Written By Attorney Lori A. Curtis
“Estate planning.” What do you think of when you hear the phrase? The Rockefellers? The Kennedys? Movie stars? Sports figures making millions? The rich and famous?
Estate planning is not just for people who have a lot of money, property, businesses, or even any legal problems. Estate planning is simply a way of keeping what you already have, even when you can no longer make those decisions for yourself. There are different levels of estate planning, based on your individual needs, but the most basic estate plan includes documents that every adult should have: a Will, a General (or Durable) Power of Attorney, a Health Care Power of Attorney, and a Living Will (or Medical Directive)
A Will is simply a document that tells your loved ones who will get what and, if you have minor children, who you would like to be their guardian in the event of your death.
The Durable Power of Attorney is a legal document in which you grant another individual the authority to make legal and financial decisions on your behalf in the event you are ever incapacitated and unable to make such decisions for yourself.
A Durable Power of Attorney Health Care is similar in that you grant another individual the authority to make health care decisions on your behalf in the event you are ever incapacitated and unable to make such decisions for yourself.
These documents do NOT mean these individuals can “pull the plug” or spend all your money; it only means they can take care of your financial affairs and make health care decisions for you.
The document that tells your physicians and loved ones under what measures you want end of life care is called a Living Will or a Medical Directive. This document usually tells your doctors what treatment, if any, you want if you end up with an incurable injury, disease or illness.
These documents work together and it is important for everyone to have all the documents. I will give you an example (the character is fictional, but the situation is all too real).
Single mom raising three kids by herself. Her husband was killed serving in Afghanistan. She is only 33 years old and anticipates being around for a long time. She makes decent money. Purchased a house with the insurance money she received when her husband died, but still owes some money on it. She doesn’t have any close family members; she was an only child and mom and dad died a number of years ago; but she has a number of friends as a support group. Let’s call her Clara.
On her way home from work one day, Clara is in a car accident. She is unconscious and the paramedics do everything they can to keep her alive on the way to the hospital.
Once there, things look grim. There are a number a surgeries she needs, but there are also competing surgeries and therapies the doctors can try to save her life. Clara, unfortunately, has no Health Care Power of Attorney. She doesn’t have any family for the physicians to call. One of Clara’s friends hears about the accident and rushes to the hospital, but she is unable to make health care decisions on Clara’s behalf. The doctors were forced to make all the decisions on their own. They used extreme measures to try to keep her alive and managed to get Clara stable, although Clara was still in a coma after the surgeries. Clara had no Living Will or Medical Directive stating what her wishes were in those circumstances, so she was kept alive through a number of machines, even though she was non-responsive and the doctors did not think she would ever wake up.
Clara’s friends help out by taking her three kids, but no one knows what to do about Clara’s bills. They don’t know what bills are out there and no one has the authority to access Clara’s bank accounts to pay the bills. No one has Clara’s Durable Power of Attorney. Late notices, interest, and penalties start to accrue. Her utilities are turned off and the mortgage company sends out a notice of default on the mortgage. Clara’s friends are more than happy to help with the kids, but her friends all have their own bills to pay and the Clara’s kids are adding to their expenses.
After a number of months in the hospital, Clara died. One of her friends who had become attached to the kids, applied for guardianship through the Court, but Clara had an uncle she hadn’t heard from in years who lived in California. He contested the guardianship and, as a relative, was awarded guardianship of the children, who had never met him before in their lives.
Clara’s bank foreclosed on her home so the children lost the one place they knew and loved. Their uncle moved them back to California to live with him, so they lost all their friends and all their familiar surroundings.
Clara did have a life insurance policy through work, but her kids were named as beneficiaries. As their guardian, Clara’s uncle was in control of the funds. He started off using the funds to pay his monthly bills and buy food for the kids, but then he ran into some financial difficulties at work and decided to “loan” himself the money until he could pay it off. His work problems only got worse, and eventually he declared bankruptcy.
Each of Clara’s kids, once they turned 18, left the uncle’s home – at his request – because he simply couldn’t afford to care for them any longer and felt they should learn life’s experiences the hard way. Her children were forced to work minimum wage paying jobs and apply for student loans to try to go to college – which meant paying outrageous California tuition rates, or, since they had been living in California, out-of-state tuition rates for Arizona schools, which is where they really wanted to be so they could come back and reconnect with all the friends they used to know.
If Clara had planned in advance and had a Will, providing for a guardian she knew and loved for her children, if she had her Powers of Attorney and Living Will (Medical Directive) in place, there is no guarantee Clara would still be alive, but her family likely would have been raised more closely in tune with what Clara wanted for her children. (And, with a properly prepared trust, she could have made sure her life insurance policy was used for her children to get an education and become established in life…but that is a topic for another day.)
We never know what life has in store for us and when we may need basic estate planning documents. Make sure your family is protected. Make sure you have your Will, Powers of Attorney, and Living Wills prepared for you while you are still able.