What if You Had a Do-Over?

Q. My mother, Sheila, and my father, Tim, always lived in the moment and steered clear of discussions about getting older, retirement, and planning for the future. They lived in a rural part of Virginia and were convinced that Social Security and Medicare would be enough for them to get by on when they retired. They never did any estate planning, incapacity planning, or long-term-care planning.  Dad ended up needing nursing home care and they depleted almost all of their assets to pay for the nursing home. After mom died, what little was left of their estate went through probate, which was a real nightmare for my sister and me. I do not want to same fate for my family.

My husband and I are both in our mid-40’s, and both work for the government, so financially we’re a lot better off than my parents, and we’ve already started saving for college for our three children (ages 5, 7, and 10) and we both have retirement accounts with the government.  As far as other planning goes, we haven’t done anything yet.  When it comes to incapacity planning and estate planning, what should we be thinking about? 

A.  Planning for incapacity, disability, and death are things that most people never think about until they (or their loved ones) are forced to grapple with an emergency situation. However, every adult over the age of 18 should have an Incapacity Plan that includes a Financial Power of Attorney, an Advance Medical Directive, and an Advance Care Plan.  Many people think that estate plans are for someone else, not them. They may rationalize that they are too young or don’t have enough money to reap the tax benefits of a plan. But as the following list makes clear, estate planning is for everyone, regardless of age or net worth.

1. Loss of capacity. What if you become incompetent and unable to manage your own affairs? Without a plan the courts will select the person to manage your affairs. With a plan, you pick that person (through a power of attorney).

2. Minor children. Who will raise your children if you die? Without a plan, a court will make that decision. With a plan, you are able to nominate the guardian of your choice.

3. Dying without a Living Trust.  Without a proper estate plan using a Living Trust, your assets will go through the nightmare of probate.

4. Blended families. What if your family is the result of multiple marriages? Without a proper estate plan using a Living Trust, children from different marriages may not be treated as you would wish. With a proper plan, you determine what goes to your current spouse and to the children from a prior marriage or marriages.

5. Children with special needs. Without a plan, a child with special needs risks being disqualified from receiving Medicaid or SSI benefits, and may have to use his or her inheritance to pay for care. With a plan, you can set up a Supplemental Needs Trust that will allow the child to remain eligible for government benefits while using the trust assets to pay for non-covered expenses.

6. Keeping assets in the family. Would you prefer that your assets stay in your own family? Without a proper plan, your child’s spouse may wind up with your money if your child passes away prematurely. If your child divorces his or her current spouse, half of your assets could go to the spouse. With a proper plan, you can set up a trust that ensures that your assets will stay in your family.

7. Financial security. Will your spouse and children be able to survive financially? Without a plan for long-term care and disability in place, your family may be unable to maintain its current living standard.

8. Retirement accounts. Do you have an IRA or similar retirement account? Without a plan, your designated beneficiary for the retirement account funds may not reflect your current wishes and may result in burdensome tax consequences for your heirs (although the rules regarding the designation of a beneficiary have been eased considerably). With a plan, you can choose the optimal beneficiary.

9. Business ownership. Do you own a business? Without a plan, you don’t name a successor, thus risking that your family could lose control of the business. With a plan, you choose who will own and control the business after you are gone.

10. Avoiding probate. Without a plan, your estate may be subject to delays and excess fees (depending on the state), and your assets will be a matter of public record. With a plan, you can structure things so that probate can be avoided entirely.

Estate Planning for Parents with Minor Children

Parents of Minor Children Need a Child Protection Plan.

If you’re a mom or dad with one or more children at home under the age of 18 (as I am), you need a Child Protection Plan. Without such a plan, if you are killed or incapacitated in an accident, the police will typically show up at your house to notify the family. If the police find your kids home alone, or with a babysitter, they will have no choice but to call in Child Protective Services and have your kids removed from your home until the system can figure out what to do, and that may take weeks or even months.

Doesn’t a Will Naming Guardians Suffice?

Having a Last Will and Testament to name permanent, long-term guardians for your minor children is vitally important, but it is not sufficient to protect your children in these situations. First of all, the police typically won’t know where to find your Will, so your kids will often wind up in the hands of strangers until everyone can figure out what to do. Even if the police did somehow obtain a copy of your Will, a Will doesn’t actually appoint guardians. A Will only nominates guardians for your children after your death; a Court must make the actual legal appointment. And a Will only works if you die, not if you become temporarily or permanently incapacitated.

A Will doesn’t even become effective until it is admitted to probate (which often occurs weeks or months after death), and then it can take additional weeks or months for the Court to officially appoint your guardians. In the meantime, who is going to take care of your children? Who is going to be authorized to obtain medical treatment if a child requires it? Unfortunately, it is typically the Child Protective Services system, through its network of Foster Care volunteers.

A Child Protection Plan addresses who is authorized to take charge of your children immediately and comfort them in those terrible first hours, days and weeks after your death or incapacity, so that you can have the peace of mind of knowing that your children will be taken care of by trusted and loving family or friends who you decide on, not random strangers that the overworked government system foists upon your children.

What is a Child Protection Plan?

A Child Protection Plan is a set of legal documents that includes an Appointment of Temporary Guardian for someone you choose to take immediate custody of your children, a Parental Consent for Medical Treatment form, and a Medical Information form containing information on your child’s medical allergies and conditions, pediatrician information, health insurance information, immunization record, and medication list. Your Child Protection Plan will also include a special wallet card. The wallet card will be registered with a national database that contains all of the above information on file for each child.

If you are in an accident, your Child Protection Plan will help ensure that your children are never turned over to Child Protective Services because the police don’t have clear instructions from you and, if the unthinkable happens, your Child Protection Plan will help ensure that your children are not turned over to Foster Care strangers chosen by a overburden social services system that doesn’t care about your wishes or who you would prefer to take custody of your children.

Elder Law doesn’t start when you are “elderly”– it is something that should start when you first become an adult and continue throughout your lifetime. Your life goes through incredible changes each decade; therefore, you should look at Elder Law and Estate Planning as gradual processes, rather than a one-time ordeal. If you haven’t done so already, now is the time to begin your process.  Learn more at http://www.VirginiaElderLaw.com and call us at our Virginia Elder Law Fairfax office at 703-691-1888 or at our Virginia Elder Law Fredericksburg office at 540-479-1435 to make an appointment for an introductory consultation.

 

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.

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