What all is involved in an estate plan?
What all is involved in an estate plan?
A basic estate plan consists of a Last Will and Testament, Personal Property Memorandum, Durable Power of Attorney, Healthcare Power of Attorney, Living Will / Advanced Directive for Natural Death, Advanced Mental Health Instruction, HIPPPA Release, and the forms to register some of that with the Secretary of State. Some situations call for the use of a Revocable Living Trust. A trust can help avoid probate while also providing protections for your family against creditors, Medicaid, incapacity, bankruptcy, etc.
The process is also not nearly as difficult or stressful as many folks think. North Carolina has no estate taxes and the federal estate tax doesn’t kick in until you get well over $10 million (as of 2023, but that sunsets after 2025). In the 14+ years I’ve ben practicing law, I’ve also seen just about every combination of family, assets, and oddities. Chances are we can do an estate plan that meets your needs quickly and easily. I start off with a simple worksheet that will take less than 10 minutes and does not require you look up account numbers or balances. Often that worksheet is enough for me to put together a plan we can look at when we first meet. Sometimes we even sign everything at the first meeting. If we need to make some changes or if I need more information, we can continue to meet in person or by phone/video. Usually, one or two more meetings is all that’s needed, but if you want more, I don’t charge any extra.
Let’s start by walking through the documents.
Durable Power of Attorney
Financial Powers of Attorney appoint someone else to manage your affairs. There are several different types of POAs, but the one I recommend using is called a Durable Power of Attorney. Durable means that it works both before incapacity and during incapacity. I recommend to my clients to use these because it does not require the determination of incapacity by your doctors or a court. If you are out of the country or otherwise unable to handle things, this allows the person you’ve appointed to handle those things on your behalf.
But that also means that if you sign a Durable Power of Attorney appointing your brother as your POA, he can take that document down to the bank and gain access to all your accounts immediately. No matter how much you trust and love your brother, I would not recommend giving him a copy of this document. When I used to represent the Adult Protective Divisions of the Guilford County Department of Social Services, I saw lots of crazy situations where children married horrible people who convinced them to do unethical things with mom and dad’s money. Or children getting involved in drugs and gambling or suffering from mental health issues. Instead of giving the document directly to the person or persons listed, I recommend one of two methods to protect the document.
First, get a fireproof safe and put this and all your estate planning documents in it. Then make a copy of the key or write down a copy of the code and tape the key or code under a drawer in the kitchen and tell everyone that if something ever happened, the documents are in the safe and explain where the safe and the key or code is located.
However, if you’ve named a child or someone living with you as your POA, you may not want to use that method. Instead, give this one document to someone else that is not listed in the document. I call that person a gatekeeper. Tell the gatekeeper to never give the document to the people listed unless the gatekeeper has personally verified that you are not competent and there is a need for the POA to act on your behalf. Then tell all the people listed on the POA who has it. This way you have appointed one person to decide when you are not competent and someone entirely different to then act on your behalf.
Healthcare Power of Attorney
Similar to the Durable Power of Attorney, the Healthcare Power of Attorney document appoints someone to make healthcare decisions on your behalf. But unlike the Durable POA, the Healthcare POA only comes into play if a doctor decides you cannot make those decisions. For that reason, we want to be sure that all the people we list on it have copies, along with all our doctors. The NC Secretary of State also allows you to register this and other healthcare directives with their advanced healthcare registry so they can be accessed by healthcare providers.
These two documents, the Durable POA and the Healthcare POA are arguably the most important documents as they impact who will be making decisions about you and your money while you are still alive. Every estate plan I help with includes these two. But if you decide not to use my firm, you can get versions of them for free from the NC Secretary of State and from the NC Legislature. I’m happy to send you the forms and will even notarize them with witnesses here if you fill them out and call for an appointment, all for free. Please don’t go without these as they can easily prevent huge problem in the future.
Advanced Directive for Natural Death / Living Will
This document allows you to make decisions about when to withdraw or withhold life prolonging measures in certain end of life situations. Specifically, it allows you to tell the doctors to withdraw or withhold life prolonging measures if you are on your death bed, in a permanent coma, or a permanent vegetative state. This is different from a Do Not Resuscitate (DNR). A DNR allows a person to decline efforts to resuscitate them in advance of a situation that they stop breathing or their heart stops beating. DNRs are generally more applicable to situations where someone has a terminal illness and does not want to be brought back to life when that time comes. DNRs are medical decisions, not legal decisions. The Living Will, however, is an optional but common component of an estate plan.
HIPPA is the federal law governing the protection of sensitive patient health information. A standard release requiring doctors to grant access to your healthcare records to your Healthcare POA allows your Healthcare POA to get second opinions before the doctor makes an official determination that you are not competent. A HIPPA release can also grant access to your attorney so he or she can assist in various situations if you can no longer consent.
Advance Instruction for Mental Health Treatment
This document is not something that many people will ever need or utilize. However, with the rise in mental health diagnoses, its good to know that it exists. If you are ever diagnosed with a mental health illness, this document allows you to consent to certain types of treatment, including involuntary commitment in advance of a psychiatric episode. The document is fairly easy to go through with your psychologist, neurologist, or mental healthcare provider.
Last Will and Testament
The Last Will and Testament is often what people think about when they hear estate planning. While important, this document is actually not a great way to pass assets to heirs. In order for a Last Will and Testament to do anything, it has to be probated or filed with the court system. The process of probating a Will and administering an estate is very time consuming and confusing and often requires the assistance of an attorney. In addition, the Clerk of Court charges $4 per thousand of all probate assets up to a maximum fee of $6,000. We will discuss all the reasons to avoid probate and some of the methods of doing so below, but for now let’s just talk about what the Will does do a good job of handling.
First, the Will is a good place to nominate someone to be your minor children’s guardian if you and your child(ren)’s other parent pass away or otherwise cannot serve as parent. I used to represent the Department of Social Services in foster care cases. While the vast majority of foster families are truly remarkable people, you do not want your children in the system.
Second, there are a few things that generally have to go through the probate process. Vehicles are little mobile boxes of liability. If you get into an accident and hurt someone, that person or their family is going to go after everyone on the vehicle title. Owning a car jointly can just increase the total potential liability associated with that car. Putting a car into a trust can be even worse by making people think you have a lot more assets that you really do. As a result, the Last Will and Testament is the best way to designate who would inherit a car that you routinely drive.
On the other side of an accident, if you are killed by someone else’s negligence your family may file a wrongful death action against the other person. Money awarded in that lawsuit would go through your estate and be governed by your Will. Finally, sometimes no matter how hard we work to get your assets to pass outside of probate, sometimes you forget about an account and don’t set beneficiary designations. Those accounts also go through the probate process and are governed by your Will.
A separate component of the Last Will and Testament is the nomination of a Guardian for Minor Children. If a child’s parents both pass away, someone needs to step into that role and serve as the child’s guardian. While North Carolina will not allow parents to sell or give away their kids (or even pay someone to take them), you can nominate who you would want to serve in that role if something were to happen to you and the child’s other parent. Absent a nomination in the Will, the courts will look to the best interests of the child. That means your family members may end up fighting for custody in court. Do your parents and in-laws get along? Would you be okay if your spouse’s brother became your child’s caretaker? Worse yet, if the family is fighting hard enough, the Department of Social Services may step in and take custody with foster care placement until the courts can work something out. I greatly appreciate the folks at DSS and they have a difficult job, but I personally don’t want them or the court system deciding who my kids would go to absent my input. When I worked with DSS, I saw multiple instances of grandparents adopting grandkids for a host of reasons. As a result, I usually advise my client to list a potential guardian even if their kids are all grown. Trying to predict what life will throw at you is a fools errand, so we try to create plans that will work in lots of unforeseen circumstances.
Personal Property Memorandum
As your estate planning attorney, I have three jobs. First, to protect you during your lifetime. With the healthcare directives and a solid durable power of attorney, we will help you select the right people and give them the right authority to handle your affairs if you are still alive but unable to do so. We will also discuss asset protection, Medicaid eligibility, and other things that will benefit you during your lifetime. Second, I want to ensure that your stuff goes to the people you want to get it after you’re gone and prevent lawyers, creditors, bankruptcy, government benefits, etc. from taking any more than we have to give them. Third and finally, my job is to get myself out of a job. While the laws occasionally change and it’s a good idea to review your plan on a routine basis, my hope is that you pay me once and don’t need me again for a long time or maybe forever. One of the ways we do that is using the personal property memorandum. This is a simple document that allows you to designate particular things to go to particular people. It’s also something that you can always tear up and redo without the assistance of an attorney. Your decisions about who should get grandma’s engagement ring, the antique dresser, or all of your dad’s old wood-working tools will inevitably change over your lifetime. I don’t want to charge you every time those decisions change. We’ll have this and show you how to use it.