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Important considerations in estate planning

Those planning their estates tend to focus on the testamentary document, such as a will or living trust, and rightfully so. This document oftentimes has the biggest impact on the administration and disposition of a person’s estate. But not always. Other common documents prepared in connection with the typical estate plan are equally, if not more, impactful, so I will briefly discuss those other estate planning documents today.

Beneficiary designations: Beneficiary designations are a commonly overlooked estate planning document. The disposition of retirement plans such as 401(k)s, IRAs and annuities as well as life insurance policies are controlled by beneficiary designations, not a will or trust. Beneficiary designations are of often prepared without counsel when an individual first sets up the retirement plan or insurance policy. Beneficiary designations are often forgotten and often found to conflict with the carefully crafted testamentary objectives expressed in a will or trust. The beneficiary designation forms designed by investment or insurance companies tend to be blunt instruments. Sometimes the beneficiary designation can be crafted to align with an individual’s testamentary objectives, but sometimes, and increasingly, they can’t. When a beneficiary designation form or the self-serving limitations imposed by an insurance or investment company are too rigid, then it is necessary to make the beneficiary designation and the will or trust work together to accomplish a testator’s objectives. I could go into some detail on this, but this type of planning is complex and should only be undertaken with qualified, personal guidance (and probably not the customer service agent on life insurance company’s hotline).

Power of attorney for property: This document may be used to appoint an “agent” or “attorney in fact” to exercise decision-making authority over the maker’s property and finances. It may be designed to take effect upon its creation or to take effect upon a person’s disability or incapacity, and the scope of authority may be narrowed or enlarged to accommodate the preferences and objectives of the maker. Financial institutions and others who may be asked to rely on a power of attorney may not always be cooperative, for understandable reasons. Although Colorado law mandates that powers of attorney are to be observed, it may be necessary or advisable for an individual to pave the way for his or her agents by notifying certain institutions of the terms of the power of attorney or by making a separate power of attorney provided by the institution in question on its own forms.

Power of attorney for health care: This document may be used to appoint an agent or attorney in fact with authority over the maker’s health care and personal decisions. The power of attorney for healthcare can also be limited or enlarged to suit the needs of the maker. Like the power of attorney for property, this document can be revoked by the maker (who has capacity), who will also retain the authority to overrule the instructions or actions of the agent.

Necessity of Powers of Attorney: In large part, the above-referenced powers of attorney are designed to avoid the need for going to court to establish a conservatorship or guardianship when an individual becomes incapacitated. An otherwise healthy person is statistically more likely to become incapacitated during his or her lifetime than to die (meaning, incapacity is likely to happen more than once). Court proceedings are expensive and can aggravate disputes among family members, so it is beneficial for everyone, even young people with small estates, to prepare powers of attorney.

Living Will: This document has limited applicability. A living will provides end-of-life instructions when a person is close to death as a result of a terminal condition or is subject to a persistent vegetative state. The instructions range from prolonging life as long as possible to immediate cessation of life-sustaining procedures and artificial nutrition. If a person is capable of communication, then his or her expressed instructions will trump the provisions of a living will. The maker of a living will may also authorize his or her agent under a health care power of attorney to overrule the instructions in a living will. Most people are familiar with the Terri Schiavo case and want to avoid that fate, so a Living Will has been a part of almost every comprehensive estate plan that I have prepared.

Guardian Appointments: Parents of dependent children, individuals who are serving as guardians for another person’s children, and guardians of an incapacitated adult may appoint a successor guardian using this instrument. The guardian appointment will make it much simpler to establish legal authority over the so-called “ward” upon the death or disability of the parent or the currently-serving guardian.

Delegations of Parental Responsibility: A delegation of parental responsibility is basically a power of attorney for decision making authority for children. A delegation can be revoked at will, and, by law, it will expire automatically after a year. This document is useful if, for example, parents temporarily send their children to live with a friend or relative when the parents travel out of the country.

Instructions with respect to disposition of last remains: A person can make legally binding instructions with respect to the disposition of his or her remains. I will prepare this document on occasion, mostly when a client has specific preferences, often derived from religious tradition, for the disposition of remains. As a practical matter, given the accelerated time frame for the disposal of human remains, it’s often more effective simply to discuss the matter with loved ones than to create a legal instrument.

Five Wishes: “Five Wishes” is an advanced directive often supplied by hospitals and other health care providers. It has its merits and is better than nothing when there is no power of attorney for health care or living will. When I was a young lawyer, I was supplied the Five Wishes form by hospital admissions when I went in for surgery. I had no counsel with respect to its use or content, and I had virtually no time to study or contemplate it. Importantly, if signed, it would have had the effect of revoking my power of attorney for health care. Those who have a power of attorney and a living will should ordinarily refrain from signing a Five Wishes form.

DNR & MOST: DNR’s (or Do Not Resuscitate instructions) and MOST (Medical Orders for Scope of Treatment) forms are advanced directives that should have limited use. In most states, such directives require the counsel and assistance of a physician. It is my understanding that most physicians will reserve DNRs and MOST forms to physically frail, geriatric patients who would be unlikely to survive emergency life sustaining procedures if they were to be administered. If you have specific questions concerning the use of these forms, seek counsel from your physician

Matthew Trinidad is an attorney with Karp Neu Hanlon PC. He can be reached at 970-945-2261 or at mlt@mountainlawfirm.com.


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