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What you Need Right Now :: Retirement Success :: THE RETIREMENT SOURCE®
What you Need Right Now

What you Need Right Now

To most people independence means control.

The worst consequences of not making a proper estate plan have nothing to do with taxes. Rather they deal with how well a person or the family can control his or her finances. The test of this control comes under adverse circumstances. When disaster strikes, it is usually too late to plan.

This is arguably one of the most important aspects of estate planning and one of the most neglected.

There are several situations in which you may not be able to handle all of your affairs for yourself. The probability of encountering these situations increases as you get older. Some of these are physical injury, disability, incapacity, dementia and just plain lack of knowledge regarding new issues. Your best defense is to use a combination of Advance Directives and Planned Succession Management. We define "advance directives" in a much broader way than the legal and medical communities. We use Advance Directives to mean any documented strategy written in advance that will help you to solve any problem before it happens.

It is absolutely crucial to establish in advance Who Can If You Can’t!

That is who can take care of all the important personal business you handle if you are unable to do it. This applies to everything from the mundane issues of who pays the bills and balances the checkbook to the more demanding issues of making investment decisions or running a business. If you do not have these authorizations established prior to the need, it may require legal action. Undefined matters of both person and property are handled by the Probate Court, which is an expensive and time-consuming place to have personal and financial control issues settled. This is true in dealing with both estates and matters of incapacity. Intelligent use of Advance Directives can reduce the emotional and financial burdens in these matters.

Advance Directives

There are two types of Advance Directives, those regarding your finances and those regarding your person. Let’s consider first those issues which affect your person because this is one of the most neglected area and one of the easiest to address. Some Advance Directives that may help avoid disputes regarding your person are:

  • Durable Power of Attorney for Health Care
  • Living Will
  • Guardianship

Durable Powers of Attorney for Health Care (also called Health Care Powers of Attorney) are very valuable for preventing hassles if you are sick or incapacitated. This form will allow you to nominate someone to speak in your stead as to what treatment you want to accept or reject if you are unable to speak for yourself. It is important to name someone who knows your wishes and is willing to implement them if needed.

According to The Ohio Hospice & Palliative Care Organization: "A Health Care Power of Attorney is a document that allows you to name a person to act on your behalf to make health care decisions for you if you become unable to make them for yourself. This person becomes an attorney-in-fact for you.

A Health Care Power of Attorney is different from a financial power of attorney that you use to give someone authority over your financial matters. The person you appoint as your attorney-in-fact, by completing the Health Care Power of Attorney form, has the power to authorize and refuse medical treatment for you. This authority is recognized in all medical situations when you are unable to express your own wishes. Unlike a Living Will, it is not limited to situations in which you are terminally ill or permanently unconscious. For example, your physician or the hospital may consult with your attorney-in-fact should you be injured in a car accident and become temporarily unconscious."

This has been an especially rancorous issue that has generated much publicity and several lawsuits in cases where a Living Will was not on file as in the sad case of Terri Schiavo. Regardless of the ultimate outcome, she certainly would not have wanted a long and public hassle. A Living Will would have avoided the entire problem.

According to The Ohio Hospice & Palliative Care Organization: "A Living Will is a document that allows you to establish, in advance, the type of medical care you would want to receive if you were to become permanently unconscious, or if you were to become terminally ill and unable to tell your physician or family what kind of life-sustaining treatments you want to receive. In addition, the latest edition of the Living Will allows you to specify your wishes regarding anatomical gifts (organ and tissue donation).

A Living Will is used only in situations where you are unable to tell your physician what kind of health care services you want to receive. Before your Living Will goes into effect, you either must be:

(1) terminally ill (see definition as described in the Living Will Declaration Form) and unable to tell your physician your wishes regarding health-care services;
(2) permanently unconscious. To be considered permanently unconscious, two physicians
(one of whom must be a medical specialist in an appropriate field) must decide that you
have no reasonable possibility of regaining consciousness."

Everyone who enters the hospital is asked if they have these forms, but it is less traumatic to deal with these issues before going into a hospital. All states have standard forms for both of these Advance Directives available for the free use of all. Ohio residents can get a complete Advance Directives Packet with explanations from

If you wish to include more specific direction than is given in these
standard forms, you should have your own drafted by an attorney.

Guardianship is actually a court appointment of a person to oversee the care of your physical being for matters that extend beyond medical care. While this is not a typical Advance Directive, it may be one that a single person might want to address by nominating someone if they felt their health was failing. It would, of course, be subject to court approval.

There are also several advance directives that will help alleviate some of the problems and stress in handling financial matters. Some of these are:

  • Durable Power of Attorney
  • Joint ownership
  • Living trusts

In all of these instances you must involve at least one other person. We recommend using Three-Deep Planning whenever possible. That means having one person appointed with two potential successors named as a backup. A good agent or trustee needs three things. They need to have a Head for the knowledge required, Hands to do the clerical work required and a Heart to know what you would have them do. Since it is difficult to find one person with all of these qualities, you may want to choose two people to work together. For instance you may have one relative who is not great with technical matters, but understands your wishes. Another relative may be just the opposite. Together they could make a good team.

As with all important documents, you need to review them periodically to make sure they stay current with your wishes and that the appointed agents are still available and willing.

The Durable Power of Attorney is important because it helps you control property in case something happens to you while you are living. Most people are unaware that nobody, including a spouse, is authorized to transact business in your name without legal authority. When the unimaginable happens, a lack of ability to handle financial matters properly adds unneeded stress and frequently additional cost.

A Power of Attorney is a legal instrument that is used to delegate legal authority to another person, Agent, to make property, financial and other legal decisions for you. As Principal, you can give an Agent broad legal authority, or very limited authority. A "Durable" Power of Attorney enables the agent to act for you even if you are not mentally competent or physically able to make decisions. The "Durable" Power of Attorney may be used immediately, and is effective until it is revoked by the principal, or until the principal's death. Because the Durable Power of Attorney is not subject to court supervision and can be used at any time, it requires a lot of trust in your agent.

A Durable Power of Attorney is like handing your agent a loaded gun; it can be fired anytime.

One potential protective measure is to use a "Springing" Durable Power of Attorney that springs up or becomes effective only upon the occurrence of certain events such as the Principal’s incapacity as determined by a licensed physician. Another potential protective measure would be to have a Durable Power of Attorney escrowed that is, held by an attorney or another trusted person who would be willing to oversee its use if needed.

Joint Ownership and Living Trusts both have good features that can be useful for here and now planning, but they are also relevant for later life and ultimate distribution planning. There are also several reasons for caution in their use. They will be discussed at length in the Ultimate Disposition Section.

As with all important documents, you need to review them periodically to make sure they stay current with your wishes and that the appointed agents are still available and willing.

The Durable Power of Attorney is important because it helps you control property in case something happens to you while you are living.

In our Asset Control strategy, Advance Directives are half the equation. The other half is Planned Succession Management. That includes having your financial management system and your legal empowerment documents

There are three ways that property can pass upon death:

  • By Contract - This means that ownership passes by way of a beneficiary designation as in the case of life insurance policies or retirement accounts.
  • By Law - There are certain survivorship transfers established by statutes such as joint tenancy, pay on death accounts and trust agreements.

    (Both of the above pass property without going through the Probate Court. THIS DOES NOT MEAN AVOIDING STATE OR FEDERAL ESTATE TAXES. Should the above methods fail for any reason (such as naming someone already deceased), then it does prevent to probate?)

  • By Probate - If you use a will to pass property, it guarantees a requirement to pass property through the Probate Court. If you do not have a will, any property not transferred by contract or by law will go to probate under the state intestacy statutes. (In other words, if you do not have a will, the state has one for you, but you probably would not like it.) Since probate is about proving ownership and transfers, it is often a slow, costly and public procedure. Many people prefer to use various alternative methods to avoid it. Sometime this creates more problems than it solves. One example is that completion of probate closes out future claims of heirs and creditors; other methods frequently do not bring closure and do leave the estate open to later claims.

Three favored methods of avoiding probate are:

  • Joint Tenancy
  • Living Trust
  • Beneficiary Designations

A Will is only effective upon death. It is an Advance Directive that allows you to state how you want your property distributed upon your death. It has no role for the living. Use of a Will guarantees property will pass through probate. Despite the tendency of many planners to totally avoid probate, there are certain advantages including clearing all potential creditor claims. Arguably everyone should have a current Will that is written for their own specific needs and coordinated with all other legal documents. 

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