Americans Are Not Planning
Americans still do not plan for their deaths. In a survey by lawyers.com (sm) over half (55 percent) of all adult Americans do not have a will. The reasons from the survey include:
• Ignorance is bliss: One in ten (10 percent) American adults
who do not have any elements of an estate plan say it’s
because they don’t want to think about dying or becoming
incapacitated.
• Where to begin?: Similarly, nearly one in ten (9 percent)
adults say they don’t have an estate plan in place because
they don’t know who to talk to about creating such
documents. This percentage nearly doubled from 2004
(5percent).
• But I don’t need a will: Nearly one in four (24 percent) of
adults say their biggest reason for not having an estate
plan is a lack of sufficient assets. This was also the top
reason cited in the 2004 survey (21 percent).
These three reasons are not very good ones. We are not immortal. We should plan for both our potential incapacity and death. You can go here to get free forms and information designed by the Arizona Attorney General to help you plan for your end of life healthcare.
If you do not know where to find an estate planning attorney, start with the Arizona State Bar. Choose a lawyer that focuses on estate planning so he or she can anticipate issues and knows the latest law and planning techniques. Find one you like.
You may think you have no reason to create a will. However, if you have minor children, you absolutely need a will to name guardians.
Advanced Burial/Cremation Planning
An article in the Arizona Republic discussed the issues of funeral home pricing. Many consumer activists point to the vast difference in pricing between funeral homes for the same services. I was hit pretty hard by the charge for $500.00 to transport flowers. Wow.
The price difference between services and funeral homes was vast as well. The prices cited in the article varied from $1,305 to $4,700 for approximately the same basic services. However, there could be other intangibles that would make it worth the extra cost, such as personalized attention. In a time of grief, that could be very important to a family.
The article pointed out that consumer activist worry about deceptive and abusive practices because "family members must make decisions about these services at a time when they're grieving and least equipped to make decisions about money." The activists mentioned common problems are:
• Common funeral-service terminology can be confusing, making it difficult to comparison shop.
• Some businesses employ high-pressure tactics or tack on charges late in the process.
• There's little regulation, with most of the decision-making burden left to consumers.
Like every other aspect of end of life decisions, it is suggested that you make decisions ahead of time. It can save incredible emotional distress and possibly thousands of dollars. It can also help you find the appropriate services for the appropriate price.
Agent of Change: Significant Life Events Upset the Balance
When I speak with couples about their estate planning many honestly believe their kids and their family will handle the end of their life respectfully because they all get along now. However, long experience demonstrates that parents do not consider the effect of a significant stressful event in the complex tangle of family emotions and relationships.
The death or serious illness of a loved one introduces a significant change that alters the balance of power and balance of interests. You cannot anticipate how the balances will shift. The child or loved one that has always done what you wanted during life will suddenly rationalize why they should do something other than follow your wishes.
Please don't be naive and believe it only happens to others. It can happen to you as easily as it happens to others.
In this article in the Wall Street Journal (pointed out by Professor Beyer) the author reviews her family's experience when her mother executed a health care power of attorney, also known as a health care proxy or health care directive before she went for serious surgery.
What follows next is just a portion of her experience that demonstrates the very strong emotions and reactions that follow important decisions regarding appointment of a health care power of attorney or proxy.
I thought mom's logic made sense: Bob has been her companion of almost 20 years -- though not married, they might as well be. And since her oldest son, my brother Mike, lives in Texas, Mom chose her second-oldest (me) to be her second proxy. (What mother wants her child agonizing over making life or death decisions from halfway across the country?)
But Melissa didn't see it that way. As the youngest child, Melissa has always been especially close with our mom and she felt strongly that she knew mom's wishes best. Melissa felt she should be the one to make decisions when it came to anything as serious as end-of-life care for our mother.
Obviously, the mother made her choice based upon her important factors and values. But, her daughter Melissa thought other factors and values should have applied, creating the conflict. This conflict hadn't appeared before in the complex family relationship, simply because it had never been raised in the family before.
No one knows the complex emotions that are below the surface in our loved ones. Consequently, if appropriate you can share your decisions and address the complex emotions before the time of crisis.
Power of Attorney: Important Considerations
This post continues on the previous one. In another article, linked to by Professor Beyer, you will find important considerations for your power of attorney.
Specifically, the author mentions reasons that financial institutions commonly reject powers of attorney.
•The financial institution may not be familiar with the person given power of attorney and may be worried about fraud.
•The institution may be concerned that the power of attorney has been revoked.
"If you change it or revoke it, you need to tell us, otherwise we will assume this is good until you tell us," Mr. Daugherty said.
•There's a risk that the person given power of attorney may exceed his or her authority.
Because of these risks, you should plan for them to avoid them. If you do not, then:
"You don't necessarily know it's a problem until it's too late to fix it because you don't generally act on a power of attorney unless you need to, and when you need to, you can't," Mr. Sharpe said.
His clients Sandy and Gary Mayfield of Denton ran into problems when they were buying their home last year while Mr. Mayfield was on an overseas assignment.
Mrs. Mayfield said they had to revise their power of attorney four times. And, on the day the deal closed, the title company required Mr. Mayfield to call from his international location to verify that he was alive and that he gave his wife power of attorney to handle the transaction.
"It was crazy," Mrs. Mayfield said. "I have never gone through such a hassle in my life. What good does this piece of paper do if they're not going to honor it?"The house purchase was eventually completed.
What You Don't Know About Powers of Attorney!!
What you don't know about powers of attorney can hurt you!!!! With each client I advise, I spend time explaining the legal aspect of planning. But, most importantly, I focus on the practical aspect of implementing their plan. I always review the pitfalls with them.
Powers of attorney are especially succeptible to failure/rejection by banks and other financial institutions because they can be liable for fraud if they assist someone drain an account. This is the reason why it is very important that every "t" is crossed and every "i" is dotted. There are many ways to make a mistake, but few ways to do it right. Just filling out a form and executing it may not be sufficient for your needs.
This post from Gerry Beyer brought to my attention this real life story of a son who took 9 trips to the bank before it honored his power of attorney over his father. Unfortunately, this is all to common.
This is why the assistance of a qualified attorney can prove invaluable. If the bank ultimately rejected the power of attorney, then expensive guardian/conservator proceedings would have been the only way to reach his money. Truthfully, there likely would have been little left of the meager IRAs after attorney fees and court costs.
Pre Nuptial Agreements
People are becoming savvy about how the law affects them, especially as more people are experiencing divorce and its effects. They understand and feel the need for a different result.
In this article, Kathleen Pender offers some basic advice about a "pre-nup" agreement that is the the principle method to reach a different result on divorce. Here is a list of people suggested by the article that should consider a pre-nup:
Protection for YOUR money
Suppose you could deposit your money into two different accounts, which would you choose?
- Bank account (A) is safe from lawsuits, creditors, divorce, bankruptcy, etc.; or,
- Bank account (B) could be wiped clean by lawsuits, creditors, divorce, bankruptcy, etc.
I assume that you would choose account A for YOUR money. Believe it or not, estate plans that I review much more commonly offer account B to their children and grandchildren.
Whether assets or money are passed by a will or by a trust, they can be placed into a protected account. That "account" is actually a specialy designed trust for the benefit of each child or grandchild designed to give protection.
There is little downside, because the child or grandchild can become trustee of their own trust at an age that is appropriate under the circumstances. Consequently, the child has control over their "account." Truly, in this age where litigation and divorce are rampant, an inheritance protection trust is a very powerful tool to preserve YOUR money for the benefit of the people you love.
It would also be an appropriate time to include your children in your planning process. Consider asking your children which account they would rather have for their inheritance and legacy.
Planning to Avoid Probate Fights
The family dynamics after the death of a parent can change dramatically. Parents often do not truly understand their own children and family. If you are a parent, you may be saying to yourself:
He is right some families are really messed up. I am glad my kids get along.
The problem is, this is what many other parents have said before World War III breaks out after their death. Karen S. Gerstner, a member of the Houston, Texas, firm of Karen S. Gerstner & Associates, P.C. wrote the following in her article in the Property and Probate Magazine of the ABA.
When I was a young lawyer, I attended a meeting with several attorneys to discuss certain “contested matters” that had arisen after the death of a widower who died survived by four children. I was shocked to hear one of the seasoned attorneys say, “If all decedents had only one child, my workload would decrease to nothing.” Whether you go back to Cain and Abel, or only as far back as the Smothers Brothers (“Mom always liked you best”), sibling rivalry is the chief factor in many disputes arising after a parent dies. Many laypeople attribute all litigation to greed, but in the case of family situations, often much more is involved than simply greed. Sometimes children hold deep-seated resentments, which may be based on perceived unfair treatment by a parent or sibling, often going back many years. Sometimes the last living parent is the only “glue” holding the children in the family “together” (if they ever truly were, in fact, “together”). Sometimes parents have unrealistic expectations about family.
I have seen children try to impose their view of "fairness" to their parent's estate plan. In some situations it comes to theft and in others subtle manipulations. As Ms. Gerstner stated, sometimes the last parent is the only reason for children to hold back deep-seated resentments and emotions.
Proper advanced planning is the best way to mitigate the potential for court challenges in the family. Hopefully, enough can be done during life to address some of the underlying issues that give rise to court challenges.
Do-It-To-Yourself Estate Planning
The latest installment of Do-It-To-Yourself Estate Planning comes from the Florida Probate & Trust Litigation Blog.
In this case, a husband tried to give his second wife the right to live in the home until she died. But, he wanted to ensure the home went to his children from his first marriage. He executed a deed, that clearly stated his intentions.
After his death, his second wife transferred the deed to herself and her grandson, trying to ensure the property went to her family rather than his. The husband's daughter listed in the deed objected.
However, the problem wasn't with his stated intentions. The problem was that he did not comply with Florida law. Ultimately, the deed didn't work as intended and it cost much more that paying a competent attorney. Sometimes, we can be pennywise and pound foolish.
I have taken this to heart. Now, when I go to my mechanic, I listen to him a little more carefully because he is the expert and I do not want to be left stranded in the Arizona desert. I understand that good protection is worth its price.
