The most important estate planning documents that everyone over 18 needs
(hint: not a will.)
I cannot tell you how many times I have had clients in my office who were very concerned because they “need a will drawn up.” There is nothing wrong with this. We help clients with wills, and trusts and all kinds of arrangements to make sure their stuff goes where they want it to after they are on their way to the Great Beyond. The thing is the clients who are focusing on getting a will are often missing the more important documents for the Here and Now.
In my opinion, after 30 years of working with clients admittedly not always so humble (because I like to think I usually know what I am doing at this point) wills and other post-death planning are secondary. The most important documents you need to put in place are those that will help make sure things are handled correctly during your life. Because while you are alive, it is still very important to YOU that someone is making health care decisions that reflect your wishes if you cannot make them yourself, and that someone is managing your finances appropriately when you cannot.
The most important estate planning documents are (drum roll please):
A power of attorney for health care: This is a written document where you (the “principal”) choose people (known as your “agents”) who can make health care decisions in the event you cannot. Typically, you will name one individual who will act as your primary agent, and then another one or two individuals who will act in succession if your first pick cannot.
A durable power of attorney for finances and legal matters: This is a written document where you – the principal – choose one or more agents to handle your financial and legal matters. Again, you will typically select one person as the primary agent, then name one or more people to act in succession.
Wait, my spouse can’t make decisions for me? Most people are shocked when I tell them that in Wisconsin, even a spouse cannot make legal decisions on their behalf unless that spouse has been appointed as their agent. There are limited exceptions, such as limited health care decisions or the ability to act with respect to a joint bank account. But as a whole, nobody, not even a spouse or parent, can handle another adult’s health care or finances unless they have been appointed as agents in a legal document.
The importance of this point was driven home when my son Ken happily went off to college at age 18. One of the first weekends there, he was goofing off with friends, fell, and got a concussion. I got the call from the hospital and realized in a panic that this highly-experienced attorney had let her son go off to school without doing powers of attorney! While I normally never coerce my clients to sign these documents, I should confess I put some “pressure” on him to get them done as soon as possible after that little mishap.
More details on the power of attorney for health care:
A power of attorney for health care is not only the necessary tool to make sure you control your health care even when you cannot make decisions anymore, but it is also a gift to your loved ones. Typically when I am drafting a power of attorney for a client, I will go into detail about the client’s wishes and preferences for certain types of care, such as long-term care, artificial nutrition and hydration (feeding tubes and IV nutrition), end of life treatment, certain kinds of mental health treatment, and addressing some of the common issues that come up when a person has dementia. To the extent we can, we include information in the document so that it acts as a roadmap for the “agents.” I also strongly encourage clients to have frank discussions with their agents.
Typically, the agent’s authority to start making decisions about your health care will only become effective if there has been a certification that you cannot make those decisions for yourself. Typically this requires a written statement of opinion by two physicians, or a physician and a psychologist. However, a person could choose a different process – such as making the agent’s authority immediately effective – and include that in the power of attorney document.
There are helpful tools that I encourage clients to review and use, such as those that have been developed by The Conversation Project. Click here for a link to their “starter kits” for healthcare conversations. By having these conversations, a person provides guidance to the agent so that the agent can carry out the person’s wishes.
As part of the healthcare power of attorney, I recommend you also include:
Medical releases (called “HIPAA releases”) that allow your named agents to get information about your health from your medical care providers.
“Living will” language that details your preferences for end-of-life treatment. This is intended to be a direction to your physicians about whether or not to use or continue life-sustaining measures, even if your named agent is not available to act. In Wisconsin, this can be done as a separate document, but it can also be incorporated directly into your power of attorney, which is how I handle it. I do it that way because I think the end-of-life discussion requires a broader approach than the limited circumstances included in the living will language.
The State of Wisconsin has developed forms that can be used for the Power of Attorney for Health Care and the Living Will. These can be found at this link. All in all, I think the health care-related forms that have been done by the State of Wisconsin are good. There is no reason a person could not use these in a pinch. Also, the State Bar of Wisconsin has produced an excellent book called “A Gift to Your Family” which is available for a small fee, and at some times of year (often in April) is available for free. This book goes through the process for putting together a power of attorney for health care and includes a copy of the state form and other supplemental documents. In Ozaukee county where my office is located, the local bar association holds a free clinic each fall to assist residents in completing powers of attorney for Health Care.
It is helpful to have the guidance of an elder and special needs law attorney in putting a health care power of attorney together, although you are not required to use an attorney. The help of an attorney can ensure that the document is executed and witnessed correctly, and that it includes some of the broader language regarding your preferences that is not in a standard form.
More details on the power of attorney for finances:
The power of attorney for finances is a comprehensive document that allows your agent to take action on your behalf in regard to financial and legal matters. You can choose how much or how little power you want to give your agent. This should be carefully done in consultation with your attorney, because the decisions involved in this document should be made with adequate advice.
The kinds of powers that can be included in a durable power of attorney range from simple transactions such as handling your bank accounts and paying your bills, to complex transactions such as creating and funding a trust on your behalf. You can choose to give your agent the power to make gifts or change beneficiary designations, which are very significant powers. You can also give your agent the ability to handle applications for benefits such as Medicaid, or to arrange for care of your pets, or to exercise powers related to marital property, such as signing a marital property agreement. Your agent could also bring a lawsuit on your behalf, buy and sell real estate, or run a business. The potential scope of power is very broad, which is why it is important to understand the pluses and minuses of each thing.
There is also a form available for this in Wisconsin, but I absolutely do not recommend it. The Wisconsin form is incomplete, inadequately explained, and likely to create problems down the road for anyone who needs to engage in Medicaid planning. (Keep in mind that my opinion on this is not humble. It is based on years of experience having to fix the problems that were created when a person used the state form power of attorney for finances.)
A power of attorney can also be used inappropriately by an agent with ill intent, or by an agent who does not know his or her role, and therefore it is extremely important that you carefully consider who to name as your agent, and that your agent be appropriately educated about his or her duties. Also, be aware that if your agent acts inappropriately, he or she can be prosecuted criminally or pursued in civil court.
My spouse has Alzheimer’s. Is it too late for him to sign a power of attorney?
In order to execute a power of attorney, a person must have “capacity.” This means the person must have the appropriate level of understanding to know what he or she is doing. Many people who have Alzheimer’s will have capacity to do estate planning such as powers of attorney for quite awhile after being diagnosed. Even in cases where a person’s health care power of attorney has been “activated,” the person may still have capacity to do a new power of attorney if it becomes necessary. It is a person-specific issue, so it is important to get advice and input from an elder law attorney and if necessary, the person’s physician.
What if I become incapacitated and I don’t have powers of attorney?
Well, if you have not executed power of attorney documents, and you are an adult (18 or over) then if you become incapacitated it will be necessary for someone to go through the court process of having you declared incompetent and being appointed your guardian. Not only is this process costly and stressful for everyone involved, it also puts the courts in charge of decision-making and many aspects of your life, and the guardian must obtain permission from a court for certain significant decisions.
More tips:
Below is a list of additional considerations and tips about these two documents.
DO: execute both documents – or a combined document that meets all necessary legal requirements (such as witnesses) for both.
DO: Consider carefully the powers that you want to give your agent, and those that you do not want to give. Get advice on the consequences of your choices so as to avoid a result you did not intend.
DO: Pick an agent who is willing and suited. The person who would handle your finances well may not be the best person to make medical decisions, and vice versa. Talk to your intended agent to confirm whether he or she is willing to serve if needed. Take special caution in considering an agent whose geographical location or practical life circumstances (such as a job with lengthy periods of travel) would make it difficult for that person to act quickly or over an extended period of time.
DO: discuss your wishes with your agent before problems arise, so that he or she has the best possible information upon which to act.
DO: Give copies of the documents (not originals) to your agents, as well as to all of the professionals, institutions and others who would need to know that the documents exist.
DO NOT: Appoint “co-agents.” This can create a situation where your wishes are not followed if both “co-agents” cannot agree or cannot be reached. It is better to appoint a single agent with instructions that the agent consult with the other person whenever possible.
DO NOT: Sign a Power of Attorney document that someone else has drafted, without reading it thoroughly.
DO NOT: Lock your document away in a safe deposit box, attorney’s office or other place that is not immediately accessible, unless you have distributed copies.
DO NOT: Give away “gifting” power lightly. Educate yourself on the types of “gifting” power, the consequences, and the ways to phrase these powers to make them most effective for your individual purposes.
DO NOT: Wait until there is a crisis to execute a Power of Attorney. Do it now!
