Ancillary Estate Planning Documents in the Pandemic

Aug 18, 2020 | General Estate Planning, IRS / Tax Guidance, Pandemic Related Issues, Podcasts, T&E Administration

“Ancillary Estate Planning Documents in the Pandemic,” that’s the subject of today’s ACTEC Trust and Estate Talk.

Transcript/Show Notes

This is Susan Snyder, ACTEC Fellow from Chicago. The pandemic has brought estate planning to the top of our clients’ minds. It’s not just wills and trusts, but also powers of attorney, medical directives and living wills. To educate us more on these types of documents, you will be hearing today from ACTEC Fellow Lauren Detzel of Orlando, Florida. Welcome, Lauren.

Thank you, Susan. Frequently, mainstay documents that we use in every estate plan, such as the durable power of attorney, medical directives and living wills, are often given fairly short shrift by the planner who has so many other things to focus on and thus uses form documents with very little discussion and input from the client. Today we will look at some of the issues that need to be given closer scrutiny with regard to these documents, specifically financial management and health decisions for our clients during an incapacity.

Estate Planning – Financial Management Documents

Let’s look first at the financial management. And here, of course, we are referring to powers of attorney. There are two different kinds of powers of attorney. The springing power of attorney requires a determination of incapacity before it is effective, whereas the regular durable power of attorney is immediately active and can be used upon execution. The springing powers are not necessarily used in every state because, for example, Florida made a determination to repeal its springing powers because of problems in determining incapacity, delays, difficulty with banks and other institutions honoring these powers; and so, some states only have regular durable “Powers of Attorney.” But, if you are in a state and you’re using a springing power, the most important thing is ‘how is incapacity determined?’ Sometimes this is determined by state law, by the statute, sometimes in the document itself; but what’s important is that we have consistency across all of the ancillary documents as it relates to the determination of incapacity and particularly with regard to — if there is a revocable trust used. We certainly want to have the definition of incapacity in a revocable trust for when a grantor ceases to be a trustee and successor trustees come in — be the same type, the exact same standard determination with respect to the power of attorney, and when an agent is able to take over and handle that. In addition, what’s important is the coordination between the agent under the power of attorney and the successor trustees. Unfortunately, not all of our clients pay attention to everything we tell them, and they don’t get all the assets retitled into the name of the revocable trust. And so, you’ll find that some assets are going to be managed by the successor trustees under the terms of the trust and other assets, which were left in the individual’s name alone or which were jointly held, are going to be managed by the agent. And having some coordination between those two is extremely important. I was brought in as an expert witness in a case – that should be a clue there was a problem, that they needed an expert witness– in a case where an individual had created a revocable trust and had very complicated, precise, detailed instructions about how his closely-held business would be managed and succession planning for that business in his revocable trust. Unfortunately, he failed to retitle the voting stock into the name of the trust and when he became incapacitated, that whole structure didn’t work. Instead, it was managed by the agent under the power of attorney, who in this case happened to be the son who had been fired by that management committee just a few weeks prior to dad’s incapacity. It was not a good situation and so, it would really be helpful if we could have some coordination.

Speaking about coordination, it’s good to have coordination between the revocable trust and the agent, the power of attorney, as it relates to liability standards and exculpation. We really should be holding these two individuals who are going to manage finances upon an incapacity to the same standard. In this world of pandemics, it is also possible that because of inaccessibility, physical inaccessibility, we may want to have powers of attorney in another state, in addition to the home state. Clients sometimes have vacation homes in other states and bank accounts in those other states; and so, it may be helpful to have a power of attorney that is under that other state’s law to facilitate ease of use of the power.

Estate Planning – Medical Directives, Healthcare Directives

Let’s turn to medical directives. The most important thing about medical directives and healthcare surrogates, living wills, is having clear and comprehensive guidance about the treatment options. Some states have medical directives that have boxes to check about various medical procedures. Others have a blank slate, in essence, for the health care surrogate to make determinations of what the individual’s intent might be. And some states and some practices are that they’ll have a side agreement that spells out some of those medical procedures more carefully. Whatever it is, it would be a really good idea to have the good guidance about those treatment options. I bring to your attention the case of Terri Schiavo that originated in Florida. A very famous case in 1990. A young Florida woman had a brain injury and was determined to be in a persistent vegetative state – that was in 1990. She did not need a respirator to breathe but she needed a feeding tube to live. And her husband did not want the feeding tube. He wanted it removed, and her parents wanted the feeding tube to remain. Terri’s documents did not have clear guidance about what her intent would be; and what followed was 15 years of litigation in state and federal courts, including a bill in the Florida Legislature and a bill in the US Congress, and four denials of cert to the US Supreme Court, all to determine what was Terry’s intent about the feeding tube. Unfortunately, her feeding tube was taken out and put back in multiple times before finally, in 2005 — fifteen years later — it was permanently withdrawn. All of that could have been avoided had there been clearer direction; and that case served as a lightning rod for state statutes and forms to be more specific and to cover things like feeding tubes and hydration tubes.

But you say, “why is that important now?” And the reason why I think it is relevant now is because back in 1990 that was — living wills were brand new. The first living will came in a 1976 and it wasn’t until 1990 in the Cruzan case that it was even established. The US Supreme Court established that we could have these things. So it was new. We didn’t cover everything, and now I think we have another situation where we have to relook at our medical directives and see whether they cover things that might be experimental treatments now — such as a coronavirus vaccine or new and experimental treatments that have not been approved. Look at your document. Can your health care surrogate make that decision? I will tell you under Florida law you’ve got to have a specific provision initialed by the individual before you can – the surrogate can – agree to experimental treatment, and I think that’s particularly important today.

Estate After Death – Organ Donation – Custody of Remains

Let me move on and talk about decisions that are made after death. We all know that if we want to have organ donation or tissue donation, it’s very important to have written documents that provide for that in order to make sure that your client’s wishes are going to be upheld. But one document that we don’t think about a lot is the custody of remains. Who is going to make decisions about the funeral, about the cremation? This is particularly important to have nailed down when you have non-traditional family relationships. Before we had same-sex marriage, I used to have a lot of concerns because we would have companions who thought of themselves as husband and wife, or husband and husband/spouses. The other person had no legal right to make any determination at all unless it had been given in writing; and I had multiple situations where the family would come in and supersede the wishes that the surviving spouse knew would have been wanted and so we still have that situation today. Marriage is declining and lots of people are living together, and you would want to make sure that if your significant other who you would be relying upon to make those decisions has the legal ability to do so and is not countermanded by the children from a prior marriage coming in.

Storage of Legal Estate Planning Documents

Then, the last thing that I want to talk about is the storage of and access to documents. We did a poll in a presentation last week to ACTEC and ask the question of how many law firms retained original documents, and not surprisingly 71 percent either maintained them most of the time or some of the time. If that is the case — and my firm keeps original documents, we do it as a convenience to the client — I have dealt with missing documents way too many times or documents that got shredded when mom moved to the nursing home, and so we keep those as really truly a convenience to our client. But what goes along with that is you have got to have a mechanism for determining access to those documents. Let’s take a power of attorney, and dad gives son a durable power of attorney (meaning it is immediately exercisable), but says to you, “I’m perfectly fine with my son using this if I become incapacitated but being the control person that I am, I certainly don’t want my son to use that document while I’m still capable, so how can you manage that?” Well, we manage that by controlling access to that document. We don’t give out copies – signed copies of the power of attorney, and instead the original power of attorney will be released by us upon certain conditions being met; and we have escrow instructions or an escrow letter that we have our client sign that protects the client, protects the law firm, about upon under what circumstances will these original documents be released. There’s another way that you can handle the mechanism for how these original documents are released, and that is in your engagement letter. So, it’s possible to have in your engagement letter a provision that deals with the custody of these original documents. But however you do it, if you have custody of original documents, you need to have a clear line upon what circumstances is it going to be released; and of course, our escrow letter includes a waiver and release of liability, which is also nice. So, I think everybody is well served to look at what is their practice with regard to holding original documents. And with that, I’m going to conclude, and I’ll turn it back over to Susan.

Thank you, Lauren, for giving us those reminders on ancillary documents and how they are accessed during these interesting times.

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