Real World, or Dream World?
Making a realistic plan for your future is the best thing you can do right now, says Jon Graft. Here he explains the steps you can take to make things work out the way you want:
As we live longer and our families become
more fragmented, planning for our own
care has become critically important. Many
of us have been in the position of caring for
a relative or friend who can’t handle his or
her fi nancial aff airs anymore. Planning for
this sort of situation is often overlooked –
and no wonder, when it can seem such a
frightening, far-off prospect. Do it properly,
however, and you can be well cared for in
the way that you want, by the people you
have chosen, for the rest of your life.
So what are your options? There are four
basic choices open to you:
1. Counseling-oriented Trusts
Th e ideal situation is one that you have
planned yourself along with family or
trusted friends. Trusts prepared with a
counseling-oriented approach (such as the
National Network of Estate Planning
Attorneys’ three-step strategy), provide a
personalized defi nition of disability, using a
disability panel. When your loved ones start
to think it’s time for you to turn control over
to somebody else, they can call the panel
together to decide whether you are disabled.
The panel operates by your rules.Who’s
on it? You decide. It will usually include a
mix of medical professionals, family
members, or trusted friends: people who
you’ll trust when they say, “I love you, but
it’s time to let someone else take care of your
affairs.” Do they have to be unanimous, or
will a majority do? Again, you decide.
You’ll need to choose a “Successor Trustee” who will be the one to take care of you later, following instructions you’ve left. I often ask my clients: “When you need someone to care for you, would you rather be cared for in your own home, in somebody else’s home, or in a nursing home?” Everybody has their own opinion, but most estate plans don’t answer that question. Many of my clients have opinions on things like whether they want visitors, or if they want music in their room. I have clients who want to make sure somebody does their hair. Th at isn’t trivial; it is part of you. When your family knows your wishes, they are more likely to be granted.
Finally, if you have tax-deferred
retirement plans, such as IRAs and 401(k)s,
they need to be addressed separately since
they cannot be owned by trusts. Within
your trust you will need to use a Limited
Durable Power of Attorney (LDPOA) to
appoint someone to control those accounts.
This is like a General Durable Power of
Attorney (GDPOA) but with limited
powers (see below). Because institutions
don’t have to accept these, it’s a good idea
to either get advance approval of your
LDPOA, or use the institution’s own Power
of Attorney form.
2. Standard Trusts
Standard Living Trusts are often little more than word-processing. Th ey will often use a standard defi nition of disability (usually based on the opinion of any two doctors – but without any guidance from you on which doctors to use). Th ere is no attempt to prepare a personalized plan and they typically have few personal instructions, but they do at least provide for a private transfer of control to personally selected trustees.
3. Power of Attorney
People often use a GDPOA to prevent
guardianship proceedings (see below). A
Power of Attorney appoints someone as
your “Attorney in Fact,” or agent. “General”
means the powers granted are very broad;“Durable” means it remains in eff ect after
you are mentally disabled. GDPOAs are
usually eff ective immediately and have no
reporting requirements or personal
instructions, but extremely broad powers.
Although you will get to name the person
who is in control, you will otherwise have
little or no control over your aff airs. Another
common problem with Powers of Attorney
is that nobody has to accept them: if your
bank won’t take your Power of Attorney
when it is needed, you will need to go back
to a guardianship proceeding.
4. Guardianship proceeding
This is how things can work if you haven’t planned at all. In most states, your loved ones must hire an attorney, go to court, and get the judge to declare you mentally incompetent. The judge may appoint a second attorney to make sure you have a fair trial. After taking evidence in a public hearing, the judge decides if you are disabled; who will be your guardian; and what that guardian can do. Every state’s system varies, but they have one thing in common: the judge, not you, is in control.