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Your Guide to a Comprehensive Estate Plan
Part 1- Planning for Incapacitation
“Do you have an estate plan? You need an Estate Plan.”
Most individuals, at some point in their life, will be asked this question and likely given some [unsolicited] advice from a friend or family member. In order to answer this question appropriately, you might be asking what actually encompasses an “estate plan.”
Estate planning is the process of writing down instructions and nominating trusted individuals who will take over for you if something happens. A comprehensive estate will plan for two main life events: (1) you are alive but unable to make your own business, legal, financial, or health care decisions; and (2) you pass away. By making a comprehensive estate plan ahead of either or both of these live events, you ensure your loved ones will not have the financial and legal burden of going through guardianship or probate to obtain the same authority you could have conveyed with a thorough estate plan. Please remember estate planning is essential for everyone, regardless of age and wealth.
In order to explain all the documents needed for a comprehensive estate plan, we will writing a two-part series as follows:
- Part I- Planning for Incapacitation. The documents required to authorize who will make decisions for you if you become incapacitated during your lifetime.
- Durable Power of Attorney
- Healthcare Surrogate
- Living Will
- Part II- Planning for Death. The documents required to ensure your property is distributed according to your wishes after your death.
- Last Will and Testament
- Revocable Trust
- Transfer by operation of law such as deeds, joint ownerships, and beneficiary designations.
Phase 1: The Necessary Documents
1. Durable Power of Attorney (POA)
A Durable Power of Attorney is a legal document wherein you nominate a person to make business, legal, and financial decisions on your behalf. This person is also called your Agent. Your Agent should be someone you trust absolutely, as they may have access to privileged information such as your social security number, bank records, tax returns, and property deeds.
The purpose of having an Agent is so someone is authorized to make decisions and take action on your behalf. Your agent may need to make payments on bills, sell your house, purchase a handicap-accessible vehicle, or defend you in a lawsuit. We typically suggest having 2-3 backup agents designated. The agent can be a family member, friend, or advisor.
You can learn more about Durable Power of Attorney online at The Florida Bar.
2. Healthcare Surrogate
A healthcare surrogate is a legal document wherein you nominate a person, your “Surrogate,” to make healthcare decisions if you are unable to make those decisions yourself. Your Surrogate can be a trusted advisor, loved one, or next of kin and should be someone who would make the same healthcare decisions you would make for yourself in similar circumstances.
Your Surrogate can be the same person as your Agent, who you nominated for financial, business, and legal decisions under the Power of Attorney, but using the same person is not required. Whether these two agents are the same or different people is entirely up to you, particularly but you trust one person to make health care decisions for you but do not trust them with access to your bank account.
Your Surrogate is also authorized to access your privileged health information and medical records. Using this information, your Surrogate can provide or withdraw consent for medical treatment, release pertinent medical records, and permit your transfers between healthcare facilities.
3. Living Will
A Living Will is a legal document regarding a person’s end-of-life decisions and their preference whether to remain on life support. The Living Will removes the burden of requiring your loved ones to make a decision regarding ending your life; rather, while you are of sound mind, you make your decision known in writing about your desires to remain on life support.
The Living Will is only utilized when the following conditions are met:
- You are both physically and mentally incapacitated and cannot communicate your wishes regarding medical treatment; and
- You either:
- have a terminal illness, or
- have an end-stage condition, or
- are in a persistent vegetative state; and
- Your treating physician plus a second physician unanimously agree there is no reasonable medical probability your life will be sustained without the breathing and/or a feeding tube.
Upon all three of these conditions being met, a metaphorical clock will be ticking for how long you remain on life support; without direction or a valid Living Will, the medical team will continue to provide life support to you. Your medical team will seek out the opinion of your next of kin, who will be shouldered with the task of determining the appropriate time to allow you to die naturally. If you do not want your next of kin to determine the length of the clock ticking, a Living Will will override and control what happens next.
You may choose any length of time to remain on life support once the three conditions above occur. Some people choose to have life-support removed right away, while others may choose a week, a month, or a year. There’s no right or wrong answer. However, we often advise our clients with families who live outside of Florida to give at least 72 hours before removing life support that way far-away families can travel to say goodbye. Particularly in the wake of COVID, after experiencing restrictions in place, you might want to give family a longer time.
What happens if I do not have documents from Part I:
Without authorizing individuals to act on your behalf in the event of incapacitation, your loved ones must file in court to obtain guardianship. A guardianship is an arduous process to obtain a court order giving your loved ones the right to make decisions for you. The process requires resources like time and money and ensures your family must give frequent updates to the Court on your condition throughout the duration of the guardianship. This can all be avoided with a comprehensive estate plan.
Regardless of your age, net wealth or occupation, a comprehensive estate plan is essential. Your planning and preparation will save your loved one’s time, money, and emotional strife in what is an already draining situation. If you are considering making a healthcare surrogate designation, power of attorney, or living will, McCart & Tesmer can help. Please call 813-498-2757 or email info@McCartTesmer.com for a free consultation. Stay tuned for our next blog, which will break down Part 2.
Life comes at you fast, and before it ends, it is best to have your affairs in order. Dark, we know! But important nonetheless. In the event of your incapacitation or death, an estate plan anticipates and predetermines how your assets — like your home, bank accounts, life insurance, car, and more — disperse to your Successor Trustee and/or beneficiaries. Whether it’s the unthinkable or the inevitable, you should do everything in your power to prepare your estate and what you leave behind for your loved ones. We have already talked about why you need an estate plan. And for families with a special needs child or adult, a Special Needs Trust eastate plan is critical. At McCart and Tesmer, we have a wealth of experience in estate planning and can offer extra guidance for families with special needs children.
So, what makes traditional estate planning so different from estate planning with a child that has special needs? Pretty much everything. Special needs children and adults often have governmental benefits like SSI or Medicare. Not everybody knows that these benefits could be put at risk if the special needs child received a traditional inheritance. More on that later. If your estate plan is not created by someone who has experience specifically with special needs, you run the risk of them becoming ineligible for these government benefits. There are many options to choose from to avoid this, and at McCart & Tesmer, we recommend that you create a Special Needs Trust. Let’s break down what that is, why it is necessary, and what options fall under Special Needs Trust.
What is a Special Needs Trust?
First off, what’s a traditional trust? A trust is created by a person and their lawyer to transfer parts or all of their assets to their trustee(s). It can protect whatever you choose to leave the trustees from creditors, taxation and probate. Trusts are often used for people who are underaged or mentally impaired in a way that could impact their finances. Once a beneficiary is deemed competent they can possess the trust without supervision.
A Special Needs Trust is a type of trust designed to help continue the care of a disabled person once a person normally entrusted with that care passes or becomes incapacitated. Not only can it offer the person with disabilities supplemental income, but it can set up their medical care needs as well. Make sure that there are people who know where your legal documents are before you pass or become incapacitated, otherwise we did all the hard work of planning without the rewards.
Extra provisions that make a Special Needs Trust different include selecting your child’s guardian or conservator beyond the age of 18, if needed. There should be a Trustee appointed to handle money for your special needs beneficiary. It is good practice to have a shortlist of people who could step in as conservator or guardian if your first choice also becomes incapacitated or passes. The Trustee can provide the beneficiary money for a multitude of everyday costs, but the Trustee must consider the beneficiary’s disbursements on a case-by-case basis. The reasons for dispersal are fairly flexible. It could be for their pet dog or a haircut — whatever they need. However, if a Trustee mismanages dispersals, by not documenting them properly or by giving the beneficiary more than the limit set for allowable earnings, they can put the beneficiary’s benefits at risk.
Why do I need a Special Needs Trust?
Depending on the severity of the person’s disability, they truly may not be able to take care of themselves. They will need someone to make medical choices, financial choices and day-to-day choices for them. If you chose to cut out your special needs child and trust your able-bodied child to “do the right thing”, there is always a chance that child would fail to honor your request.
In the state of Florida, if a disabled person receiving Medicaid has countable assets that exceed the earning limit they can lose their eligibility. Medical insurance is not a safety net for disabled people, it is a lifeline. Putting this at risk directly puts your special needs child at risk. Luckily, assets in a Special Needs Trust are not included in this calculation.
Not to mention, government assistance is not guaranteed. The programs your child relies upon could be defunded or altogether eliminated. If there is not something in place in the event of any of these situations, your child is left vulnerable. However, if you have set up a Special Needs Trust your child will have something to fall back on. And that’s where we come in!
What are my options?
First-Party Supplemental Needs Trust– This is a discretionary trust that is funded with the assets of a supplemental needs beneficiary. Oftentimes the disabled individual’s funds are used for their own benefit but are placed in the trust to pay for future expenses without interfering with their needs-based government services.
Third-Party Supplemental Needs Trust- This discretionary trust provides stability for people who cannot live independently or earn their own income. The main difference is that a third-party SNT is funded by a family member or guardian for the benefit of a disabled person.
Third-party trusts have several benefits including no limitations on the number of assets in the trust.
Special Needs Pooled Trust– These trusts are run by nonprofit organizations that will administer supplemental income to the beneficiary. Pooled trusts apply fees, offer different services and contracts in different capacities.
Finding the right Special Needs Trust for you and your special needs child requires a legal expert who specializes in estate planning. At Mccart & Tesmer, we know that an estate plan can save your family a lot of pain, time, and stress. We have seen time and time again what happens when plans are not in place following the death of a loved one, and trust us — it is not pretty. Let the professionals at McCart & Tesmer do what we do best and get your plans in order.
Isn’t it odd that many people plan their funerals, but many of those same people have not planned their estates? The majority of Americans do not even have a will in place. At McCart & Tesmer, P.A., we have an active estate planning practice and have experienced just about every scenario out there. Not only have we assisted many clients in developing their estate plans, but we have also been involved in many cases when our client’s loved one has died, leaving an inadequate estate plan or no plan at all. Folks have many reasons why they might not plan accordingly. Below you’ll find a sampling of the most common ones we’ve heard to help you navigate this critical time in your life.
“My children will do the right thing.”
Fortunately, most parents are correct when they make that statement. However, after a parent dies, we have seen many cases where greed takes over, and the children do things the parent could never imagine. It can get very ugly. In fact, in one case, two sons fought over their father’s Cleveland Browns jacket. That’s right, an entire lawsuit was started over a jacket!
“My estate will not have to pay estate taxes.”
In most cases, this statement is true, especially in 2021, where heirs do not have to pay a federal estate tax on estates less than $11.7 million. Many assets which common sense tells us should not be included in our estates are added according to Tax law. For example, the death benefits paid to your heirs at your death on life insurance policies you own are typically added to your taxable estate. You should review your situation with an attorney experienced in estate planning to ensure your assets are adequately protected. In addition, there are many non-tax reasons to plan.
“My spouse will inherit everything from me.”
This statement is true in many cases, but what if you or your spouse has children from a prior marriage or relationship? What if you and your spouse die simultaneously? What if your spouse remarries after your death? What if your minor child decides to drop out of school? A properly drafted estate plan addresses these and other “what if’s” so that there is no question about what goes where when the time comes.
“I told everyone what I want.”
Sadly, memories fade, and often people hear what they want to hear. In the suit over the Cleveland Browns jacket mentioned above, each son testified, under oath, that his father told him that he wanted him to have the jacket. Whether one of the sons is lying or just doesn’t remember correctly doesn’t matter. If you want to ensure that your property goes where you decide, the only way to do so is through a properly drafted and executed will or trust.
“It is too complicated.”
Is a great statement as to why you should hire the pros to handle it! You do not need to have any particular legal skill or knowledge to have an effective estate plan. Generally, all you need to do is tell your attorney (who should be experienced in estate planning matters) what goals you want your estate plan to accomplish, and let the attorney draft your documents accordingly.
“I already have a will.”
This statement raises two concerns. First, if you already have a will, you should review it at least annually with your attorney’s help to ensure that it still expresses your wishes and makes any necessary changes. That said, in many cases, we review our client’s will and suggest no changes. Second, a complete estate plan has much more than a will. Although a properly drafted will is the cornerstone of any estate plan, your plan also should have powers of attorney so that you can designate who will handle your business or financial affairs and who will make medical decisions for you if you become incapacitated. Many estate plans also include trusts established for any number of purposes, such as saving taxes or minimizing probate. So even if you have a will already, you likely need to #1 review it ASAP and #2 add in the other necessary portions for the best success.
“I will do it later” or “I’m too busy.”
We agree you don’t want to rush these things to complete an estate plan. The plan should be well thought out and done at a reasonable pace. However, you do not want to wait too long. We don’t know when or how we will die, so waiting is very risky. In another example, if you lose your ability to understand the nature and effect of your estate planning documents because of something like Alzheimer’s or an automobile accident, you will be prohibited from signing them. Therefore, you will not be able to execute an estate plan. It’s not worth the risk to wait, trust us.
“I don’t want to think about it.”
As we discussed in our blog last month, death is inevitable. It’s not if, but when you die and frequently, death is unexpected. Even if it’s morbid and folks don’t like to talk about it, many of our clients express their sense of relief when they execute a plan and satisfaction that they do not have to worry about not having a plan anymore.
“It is too expensive.”
It is no secret that lawyers are expensive. However, our fees for completing an estate plan are probably less than you might think. In addition, think about how much money your heirs could save in taxes, legal fees, and other costs if you have a properly drafted estate plan. Think about how much those sons who fought over the Cleveland Browns jacket paid in legal fees. Had their father prepared an estate plan, they could have avoided an expensive, stressful, and petty lawsuit.
The moral of the story is that an estate plan should be in place before you pass away to provide the most clarity for those who will survive you. There are too many “what if’s” and unknowns to leave anything unsaid. Yes, it does take some time and a little bit of money, but the peace of mind those things buy is priceless. So when you’re ready, let the professionals at McCart & Tesmer help you get your Estate Plan in place and take one “To-Do” off your plate so you can get back to living!
Have you ever thought about how you will die? As morbid as that sounds, we all know that it is not if but when. It could be sudden like a car accident or maybe something more long-term like cancer. Listen, we get it, death is a topic that is uncomfortable to talk about. But taking the time to put things in place now, while you are alive, will set up all of the survivors to be taken care of in the wake of your death. No matter how young or healthy you are, you need a Last Will and Testament in place.
“If you fail to plan, then you are planning to fail” – Ben Franklin
The best possible scenario for everyone involved is that you have an estate planning document, like a Last Will and Testament, in place when you pass away. Planning ahead for the inevitable not only legally protects your loved ones but also guarantees that you leave your property to who you want. Having everything in writing before you die ensures that there are no questions about your wishes regarding your estate which, in turn, relieves pressure from your family during an already stressful time. With the help of a lawyer (preferably one who focuses their practice in probate), having a Last Will and Testament prepared is fairly simple and can save your survivors time and money after your passing.
There are a few considerations to your Last Will and Testament to keep in mind. Last Will and Testaments are still subject to probate; conversely, a properly funded trust will avoid probate altogether. Additionally, a Last Will and Testament allows for you to disinherit a child; however, you cannot disinherit your spouse without a validly executed pre-nuptial or post-nuptial agreement and your spouses’ consent. Florida protects legal spouses with the elective share which means, at minimum, spouses are entitled to 50% of the probate estate or 30% of everything (probate and non-probate assets) you owned at the time of your death.
Clearly there are many beneficial impacts of having a Last Will and Testament. But what happens if you never get around to completing it? Every state has intestacy laws which provide the distribution of your property when you die without a Last Will and Testament. These laws describe who inherits and what percentage each person receives.
The following are examples to illustrate the complexities of what happens if, for instance, a (1) Florida man (2) dies without a Last Will and Testament (intestate) and (3) leaves all of his property in his individual name:
- What if he was married? – The surviving spouse gets 100% of his estate. That said, if he has children from another relationship (which is about 80% of second marriages), the surviving spouse gets 50% and the other 50% goes to his children.
- What if he and his partner were not married? – This begs a few additional questions in order to be answered.
- Are there surviving children?
- Yes – Then equally to his descendants. Nothing to his partner
- No –
- Then equally to the man’s mother and father or to the survivor of them.
- If both parents are deceased, then to the decedent’s brothers and sisters and the descendants of deceased brothers and sisters.
- Unfortunately this has the effect of disinheriting a non-married partner, making it especially important to have a Last Will and Testament to ensure a partner inherits from another partner’s estate.
- Are there surviving children?
- What if there are half-siblings? “When property descends to collateral kindred of the intestate and part of the collateral kindred are of the whole blood to the intestate and the other part of the half-blood, those of the half-blood shall inherit only half as much as those of the whole blood; but if all are of the half-blood they shall have whole parts.” Sound a bit like Harry Potter? We thought so too. Here’s a translation — Half siblings only get half as much as whole siblings, unless all of the siblings are half-siblings and then they all get the same amount.
- What if there are no living brothers, sisters, or descendants of brothers or sisters? The estate shall be equally divided with 50% going to the maternal kindred and 50% going to the paternal kindred as follows:
- To the grandfather and grandmother equally or to the survivor of them.
- If there are no living grandparents, then to aunts and uncles (or their children who are decedent’s cousins)
- If there is either no paternal kindred or no maternal kindred, the entire estate shall go to the kindred that survives in the order stated above.
- Ok, but what if there is NO surviving kindred? If there is no surviving family then the estate will go to the kindred(family) of the last deceased spouse of the descendent as if the deceased spouse had survived the decedent and then died intestate entitled to the estate. (Before you panic, this does not mean a previous spouse the man divorced, just deceased.)
- What if there is STILL NO ONE? The man’s estate will escheat (be given) to the State of Florida
- The state takes your property and sells it. The profits will then be deposited in the State School Fund. At any time, within 10 years, someone claiming to be entitled to the proceeds of the property can reopen the administration of the estate and assert entitlement.
- If no claim is made in 10 years, the state’s right to the proceeds shall be absolute.
As you can see, it can get a little sticky trying to figure out who gets what. Without a Last Will and Testament, there are so many unanswered questions that can sometimes lead to rifts in families upon the division of the estate. It is easy to see that having a Last Will and Testament signed before you pass makes an already hard time a little bit easier for all of those who survive you. The professionals at McCart & Tesmer have a focused practice in Estate Planning and Probate so if you are ready to begin your Last Will and Testament, schedule your appointment with us.