Estate Planning 101

Considerations for Young Families

Class is in session – but the subject matter is pretty depressing: what happens to your family if you are unexpectedly no longer around? We’ll call it “Estate Planning 101” – and what follows is your cheat sheet on some key topics in preparing legal documents for what we all hope will never happen.

To act as our professors, we consulted several Tulsa-area lawyers who specialize in the intimidating-sounding field of “estate planning” (basically advising families and writing wills, trusts the like) to help distill a very involved and confusing topic down to a few points. Keeping in mind that there is a huge array of legal instruments of varying complexity available to plan for the future, we asked them what documents were absolutely essential for a young family. The three common recommendations were a Will (or at the very least a document that nominates a guardian for your child), a Medical Power of Attorney and an Advance Directive.

Will

A will is a document that facilitates designating which people or charities should receive your money and property after you die and also who you want to oversee the process (called an “executor”). For young families, the most important thing a will can contain is a provision nominating a guardian for minor children (defined as under the age of 18 at the time of a parent’s death or incapacity). A guardian is necessary when both you and the other parent are simultaneously unable to raise the child. It need not be a fancy or complex thing – but it is important in allowing a person to express these wishes.  The default that occurs when someone dies without a will (called “intestate” in legal jargon) is that a court will decide distribution of property and, quite significantly, appoint a guardian for your child using Oklahoma law as a guide. The result may not be at all what you intended, warns attorney Andrew Wolov of Hall Estill.


Medical Power of Attorney

A medical power of attorney comes into play in the event that you become physically and/or mentally incapacitated and can’t make your own medical decisions. It allows you to identify someone to serve in the role of medical decision maker. “Quite often a spouse is named as the decision maker,” notes attorney Andy Johnson, of Johnson & Jones. Make no mistake, this document is not just for people who are sick, adds Johnson, it’s for healthy people too, “because once you’re incapacitated, it’s too late!” A medical power of attorney should not be confused with filling out a HIPAA form for the disclosure of private health information, which allows a family member to communicate with healthcare providers about your medical care.  A HIPAA disclosure consent form does not allow someone to make decisions on your behalf.


Advance Healthcare Directive

Also sometimes called a “living will,” an advance healthcare directive allows you to express your wishes in the realm of medical care if you are unable to make or communicate decisions because of illness or incapacity. This document becomes very important when  end-of-life treatments are in question. Examples of topics this document can address include whether you wish to have food and water administered via a tube or be put on a ventilator to breathe in certain medical situations. “An advance directive can also become important when there is a dispute between family members as to how to handle a situation,” says Wolov.


Talking About the Hard Stuff

It’s hard to talk about death. It’s even harder to think of your child growing up in a world without you. But taking the first step in crafting these key documents is a step toward protecting your family. It’s wise to have some serious conversations privately before meeting with a professional. Though an attorney can advise you on what specific decisions need to be made, a good starting place is to sit down with your spouse or partner and open a discussion about the following:

  • Who would I want to be the guardian of my child(ren) if my spouse and I both die? Who would I want to be the back-up should my first choice be unable?
  • How would I want my children to be financially cared for if I am not around?
  • Who would I want to make difficult medical decisions for me and carry out my wishes?
  • What types of medical treatment am I comfortable with should I be gravely ill or injured?

Picking the Right People

Several of these documents require you to select people to carry out your wishes and intentions if you become incapacitated or die. “It’s not just an honor, it’s a job,” notes attorney Curtis W. Fisher of The Fisher Law Office, PLLC. The person you appoint needs to know he or she is being appointed and has thought through the ramifications, he adds. “Imagine if a person appointed their brother … who has three young kids already, to be the guardian of their three young kids [if they died],” Fisher exclaims. “Having six kids is a different life!”

Additionally, the person you appoint to oversee medical decisions as a Medical Power of Attorney should be someone you trust to carry out your wishes and whom you believe can maintain a calm and rational demeanor in a potentially stressful situation.


Only for the Rich?

“At the end of the day, it doesn’t matter how much money you have,” says Johnson, identifying the potential future guardian for your children is incredibly important. And, he adds, “even people who don’t have a lot of liquid assets (think – cash in bank accounts), have more than they might initially imagine.” Things such as insurance pay-outs, money saved in a retirement account such as a 401k or equity in a house all count as assets to be distributed after a person’s death. “This is one of the most important decisions…people are ever going to make, [it involves] all the assets they’ve worked for their entire life,” says Johnson.

Additionally, the two documents dealing with medical care – the Medical Power of Attorney and Advance Directive – function independently of financial wealth. These documents make clear what your wishes for care are and often have the benefit of relieving your family members of the stress and anxiety inherent in end-of-life care decision making.


What Now…

After the difficult conversations have been had, the potential guardians, executors, power of attorneys and trustees asked and the documents written, the next step is storing all of these papers safely. “Originals should be put in a bank safety deposit box,” says Johnson, “with a copy kept easily accessible at home.” It’s a good idea to attach a note to these copies indicating where the originals are located in case something happens to you suddenly and your family needs access. He also suggests keeping a copy at your attorney’s office.

Much like a check-up at the doctor, Johnson suggests reviewing your documents every three to five years as well as when there is a major life event such as a birth, death or divorce.


The Dollars and Cents

For a family looking to draw up a basic will and accompanying documents with no complex issues, hiring an area lawyer will cost in the neighborhood of $1500 – $3000, though prices will vary by attorney and complexity. Some families even choose to turn to popular and widely available computer software such as Quicken WillMaker. For families who meet specific low-income requirements, lawyers at Legal Aid Services of Oklahoma may be able to assist in drawing up a will (call 1-888-534-5243 to apply). It’s best not to attempt to draft a will, or one of the accompany documents, totally on your own. In order to be considered a proper legal will that will withstand a court’s scrutiny, there are very specific elements (set out by Oklahoma law) that must be met.

Looking for even more? These basic documents provide what attorneys call the bare minimum of preparedness. Families looking to go to the next level may explore crafting a trust which can help avoid the process of probating a will (a court proceeding that takes time and money) and can be set up any number of ways to slowly dole out inheritance to children, or executing a document to nominate a financial power of attorney to manage finances in case of incapacity. Whether a trust is a better option than a will for you and your family is something to discuss with a qualified attorney, experienced in crafting wills and trusts.

But that’s all beyond the scope of today’s introductory lesson. Class adjourned.


Special Needs: Special Considerations

While all families with young children need to take planning for an early death or incapacity seriously, parents of children with special needs have to plan for the reality of a future where their child requires indefinite care. “Children are children, no matter how old they are and especially if you think they are never going to be completely self sufficient,” says attorney Curtis W. Fisher, of The Fisher Law Office, who frequently assists special needs families in his practice.

To address the specific circumstances regarding a child with special needs, a parent should create a document called a “special needs trust,“ also known as a “supplemental needs trust, “ that will provide a surviving child with various support not already supplied through government assistance, advises Fisher. It can be a stand-alone document or part of a regular trust. A parent can use this type of trust to address things such as financing additional medical care or even earmarking money for vacations or enjoyment of life outside of funds needed for basic survival.

Inheritances can also prove tricky for a child with special needs who is receiving government assistance presently or anticipates receiving it in the future.  A sudden windfall in the form of monetary inheritance may inadvertently leave a child with special needs ineligible for help from the government. As such, Fisher notes, parents should work with their lawyer to carefully craft a distribution plan for any inheritance using a trust.

But by far the most important aspect of planning for the long-term care of your child with special needs is selecting high-quality guardians and trustees, Fisher says. For a child who will require lifelong care, parents will need to decide on guardians for the child’s physical as well as financial well-being. A financial guardian may be an individual such as a family friend or relative or an institution such as a trust company or a trust division of a bank that will ensure the terms of a special needs trust are carried out. “A guardian for the child’s physical well-being may be the same individual who assumes financial guardianship or another person who may take on the responsibility of day-to-day care personally or might oversee and arrange for nursing care or a group home,” Fisher says.

Categories: Financial Health