GOOD TO KNOW: Part II - Answering questions re: wills and estate planning

This week, we continue our discussion of key estate planning tools.

What is a living trust?

You can create a living trust to control your property while you are alive. The trustee then would control your property after you die. Under this arrangement, you sign documents to give your property to the trust. As long as you’re living, the property usually is treated the same for tax purposes as if you still owned it.

An advantage of a living trust is that property can pass to heirs after you die without going through probate. A drawback is that buying, handling, or selling assets held in a living trust may be more cumbersome while you’re alive. Ask your attorney how a living trust would affect your property.

(For more information, see the State Bar of Wisconsin’s pamphlet “Revocable Living Trusts.”)

If I have a living trust, do I still need a will?

Yes. A will would be important for several reasons. You may have property that never got transferred to your trust while you were alive. You would need a will to transfer that property to your trust after your death. Or your estate might receive money after your death. For instance, if your death was the result of an accident, your estate may receive wrongful death benefits. Again, you would need a will to transfer this money to the trust.

You also need a will in order to name a personal representative and a guardian for your minor children. That’s not part of setting up a living trust. A personal representative can take certain actions on behalf of your estate that a trustee cannot, such as pursuing a wrongful death claim.

What is a durable power of attorney?

This authorizes another person, called an agent, to act for you in financial matters. The agent’s rights to act on your behalf depend on what you say in your durable power of attorney document. These rights might include the authority to sign legal documents, pay bills, buy and sell real estate, and take other actions on your behalf. Choose a person you trust absolutely.

A durable power of attorney can take effect in one of two ways. If you wish, it can take effect immediately. Or you can provide that before the durable power of attorney takes effect, two physicians must state, in writing, that you are incapable of handling your affairs. The latter is called a “springing” durable power of attorney.

A durable power of attorney ends at your death. Your agent retains no further authority to handle your finances. If you want your agent to settle your financial affairs after you die, you need to name that person as your personal representative in your will.

What is a durable power of attorney for health care?

This arrangement gives your agent the authority to make health-care decisions for you when you’re unable to make them yourself. This is a heavy responsibility for anyone to assume. Be sure you discuss your health-care preferences with your agent, so he or she knows what you’d want. This makes the agent’s job much less difficult during what may already be a stressful time.

To create a durable power of attorney for health care, you can use the standard state form. Or, an attorney can create an individualized document for you. Either way, a durable power of attorney must meet specific requirements for it to be valid.

Can I have the same agent for both finances and health care?

Yes, one person can serve as both. If you feel you need to name two different agents, be sure they can work together. This would avoid a situation, for instance, in which your agent for finances could interfere with health-care decisions by refusing to pay certain medical bills.

What is a living will?

A living will is a separate legal document, not a part of your will. And, it’s not the same as a durable power of attorney for health care. The latter allows your agent to make health-care decisions for you. A living will, on the other hand, allows you to state in writing your preferences about life-prolonging medical treatment.

In a living will, you can declare that you wish medical professionals to withhold or withdraw lifesustaining procedures or non-orally ingested food and water – if you are in an incurable condition, or you’re near death, or if you’re in a persistent vegetative state.

Your living will takes effect only when you become incapacitated, cannot speak for yourself, and there’s no hope for your recovery.

Your durable power of attorney agent also can make these sorts of end-of-life health-care decisions for you, if you grant that power. If you have both a living will and durable power of attorney for health care, the latter rules if there is any conflict between the two.

The current law regarding living wills went into effect Nov. 25, 1991. If your living will was written before then, you should have your attorney review it to be sure it still expresses your wishes.

(For more information on durable power of attorney for health care and living wills, see the State Bar of Wisconsin’s pamphlet, “Health Care.”)

If you have any additional questions, you may call Pat Hafermann, elderly benefits specialist with the Aging and Disability Resource Center, at (920) 467-4076.

Resource: “Legal Explorer” March 2010