Like the shoemaker whose children run around barefoot, there are lawyers who have no estate plan. Even more numerous are non-lawyers who have never done any estate planning. Some folks might reason that such planning is unnecessary because they don’t have vast wealth or that all of their wealth is tied up in retirement assets that will pass to their named beneficiaries. While it is true that such people may not require sophisticated estate planning, all adults would be prudent to ensure that appropriate personal and financial decisions will be made for them should they lose the ability to make such decisions themselves. There are several basic estate planning documents that enable people to appoint trusted individuals to make such decisions on their behalf.
DURABLE GENERAL POWER OF ATTORNEY
One of the fundamental components of any estate planning program is a Durable General Power of Attorney. With a Durable General Power of Attorney, you appoint another person, most likely your spouse if you are married (sometimes acting together with another person), to transact your financial affairs in the event you are unable to do so. A good power of attorney has the following characteristics.
Durable Power of Attorney
It is important that such power of attorney be durable. That is to say that the power of attorney itself should contain language that enables the powers conferred therein to be in force after you become disabled and unable to act for yourself. Maryland, like some other states, has changed its law to create a presumption of durability for any new power of attorney, however, in order to ensure that the power of attorney will be valid in any state, the Gatesman Law Office recommends that one’s power of attorney contain language of durability. Such language often takes the form “This power of attorney shall survive my disability.” If you have a power of attorney that does not have such language of durability, we recommend that you review your estate plan with a qualified attorney.
A power of attorney without such language, if it was signed before Maryland changed its law, or if it is presented for use in a state where there is no presumption of durability, will not be effective once the individual who signed the power of attorney becomes incapacitated. In all cases, the authority of an agent under a power of attorney ceases upon the death of the principal.
Springing Power of Attorney
While the Durable General Power of Attorney can be drafted in such a way that it becomes effective upon your disability (known as a “springing power of attorney” because it “springs” into effectiveness upon the happening of a certain event such as the written certification by your doctor that you are incompetent), it is better to draft the power of attorney such that your agent’s authority begins when you sign the document. Otherwise, you effectively appoint the medical community as gatekeepers to the exercise of power by your attorney-in-fact because any institution such as a bank to which the power of attorney is presented has the right, and is likely to require irrefutable proof from your doctor or doctors that you are, in fact, incapacitated.
Some people desire to employ a springing power of attorney because they are uneasy that their attorney-in-fact may usurp their authority over their assets. If that is the case, then the proper inquiry should not be: “When does my power of attorney become effective?” Rather, the question should be: “Have I made a wise choice as to the person who will serve as my agent?” If you are nervous about such person taking improper action while you are around to oversee your affairs, such person is the worst possible choice to be the one to manage your affairs in the event you lose the ability to do so yourself.
Gift Giving Power
Gift giving can be an important estate planning and long-term care planning tool because inter-family asset transfers often will enable one to preserve wealth that otherwise will be wasted on taxes or will be used for long-term care costs that otherwise would be paid for by insurance or government benefits. Thus, it may be in your best interest that your attorney-in-fact make gifts in order to effectuate those estate planning and long-term care planning goals. In Maryland and D.C. as in many other states, an attorney-in-fact is not authorized to make gifts unless one’s Durable General Power of Attorney gives express authorization for such gifts. Therefore, your Durable General Power of Attorney should include express gift giving authorization if that is appropriate to your circumstances.
Real Estate Transactions Under Power of Attorney
Your power of attorney should be notarized so that it may be used to transact your real estate if that is your desire, otherwise it cannot be recorded in the land records, a requirement if your attorney-in-fact is to be able to sign a deed on your behalf. Also, if you own real estate in the District of Columbia, your power of attorney must contain special language at the top of the first page in order to give your attorney-in-fact power over your real property. Without the proper language and typeface required by the D.C. code, your agent will not be able to transact your real property in the District of Columbia even if your power of attorney provides such authorization in the body of the document.
ADVANCE HEALTH CARE DIRECTIVE
Every individual should have in force the fundamental estate planning document known in Maryland as an Advance Directive and Appointment of Health Care Agent. The purpose of this document is to appoint an individual whom you trust to make medical decisions on your behalf in the event that you become disabled and are unable to communicate your desires to your medical care providers. In addition, this document can be drafted in such a way that it serves as a Living Will in the absence of a qualified decision maker allowing the document to communicate your choices regarding end of life care.
Access to Medical Records after HIPAA
It is important that the person you appoint to make medical decisions have access to your medical records. The Health Insurance Portability and Accountability Act, commonly referred to as HIPAA, severely restricts a third party’s access to your medical records and your Advance Directive should contain specific language recognized under the statute to enable your agent to obtain such information. Otherwise, your agent may not be allowed access to your medical records thereby defeating the purpose of appointing such agent in the first place.
Who should use these estate planning tools?
While a durable general power of attorney and an advance directive serve as building blocks for even the most sophisticated estate plans, every person should employ these tools to ensure that appropriate personal and financial decisions are made in the event they become unable to make such decisions for themselves. If you already have such estate planning documents, we urge you to review them to ensure that they have the characteristics discussed in this article.
If you have any questions about the estate planning strategies discussed in this article or elsewhere on this website, please contact William M. Gatesman using the contact information at the bottom of this page or by sending email to firstname.lastname@example.org.