Watching Out for Your Family:
Why You Need A Living Will and Power of Attorney
(From May 05)
· First
in a three-part series
By David Black
In light of the media attention surrounding the recent Terri Schiavo
case in Florida, Birmingham Parent is examining the need for Advanced
Care Directives (Living Wills). This is the first in a three-part
series on the importance of all types of wills for families, particularly
those with younger children. Look for additional stories on wills,
estates and trusts, as well as planning for a guardian for your children,
in the June and July issues of Birmingham Parent. As always, check
with a professional before making a decision for you and your family.
Birmingham Parent makes no legal recommendation or endorsement.
It’s the question an entire nation has asked in recent weeks:
If you were in Michael Shiavo’s situation, would you know — and
be able to prove — your spouse’s wishes regarding life
support and artificial feeding?
It’s not an easy question to answer, but attorney Greg Case
with the Southern Law Group in Hoover has a suggestion: Sign an
advanced care directive and a power of attorney.
Advanced care directives, also known as living wills, allow you
to specify the extent and nature of care you receive if you become
incapacitated. If there is no such directive on file and you become
incapacitated, then every effort will be made to keep you alive for
as long as possible, which may not always be desirable, Case says.
“
How do you feel about being on life support? If you don’t
want that, you need to
address that,” Case says. The directives are detailed forms
with boxes you can check.
“If you’re drawing up a regular will, an advanced care
directive can be added easily,” Case says.
In fact, the living will is one of the easiest and most affordable
legal documents you can write, says Howard Neiswender, partner
in Balch and Bingham of Birmingham and co-chairman of its Wealth
Management Group. “Living wills can be downloaded from the
internet, picked up at the hospital, the doctor’s office – just
about anywhere. In fact, we don’t even charge for them as
they are part of the will package when we prepare a will,” Neiswender
adds.
“The reason the [lack of] a living will was such an issue
in the Schiavo case was that the family disagreed,” Neiswender
adds. “Without such a document, a family is unprepared for
the unexpected, and their wishes may not be carried out, even if
they did state them.”
Once you have a living will, Case suggests giving a copy of your
directive to a pastor or doctor so it’s on file with others
who know you.
In the case of severe disability, having someone
else you trust authorized to pay bills and sign your name on checks
and other
important documents becomes vital. Setting up a power of attorney,
as it’s
known, can be done for around $100,
Case says, and could mean the difference between whether a house
payment or
medical bill gets paid.
“
Let’s say you’re going in for cancer surgery,” Case
says. “You’re going to undergo chemotherapy. You don’t
want to worry about whether your bills are being paid while you
recuperate. You might want to think about doing a power of attorney
in case something
happens.”
“Or, imagine that you’ve drawn up house
papers for joint tenancy with right of
survivorship, meaning that — if your spouse dies — ownership
of your home automatically reverts to you. Your spouse gets hit in
a wreck and goes into a coma. You accumulate $650,000 worth of medical
bills. There’s a miracle cure, but the insurance is exhausted
and you have bills to be paid. You’re thinking, ‘I’ll
sell the house to get the money to do what we need to do.’ But
you can’t, because your spouse can’t sign. This is
where a power of attorney would allow you to sell the home.”
“This is getting into a very personal area,
and, with so many marriages ending in divorce, it may not be a
good idea for some
relationships. Getting a power of attorney is an individual decision.
You may have
to seriously consider this one. There has to be a lot of trust.
But it never hurts to grant a power of attorney to your spouse in
case
they need it.”
Case says he has drawn up powers of attorney for some clients and
not
executed them, at their request. “They can go and sign it
later if they want,
and get it notarized, and then it’s done. There’s nothing
to replace a power of attorney except guardianships, which have become
complicated and extraordinarily expensive,” Case says.
According to Neiswender, two kinds of power of attorney
are available: specific, and durable, or general. A specific power
of attorney
gives you the power to do specific things, such as transferring a
car title
for someone who’s not around to do it on their own, or giving
a relative or guardian power to accept medical care for your children
temporarily, while you are out of the country, for example. The
power of attorney then expires after the event.
A durable or general power of attorney gives authority to do basically
anything
the person could do if they were able to, Case says, such as selling
property
or transferring funds.
Powers of attorney are not necessarily permanent. “You can
revoke a power of attorney at any time,” Case says.
If you haven’t executed a living will, Neiswender says you’re
not alone, but you should do so as soon as possible. “The biggest
misconception is that people can always ‘get around to it.’ They
put it off, assuming nothing bad will happen to either parent,” Neiswender
explains. “This can have serious consequences if you experience
any problems.”
RESOURCES:
Learn more about Living Wills at:
· The Alabama Bar Association, www.alabar.org/public/lifeplan.cfm
·
St. Vincent’s Hospital online, www.stv.org/adam/encyclopedia/ency/article/001908.htm
Learn more about Powers of Attorney at:
· www.stv.org/adam/encyclopedia/imagepages/9619.htm
· www.ipowerofattorney.com/
Attorney referrals at:
· www.alabar.org
Watching Out
For Your Family:
Trusts and Estates - Tips To Make Your Final Affairs Trouble-free
Second of a Three-Part Series
(As always, check with a professional before making a decision for
you and your family. Birmingham Parent makes no legal recommendation
or endorsement.)
How much are
all of your assets worth? That may not be an answer you readily
know, but attorney
Greg Case of the Southern Law Group
in Hoover says it’s critical in helping determine how much
of a tax bite the government will take out of your estate later.
“Depending on the size of your estate, it may not hurt to
go ahead and set up a trust in your children’s name,” Case
points out.
“A trust
is basically money set aside for the children or whomever you name.
You can
set up a trust at any bank. There are
ways within trusts that you can pass the property without it being
subject to estate tax. You need to consult an attorney about that.”
Under trusts,
children can access the money at a certain age, even during your
lifetime,
according to Howard Neiswender, partner in
Balch and Bingham of Birmingham and co-chairman of its Wealth Management
Group. Income from the trust can go to the kids, but neither the
body of the trust nor the income from it must be touched by the person
who grants the trust. “It can protect money for the child(ren)
against future divorce or bankruptcy of the parents,” Neiswender
says.
“There can be a certain amount of money set aside that will
come out of the trust at particular periods in the child’s
life. If the mother and father are wealthy, they could set aside
a million dollars in trust at 4 percent a year. That’s $40,000
a year that would come as income,” Case adds.
You also have
to look out for the age of the children, Case says. “If
you have kids, the guardian or custodian you name may be the guardian
or custodian who takes care of your house until that child gets old
enough to be granted possession of the property. It has to be someone
that you trust and who is willing to take on that burden.”
Not only is looking at your estate important in death; it is important
for your quality of life, as well, says Greg Powell, CIMA, wealth
consultant and president of Fi-Plan Partners of Birmingham.
“We ask clients today about what they want their legacy to
be, and this can change throughout their lives and they earn and
spend money,” Powell explains. “So it is important to
have an ongoing plan, looking at it periodically and making changes
as needed…we handle ‘generation’ planning.”
The 52 Percent Tax
Estate trusts are set up to help get money moved around to keep tax
liability low. In Alabama, estates worth more than $1.5 million
are subject to an estate tax, Neiswender says, and next year, in
2006, that amount will rise to $2 million. “In 2008, the
amount will rise to $3.5 million,” Neiswender adds.
This “estate tax” amounts
to 52 percent, Case says, so parents may try to move money to reduce
taxes.
Just
how much should you reserve for a child in a trust? “What
a lot of people do is to try to put enough money in that kid’s
hands to understand how to manage their money. At a certain point,
hopefully, they’ll learn how to manage their money and they
can have access to the entire body of the trust,” Case says.
Trusts can be
important, too, for special issues within your family, Powell adds.
For example,
if you have a special needs child, you
may need to plan for him as you get older and if you should die.
Estate planning is also about the “quality of life,” Powell
explains.
“When you
set up a trust for the benefit of your children, what you’re doing
is cutting all ties to the money. You’re
really giving it to the kids. You have to have no strings attached
to that money. The government wants every bit of money it can get.
If there’s any string whatsoever that brings money back to
your estate, it will be subject to the estate and gift tax,” Case
explains.
And once the trust is established, he adds, it become irrevocable.
Under the most
desirable circumstances, surviving members of your family would
be able to
distribute your estate’s assets without
having to deal with challenges or other issues that might force the
estate to be probated, or subject to hearings in court. “There
are ways you can avoid having to probate an estate,” Case says.
If a family’s
home is listed in the name of one parent who dies, the surviving
parent
would be left without clear title to the
house, requiring the estate to be probated, Case says. But this situation
can be avoided easily.
The spouse who
owns the home should sign a quitclaim or warranty deed, in which
ownership
of the house passes to the spouse. The legal
act is known as joint tenancy with right of survivorship. “The
house automatically goes to the survivor, without the need for a
will or probate. If your spouse is already on the deed, you can avoid
the cost of probate.”
Sizing Up Your Estate
A million dollars doesn’t go as far as it used to. And that
could be true when looking at the total value of your estate.
This is important,
Neiswender adds, even for the seemingly “unwealthy,” as
life insurance benefits, retirement benefits and death benefits are
all subject to the estate tax. Even if you aren’t worth $2
million alive, you may be once you die.
Case also suggests reviewing your life insurance every three or
four years to make sure the beneficiary is still who you desire.
Powell
reiterates the importance of looking at your estate as your wealth
and life
grow
and change. Things happen. Your money may grow,
you may inherit property or money, or health care may deplete your
funds, should a health issue arise. “You need a game plan in
place…we act like the hub of a wheel to help put everything
into play and take a client by the hand, walking through the different
scenarios of life, from estate planning, to trusts, planning for
college and more,” Powell says. “And if your financial
planner isn’t looking at the long-term game plan, this should
be a red flag that he’s not doing his job.
David Black is
a Birmingham freelance writer. Carol Muse Evans alsocontributed
to this story.
Watching Out For Your Family:
THE IMPORTANCE OF WILLS -
Tips To Make Difficult Times Easier
Third in a three-part
series (As always, check with a professional before making a decision for
you and your family. Birmingham Parent makes no legal recommendation
or endorsement.)
That upcoming
vacation really has you and your spouse excited. But you know these
are
uncertain times in the world. So, just in case,
you’ve asked your best friends to look after your kids in case
the unthinkable happens while you’re away. You and your spouse
have also signed a joint statement in each other’s presence,
specifying how your property is to be divided. You think you’ve
handled all the essentials to make sure the kids are taken care of
if something does happen...right?
Attorney Greg
Case of the Southern Law Group in Hoover says you’d
better think again. Many couples, including young parents, make huge
mistakes in planning for the division of their assets by failing
to know what the law does and does not allow, Case says. In addition,
the worst is not planning for who will care for your minor children.
A simple will could prevent such a mistake.
A will, according
to Joe Bedingfield, certified financial planner with Bedingfield
Financial
Planning LLC, is a legal document that
details where you want your estate’s assets to go (after debts
and taxes are paid) and who is going to verse the execution of the
will, as well as care for minor children. “There are typically
three reasons why people do not have wills. The main one is just
good old-fashioned procrastination…. the second that is most
prevalent among parents with young children is an inability to agree
on who they would name as guardian,” Bedingfield says. “The
third is not confined to age – the fear of facing your own
mortality.”
Still, perhaps
the single most important step that parents should take is to have
what’s known as a simple will. “You don’t
like to think about death, but parents should have a simple will
soon after they get married or at least soon after having children,” Case
says.
As the name implies, simple wills are neither complex nor expensive
to create. Case, who has been in practice handling wills, estates
and trusts for 12 years, says most simple wills can be drawn up for
around $150 to $200. Failure to draw up a simple will, however, can
lead to costly legal proceedings that can leave a family sharply
divided for years.
It is important
to consider why you are accumulating assets/wealth, in considering
how to put
a will together, says Greg Powell, CIMA,
wealth consultant, president and CEIO of Fi-Plan Partners. “If
you accumulate wealth and want your loved ones to have it after you’re
gone, [not having a will] will leave your loved ones with no way
of claiming it.”
When a person who has filled out a will dies, the executor of the
estate files the will, pays any debts and meets the wishes of the
deceased person and closes the estate. If the value of an Alabama
estate is less than $1 million, the estate is closed in six months,
Case says.
And, Case warns, there are myths about wills that, if not understood,
can lead to major legal challenges for surviving family members:
Myth # 1: A husband
and wife can have their assets divided by drawing up what’s
known as a joint will.
“Joint
wills are legal fiction,” Case says. “They
do not exist. You might not die at the same time as your spouse.
Your property has to go
where you want
it to go. Every person must have their own will for it to be accepted.”
Myth # 2: In creating a will, you can keep a family member from receiving
money or property simply by not mentioning them.
There is much
debate over this, even in the legal community. Howard Neiswender,
partner in
Balch and Bingham of Birmingham and co-chairman
of its Wealth Management Group, says that the only person you must
intentionally mention is the spouse, in order to prevent him or her
from getting one half of the estate as required by law. “If
you fail to mention anyone else in the family, the only way that
person or persons can contest the will is to prove undue influence
or lack of mental capacity at the time the will was drawn up by the
deceased,” Neiswender explains. “Alabama has no law that
you must mention other family members…but the law does say
the estate must be divided between the surviving spouse and children
unless it is otherwise specified.”
But Case disagrees.
Failing to mention a family member is a quick way for your will
to become
mired in legal challenges, Case says. “You
can’t just leave somebody out of your will, even though that’s
what you intended. Let’s say you have a family member you’re
completely fed up with and you choose not to leave anything to them.
So, you make no mention of that person whatsoever in your will. But
if you leave them out of the will, they can come back and challenge
the will in court, saying, ‘My parents meant to leave me something.’”
Myth #3: The state will still make sure your last wishes are honored,
even if you have not drawn up a will.
Don’t count on it. Even if you have planned for a friend or
family member to take your minor child after your death, if it’s
not in legal terms (will), your last wishes may not be honored. “A
will is especially important with young children, a second marriage
or any special circumstances,” Powell points out.
“
If you don’t plan for your death, the state takes over,” Case
says. “They have a set of guidelines that they’re going
to follow. They’re going to do it by their rules and not
yours. The state doesn’t know what you wanted to do, and
they don’t care. That may sound cold, but that’s how
it works.”
Myth #4: Wills are acceptable in almost any form.
“Wills have a particular form they have to follow,” Case
says. “Alabama law generally won’t recognize handwritten
wills. You have to have a special court hearing to have those recognized.
In Alabama, if there are two witnesses and it’s notarized and
meets the other criteria for a will, it could be considered a will.”
You can create
your own will, but you must know the rules, Case says. Requirements
about
wills, including witnesses and the presence
of a notary signature, vary from state to state. If you don’t
meet the formality requirements of a will, it can be challenged.
“You have to be sure what the requirements in your state are,” Case
says. “Otherwise, you’re going to a gunfight with a knife
in your pocket.”
To save money,
many people now use computer software to draft their wills, Bedingfield
points
out, but you should still have an estate
attorney review it. “If you own your own business, have a special
needs child, are in a second or later marriage or estimate your estate
to exceed $1.5 million, you should have an attorney who specializes
in estate planning draft the document.”
Neiswender agrees. “Find someone who specializes in it…otherwise,
if you do it yourself, it’s almost like doing brain surgery
on yourself,” he adds.
Be sure to put your will in a safe spot, but where it can be found. “A
safe is a good place, but others need to know where it is,” Case
says.
Case offers these four tips for newly married couples and parents
regarding wills:
1. Draw up a simple will
It takes only an hour or two, can be done for around $150, and can
prevent
major legal and emotional complications for your family.
2. Determine how much your estate is worth
Are all of your assets worth a million dollars or more? If so, you
may want to
explore ways of reducing your vulnerability to being taxed at more
than 50 percent
of the value (of your estate? Not sure what goes here incomplete – more
info needed)
3. Consider signing an Advanced Care Directive
Known formerly as living wills, these directives specify how much
and what kind of care you wish to receive if you become unable
to care for yourself.
4. Consider signing a Power of Attorney
If you become temporarily or permanently incapacitated, having a
power of attorney
in place allows someone else to take care of important matters for
you, such as
paying monthly bills and signing official documents.
DAVID BLACK IS
A BIRMINGHAM FREELANCE WRITER. CAROL MUSE EVANS ALSO CONTRIBUTED
TO THIS STORY.
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