Wills & Incapacity Planning

• Why Do I Need a Will (and Power of
  Attorney and Advance Directives)?

While nobody wants to think about death or disability, establishing an estate plan consistent with your goals and wishes is one of the most important steps you can take to protect yourself and your loved ones.  Estate planning not only puts you in charge, it can also spare your loved ones of the expense, delay and frustration associated with managing your affairs when you pass away or become disabled.

Last Will and Testament (“Will”)

A will is the document that directs what happens to certain assets at death. The assets that pass under the Will are called probate assets. Generally probate assets are titled in the name of the deceased individually or in the name of the estate of the deceased, and the will, by specifying beneficiaries, disposes of those assets as the deceased intended. The non-probate assets pass outside of the will. Examples of non-probate assets are survivorship real estate, joint bank accounts and insurance policies and retirement plans with beneficiary designations (other than the decedent’s estate). Non-probate assets vest in the joint tenant or beneficiary without action of the Probate Court. In addition to directing probate property to the rightful owner, the will allows for the appointment of guardians for minor children, the incorporation of testamentary trusts for the benefit of minors or others for whom the testator sought trust protection, and the appointment of trustees to manage and executors to administer the estate. The will should be periodically reviewed as goals and finances can and do change over time. A will can be changed any time, as long as the testator is mentally competent, prior to death. If someone dies without having a will, the intestacy statutes of the State of Connecticut and other applicable law dictate to whom the decedent’s property will go.

Providing for Minor Children

It is important that your estate plan address issues regarding the upbringing of your children.  If your children are young, you may want to consider implementing a plan that will allow your surviving spouse to devote more attention to your children, without the burden of work obligations. You should also discuss with your attorney the possibility of both you and your spouse dying simultaneously, or within a short duration of time.  A contingency plan should include a list of persons you’d like to manage your assets and name a guardian you’d like to nominate to raise your children in your absence. The person, or trustee, in charge of the finances need not be the same person as the guardian.  In fact, in many situations, you may want to purposely designate different persons to maintain a system of checks and balances.

You should give careful thought to your choice of guardian, ensuring that he or she shares the values you want instilled in your children.  You will also want to give consideration to the age and financial condition of a potential guardian.  Some guardians may lack child-rearing skills you feel are necessary.  If you fail to plan, the decision as to who will manage your finances and raise your children will be left to a court of law.

Another issue to consider during the planning process is whether you’d like your beneficiaries to receive your assets directly, or to have the assets placed in trust and distributed subject to conditions and circumstances such as age, need and even incentives based on behavior and education.  Including terms and conditions specific to your children’s needs can safeguard your assets for your children until they are able to manage them on their own.

There are times when an adult can benefit by the protection offered by a trust. Depending on the circumstances, assets may be protected from creditors, certain special needs of a seriously ill or mentally handicapped individual may be funded, or, a surviving spouse may have lifetime access to income with the balance remaining going to contingent beneficiaries.

Planning for Incapacity

If you become incapacitated, you won’t be able to manage your own financial affairs.  Many are under the mistaken impression that one’s spouse or adult children can automatically take over for them if they become incapacitated.  The truth is that in order for others to be able to manage your finances, they must petition a court to declare you legally incompetent.  This process can be lengthy, costly and stressful.  Even if the court appoints the person you would have chosen, the individual is generally required to submit periodically an accounting to show how he or she is spending and investing your money.

If you want a person/person(s) to be able to act immediately should you become unable to do so , it’s essential that you work with an attorney to create the proper legal documents to designate a person, or persons, that you trust so they will have the authority to withdraw money from your accounts, pay bills, take distributions from your IRAs, sell stocks, and refinance you home.  Many people mistakenly think that a simple will can effectively protect you in the event that you become incapacitated, but the truth is that a will does not take effect until you die.

In addition to planning for the financial aspect of your affairs during incapacity, it is critical you establish a plan for your medical care.  The law allows you to appoint someone you trust – for example, a family member or close friend, to make decisions on your behalf about medical treatment options if you lose the ability to decide for yourself.  You can do this by appointing a health care representative to make such decisions on your behalf.  In addition to a health representative appointment, you should also have a living will which informs others of your preferred medical treatments and the use of extraordinary measures should you become permanently unconscious or terminally ill.

IMPORTANT CAVEAT:  This is general information only. There are other important issues to understand and discuss and additional estate planning tools depending on your circumstances and that of your family, including long term care insurance, planning for changing health care and financial needs, and factors affecting beneficiaries and personal representatives that necessitate review and update periodically or immediately if there is a sudden change that may affect the estate plan.