Estate Planning Basics - Who will make your Financial and Healthcare Decisions if you can't?

Estate Planning Basics:  Who will make your Financial and Healthcare Decisions if you can't?

   When people think of estate planning, they often think of wills and trusts; more generally, they think about what will happen when they die - who will be appointed guardian for their minor children, and who will inherit their assets. Although it is certainly true that these are important decisions that have to be made, a comprehensive estate plan will also include a Durable Power of Attorney-Healthcare and a Durable Power of Attorney-Financial.

   In general, a power of attorney allows one person (the principal) to appoint another (the agent) to act on his or her behalf.  A "durable" power of attorney is effective even after the principal is declared mentally incompetent, unlike a "non-durable" power of attorney, which is effective until the principal is declared mentally incompetent.  In fact, for estate planning purposes, providing for one's care upon declaration of mental incompetence is the primary reason a durable power of attorney is used.  There are many different types of powers of attorney - this article will focus on two:  the Durable Power of Attorney-Healthcare and the Durable Power of Attorney-Financial.

   A Durable Power of Attorney-Healthcare is typically written so that it becomes effective if and when the principal is declared mentally incompetent, typically due to illness or injury.  The purpose of this document is for the principal to choose an agent to make medical decisions for himself or herself in the event the principal is no longer able to do so.  

   The agent will be given as much or as little authority to make decisions regarding the principal's medical treatment as is specified in the document.  This decision-making authority may also include the ability to refuse or terminate the principal's medical treatment.  A Durable Power of Attorney-Healthcare is not limited in duration by law; however, the principal can limit the duration when the document is created. If no duration is specified in the document, it becomes ineffective if and when the principal is later declared mentally competent, or upon the principal's death.      

   A Durable Power of Attorney-Financial is also usually written so that it becomes effective if and when the principal is declared mentally incompetent.  A Durable Power of Attorney-Financial is used to give an agent the authority to make financial decisions for a mentally incompetent principal.  The agent is typically given the authority to access bank and investment accounts for the purpose of paying bills and handling other day-to-day financial transactions.  The agent may also be given the authority to buy and sell property on behalf of the principal.  

   A well-written document will specify in detail the precise amount of authority that should be given to the agent.  And similar to a Durable Power of Attorney-Healthcare, a Durable Power of Attorney-Financial is not limited in duration by law.  If no duration is specified in the document, it becomes ineffective if and when the principal is later declared mentally competent, or upon the principal's death.  

   In conclusion, a comprehensive estate plan should include two documents that are meant to protect a person during his or her lifetime - a Durable Power of Attorney-Healthcare and a Durable Power of Attorney-Financial.  

   To learn more about this topic, or to schedule an appointment with Attorney Mike Toburen, please visit 

http://www.toburenlaw.com/my-blog/

   

Estate Planning Basics - How to Choose the Right Guardian for Your Child

Estate Planning Basics:  How to Choose the Right Guardian for Your Child

Choosing the right guardian is a Gift to your child

            

   As difficult as it may be to think about someone else raising your child, choosing a guardian for your child with the same values, morals, religious beliefs, and commitment to education that you have is actually one of the greatest gifts you could ever give to your child.  Although it may be unthinkable now to consider entrusting your child’s care and upbringing to someone else as a “gift,” choosing the right guardian is the best way for you to ensure that your child will grow up to be the person you want him or her to be.

   Many parents often assume that their minor child’s grandparents, or a favorite aunt or uncle, will be able to assume guardianship of that child if both parents were to die.  Unfortunately, this is not guaranteed to happen unless you have a will or trust in place that appoints a guardian.  Without a will or trust, this decision will be left up to the courts.  And while it is possible that a court may ultimately appoint the person you would have chosen as guardian, the only way to be absolutely certain this will happen, and the only way to avoid a possibly lengthy court battle, is to have a valid will or trust with a guardianship provision.

I know I need to choose a guardian – but how do I choose the right guardian for my child?

            

   The following is a list of factors you may want to consider when choosing a guardian for your child.  My advice to my clients is to use some or all of these factors, rank them in order of importance to you, and then choose a guardian (and a backup guardian) that most closely matches the factors you think are most important.    

Factors to consider when choosing a guardian for your child:

         Values and Morals:  Does the potential guardian have the same sense of right and wrong that you do, and will that person be able to teach your child the values you believe in? 

          Parenting style:  How does the potential guardian handle discipline?  Will the guardian be “hands on” and play an active role in your child’s day-to-day life?  Will the guardian support your child’s extracurricular interests (sports, music, other after school activities)?

          Religion:  Does the potential guardian share your religious beliefs, and if not, will that person at least support your child’s religious education and upbringing in the same way that you would have?

          Education:  Will the potential guardian be committed to supporting your child’s education?  Does the potential guardian believe that education – including a college education – is important?

          Financial stability:  Does the potential guardian have the resources to take on the added responsibility of raising your child?  Does the guardian have a stable job and a secure income?  Is the guardian in a one-income – or two-income household?

          Your child’s relationship with the potential guardian:  Your child may feel more secure if the guardian is someone he/she has a relationship with already.  Family members and close friends are often chosen for this reason. 

          The impact of moving to a new city:  Just as choosing a guardian that your child is already comfortable with may be beneficial to your child, you may also want to consider the impact on your child of having to move to a new city.  This factor will probably be more significant the older and more established your child is.  Your child may benefit by remaining in the same city so he/she can maintain friendships and stay involved in extracurricular activities.  

          Health and age of the guardian:  You will want to make sure that your potential guardian is healthy enough to raise your child.  Age is also a factor you should consider, especially if you have young children.  This factor is often a concern if grandparents are considered as potential guardians.

Congratulations!  – You have chosen a guardian for your child – Next Steps

            
   Now that you have chosen a guardian for your child, you need to talk to the person you have chosen to make sure he/she is willing and able to assume that responsibility.  For a number of reasons, some people are not willing to take on that responsibility, as unlikely as it is that they will ever have to actually assume the role of guardian.  You should also choose a backup guardian, just in case your first choice becomes unable or unwilling to handle that responsibility later on down the road.      

            
   Now that you have chosen a guardian and a backup guardian for your child, you need a valid will or trust to implement your decision.  To learn more, please go to:   http://www.toburenlaw.com/

Estate Planning Basics - Top 3 Reasons You May Need a Will

Estate Planning Basics:  Top 3 Reasons You May Need a Will

   When I meet with a potential new Estate Planning client, one of the first questions I always hear is, "Do I really need a will?"  That question is usually followed by comments such as, "I don't have tons of money," or "If I die, my spouse will just get everything," or "If my spouse and I both die, my parents will raise our kids."

   I also frequently talk to parents who just can't imagine someone else raising their minor children if the unthinkable happens and both parents die.  And while it may be true that your spouse will inherit all of your assets upon your death, or that the person you want to raise your minor children will be appointed guardian, the only way to make absolutely certain that these things happen is to have a will or trust.  

   With that being said, the following are the top 3 reasons you may need a will to protect yourself and your family:

1.  You have minor children, and you want to choose their guardian(s) in the event that both parents pass.

   The only way to be absolutely certain that the person(s) you want to be guardian of your minor children in the event that both parents pass is to have a valid will in place.  Under Michigan law, if both parents pass and a will has not been executed, a judge will decide who becomes the guardian of your children.  Michigan law does not have a provision that appoints the grandparents, or an aunt or uncle, as guardian in the absence of a will.

   In the event that both parents pass without a will, and the entire family agrees on the appointment of a guardian, a judge will usually follow that recommendation.  But is it fair to place your extended family in a position where they have to make that decision?  And what if they don't agree?  Then the only resolution is to go to court and let a judge decide.  

   In summary, in the event of your untimely passing, the only way to guarantee appointment of the guardian you want for your minor children is to have a will.    

2.  You want to decide - instead of allowing a judge to decide - how to distribute your assets upon your death. 

   Just as with the appointment of a guardian for your minor children, the only way to guarantee that your assets are distributed as you desire is to have a will.  If you don't have a will at the time of your death, your assets will be distributed according to the laws of intestacy.  (Intestacy is the legal term used to indicate that the deceased did not have a will).  Under the laws of intestacy, your surviving spouse has the first claim to your assets.  Depending on whether any money is left over after your spouse receives his/her share, your children will have a claim, and then your parents and siblings will have a claim if money is still available.  If you want to make these decisions instead of allowing your assets to be distributed according to a formula, you need to have a will.  

   In summary, you need to have a will if you want to decide who will receive your assets upon your death. Under the laws of intestacy, your surviving descendants will receive your assets upon your death, which leads us to reason #3 you may need a will.

3.  You want to distribute a portion of your assets to someone not in your family.

   As mentioned above in #2, if you don't have a will, your assets will be distributed according to the laws of intestacy.  Under Michigan's intestacy provisions, the only people that will receive your assets upon your death are members of your family (your surviving descendants).  If, at the time of your death, you have no surviving descendants, the state will inherit your assets.  Your boyfriend, girlfriend, or partner, even if sharing your household at the time of your death, is not considered to be a part of your family and will not receive any of your assets if you do not have a will.  If you want someone outside of your family to receive all or a portion of your assets, you must have a will.

   In summary, the best and only way to make sure that your wishes are carried out upon your death is to have a validly executed will.  

   To learn more about this topic, or to schedule an appointment with Attorney Mike Toburen, please go to:  http://www.toburenlaw.com/