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Estate Planning Beyond the Will and Revocable Trust

When people think of estate planning, they are usually only thinking about the Will and Revocable Living Trust.  However, there are additional issues and documents that should be considered in each estate plan.  Specifically, the Durable Power of Attorney (“DPA”) and Advanced Health Care Directive (“AHCD”).  The DPA and AHCD are specifically designed to deal with issues regarding incapacity while a person is still alive and can be a vital part of an estate plan.  Without a proper DPA or AHCD, if you have a loved one that has lost mental capacity to deal with their own financial affairs or medical decisions, you will be looking at a court supervised, time consuming, and expensive conservatorship proceeding.

The DPA is a written agreement between a person (the principal) and another person they appoint to act on their behalf (the agent).  A DPA may be effective upon signing or may become effective upon the happening of a certain event as set forth in the DPA, i.e., incapacity.  The power of attorney will not be helpful in an incapacity situation unless it is durable.  A durable power of attorney must contain either the phrases “this power of attorney shall not be affected by subsequent incapacity of the principal” or “this power of attorney shall become effective upon the incapacity of the principal” or wording that shows a similar intent.  Without the aforementioned wording showing an intent to become effective upon incapacity, a power of attorney will be considered nondurable and will terminate when the principal becomes incapacitated.  A nondurable power of attorney may defeat the main reason for creating the power of attorney.

The AHCD is a power of attorney to deal with medical issues.  The AHCD can also address issues such as where the principal will live when incapacitated and the authority to hire care workers for the principal.  The AHCD is durable upon creation, if done correctly, unless it specifically provides otherwise.  The AHCD becomes effective upon a determination of incapacity by the principal’s physician unless it provides that it becomes effective upon signing.    

The DPA and AHCD should work in conjunction with each other.  If you have a DPA without an AHCD, you may run into issues trying to obtain a physician’s determination of incapacity because they will not be authorized to provide the agent the results of the medical examination as that authority is not usually granted in a DPA.  That authority is found in the AHCD. 

The DPA and AHCD are designed to be conservatorship substitutes.  However, if the principal refuses or opposes an agent’s assistance and will not submit to a medical examination you may be forced to pursue a conservatorship proceeding nonetheless.  Accordingly, discussions between the principal and agent at the time of execution of the DPA and AHCD, and periodically before incapacity can be helpful in obtaining the principal’s consent to medical examinations so that the DPA and AHCD can be utilized as intended.

Notwithstanding having the DPA or AHCD, if a conservatorship proceeding is required because of a principal’s refusal to submit to a medical examination to determine capacity; there are essentially two types of conservatorship proceedings: conservatorship of the person; and conservatorship of the estate.  A conservatorship is a protective court proceeding.  The conservatorship of the person is a court supervised proceeding whereby a court-appointed fiduciary, i.e., the conservator, manages the personal care of a principal who cannot properly provide for their personal requirements for medical care, health, food, shelter, or clothing.  In a conservatorship of the person, the conservator may also decide where the principal will live.

The conservatorship of the estate is also a court supervised proceeding whereby a court-appointed fiduciary manages the financial affairs of the principal (i.e., the conservatee) who is substantially unable to manage their own financial assets or to resist undue influence or fraud.  In a conservatorship of the estate, the conservator’s primary duties are to conserve, use, and manage the conservatee’s resources and assets for the benefit of the conservatee and those he is obligated to support.

The creation of a court-supervised conservatorship substantially impacts the conservatee’s rights.  Consequently, a court may not appoint a conservator unless the requirement for one is established by clear and convincing evidence. As a result of the curtailment of the conservatee’s rights, the court must review the conservatorship proceeding periodically to ascertain that the best interests of the conservatee are being addressed.  Accordingly, the court investigator has to report to the court six months after the appointment of the conservator whether the conservatorship is appropriate and whether the conservator is acting in the best interests of the conservatee.  Additionally, after appointment of the conservator, the court investigator must report to the court one year after appointment of the conservator and annually thereafter unless the court orders a different review period. 

Where the conservatorship proceeding is a court proceeding, it is public, time consuming, and expensive.  A conservatorship substitute found in the use of the DPA or AHCD will be preferable in most instances.  However, the DPA or AHCD will not protect against the potential for abuse by the agent.  Accordingly, it is imperative that a proper agent be appointed in the DPA and AHCD. 

There are many issues involved in a proper estate plan that go beyond the basic Will and Revocable Living Trust.  Accordingly, using online legal forms or using attorneys that do not specialize in estate planning can do more harm than good.  When dealing with your health, finances and well-being, seek the best counsel possible.

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