The recent COVID pandemic has left many thinking about the possibility of death, worrying about plans they have put in place, or the plans they have not put in place. For many, stress is created by the idea if I plan for my death, it means it is going to happen soon. We hope you can think of estate planning as a means of getting what you want to happen when you become unable to make it happen.
Estate planning gives you a say. You make decisions and put the documents in place to inform everyone of your wishes. The basic four documents are the will, a power of attorney, the living will, and the health care proxy. Frequently attorneys will create these four documents as a package deal. The power of attorney, health care proxy, and living will are all documents that are in effect while a person is living. The last will and testament becomes the governing document when a death occurs.
Do you want to be able to say who will manage your financial affairs while you are alive if you are unable to do so? How will your bills get paid if you are unable to write out checks or do online banking? Who will make investment decisions if you are incapacitated and unable to do so? Who can access funds to pay bills if you are in a coma and unable to make those phone calls to request funds?
The power of attorney (POA) document gives someone the authority to act on your behalf if you are unable to do so. We see a POA used if someone is out of town and paperwork needs to be signed. For example, a person has been deployed or is out-of-town for travel and a document requires a signature. Maybe someone is in a coma or shows signs of forgetfulness and needs assistance in managing their finances. The POA allows someone to act on your behalf. The POA requires them to act in a manner that is for your best interest.
Certainly, a POA gives someone a lot of autonomy and you need to be cautious about whom you give this power. If there is a marriage, often the spouses first name each of as their POA. Adult children can be named for their parents or the parents can be the POA for adult children. We often see siblings or a trusted family friend named as a POA. When determining your POA, make sure it is someone you trust to understand how your finances work and what you would do in various situations. You want a POA who will look out for your interests first and put theirs second when managing your financial affairs.
The health care proxy allows someone to make medical decisions for you if you are unable to do so. The living will document can provide the person who is your health care proxy with information about what you are willing to accept or not accept to keep yourself alive. Are you willing to take experimental drugs? Do you want to be put on a ventilator to help you breathe if you are in a vegetative state? What medical measures are you willing to accept if you are considered brain dead? Are you willing to be part of experimental trials? In your living will, you can let individuals know what you want and do not want to give them the information to make medical decisions for you. The health care proxy individual makes decisions based on what you have said you want.
Your power of attorney and your health care proxy do not have to be the same person. If you consider that a POA is someone who will manage your finances, you certainly want someone whom you consider to be a financially responsible individual. Meanwhile, the health care proxy needs to be someone who understands what you want and can follow through with your wishes. If you wish is to “have the plugged pulled” because you are in a vegetative state, can the person whom you are naming as your health care proxy make that decision? Is this a child who will keep you alive at all costs or follow your wishes? A sibling may be a better choice than your daughter so that you are not putting that responsibility on someone who might find it challenging to make those decisions. Is your daughter a better choice than your son? In the case of both the POA and healthcare proxy, you want to match the responsibilities to the individual’s ability to handle those responsibilities.
These three documents are meant to help while you are still alive. Failure to have them in place might mean someone has to go to court to gain the ability to manage your financial affairs if you are unable to do so. This means time and money. If there is no indication of what measures you want to be used in a medical crisis, are you going to have children who want different actions and end up in discord over your care? What you want is much more likely to happen if you have put the documents in place to allow someone to carry out the wishes that you have made known to them.
When your death occurs, the POA becomes invalid and that individual no longer has the authority to act of your behalf. This is where the will takes over and decisions are made because of that document. When a death occurs, a lot of activity must occur quickly. The first set of decisions are related to the services you want for burial.
If you have planned your funeral, it means everyone knows what you want to happen when you die. Do you want to get cremated or be buried? You can pick out your casket that will hold your body and the plots where you want to be buried. You can choose the urn that will hold your ashes. Do you want a church service or not? Do you want a viewing as part of your services? You can pick the funeral home. If you pre-plan, the music and readings can be determined ahead of time. You can plan who will read at the service, who the pallbearers will be, and what you want to wear. Do you want to be buried with a favorite item, your wedding rings, or pictures of loved ones?
If you choose not to pre-plan your funeral, what will happen? Your family will be dealing with the grief of your passing and also need to make lots of decisions. If you have family members who are thinking differently, how will that be resolved? Ideally, you have pre-arranged your funeral so that everyone knows what you want. If you have paid for the arrangements, it means that no one needs to be concerned about the financial impact of the decisions that were made.
In pre-planning your funeral, you can make your wishes known and hope that they are followed. You can also elect to pay in advance for the services that you want and know then that financially your wishes can be followed. If you chose to plan your funeral and not pay for it, you are taking the risk that the funds will be there to pay for your choices.
Prepaying for your funeral ensures that you are not putting the burden of funeral costs on loved ones, who may or may not be able to afford it. While we all hope that we have assets available at the end of our life, we cannot be sure of that. If you have a prolonged illness before passing, will it “use up” all your cash?
I am also aware that many individuals believe they have life insurance in place to pay those costs. We see cases where those policies must be cashed in to pay for long term care costs. We see cases where the life insurance has been borrowed against and the death benefit must first be used to pay off the outstanding policy loans. We have seen individuals later in life forget to make premium payments and the life insurance policy is no longer in force.
We often see children scrambling to try and pay for services. This can create discord between siblings if you have children who have different levels of financial security and the ability to pay. We see arguments over what services can be between children that turn into a lifetime of not speaking to one another and families split apart. For a variety of reasons, we believe both pre-planning and prepaying for your end-of-life services makes sense. You know what you want. You pay for what you want. And – that should mean, you will get what you want.
After the final services, the time comes for settling the estate. Look for our next post that discusses the will, titling of assets, and probate.