the physician and the patient or someone speaking for the patient agrees on a treatment plan based on either an existing condition or something that might happen.
An individual might do a plan before going into surgery or before a nursing home admission. The plan should be updated every time there's a change in medical condition.