The basic estate planning documents that everybody needs

The term "estate planning" sometimes makes people think of millionaires who live behind wrought iron gates with a butler at the door. But all it really means is that you've put plans in place to deal with your eventual passing and for the possibility of losing your mental capacity. Estate planning isn't just for the wealthy. Everyone with a family needs to think about estate planning.

Most people know they need a will, even though a good half of Canadian adults don't have one. Even with a valid will in place, you haven't fully prepared yourself to protect your family and your assets. Your will does nothing to help you or your loved ones if you are alive but unable to make decisions due to dementia, illness or injury.

Here are the basic documents that everybody should have:

1.  A valid will that is kept up to date to reflect changes in your life. The will should be prepared as part of a bigger estate planning picture that takes into consideration your joint property, your designated beneficiaries on policies and plans, your insurance coverage and of course your plans for your family members left behind. All of these things must be co-ordinated so that your documents don't contradict each other or create confusion that will end up being sorted out by the courts.

2.  An Enduring Power of Attorney, which is also called a Continuing Power of Attorney, or a Power of Attorney for Property. This document allows you to appoint someone to make financial decisions for you if you should be unable to do so for yourself. Most commonly this document is used when a person develops dementia, but it may also be used if you should be severely injured in an accident or become very ill.

3.  An Advance Health Care Directive, also called a Personal Directive or Health Care Proxy. The person you name in this document will be able to make decisions for you about medical issues, health care and personal issues. The document should also contain your instructions on end-of-life decisions.

The above three documents are usually sufficient for individuals whose estates are not complicated. Business owners may find that they need additional estate planning documents, such as:

4.  Shareholders' Agreement, sometimes called a buy/sell agreement. While not solely an estate planning document, a shareholders' agreement should address what is to happen with shares of a privately held company if the owner should pass away or lose mental capacity.

5.  Life insurance to fund the buy/sell agreement.

6.  A written business succession plan that sets out who is to take over the family business, and how that plan is to be implemented financially.

7.  A holding company may be needed to funnel excess cash out of an operating company to improve the potential tax situation.

Individuals differ, and so do their estate-planning needs. You may find that you have specific goals that will require additional documents to be made. For example, you may wish to leave a Memorandum of Personal Effects that gives certain items to specific people on your passing. You may wish to leave a Letter to Executor that leaves personal messages, gives further explanations or expresses wishes to your family members.

Start by making sure that you have the first three documents in place and keep them up to date. An experienced estate planning lawyer can help you decide what else you might need or want to protect your loved ones.

Case emphasizes need for end-of-life discussions

Have you ever wondered whether it's worthwhile to have a Health Care Directive (also called a health care proxy, personal directive, power of attorney for personal care) made up to express your wishes? If you've ever considered it unimportant,click here to have a look at this article from www.advocatedaily.com. Right now, the Supreme Court of Canada is deciding an essential issue for all of us. They are looking whether doctors have to listen to the person who was appointed under a health care directive when the doctors think it's time to pull the plug on a person in a vegetative state.

The case centres around Mr. Hassan Rasouli. Mr. Rasouli's doctors believe that he is in a vegetative state and will never recover higher functioning. His wife was named by Mr. Rasouli in a health care directive and opposed the doctors' suggestion that life support be discontinued. Had she given her consent, life support would have been withdrawn, allowing Mr. Rasouli to pass away naturally.

The court will decide whether in a case like this, the doctors need the consent of a substitute decision maker to give treatment that they see as ineffective or inapproprite. In case you are getting the impression that the doctors are fighting to end this man's life, please understand that the doctors need and want this clarification by our  higher court as much as Mr. Rasouli's family - and the families of anyone who is on life support - want it. Everyone needs to know where this issue stands.

Each of us should have this document prepared appointing a trusted loved one or friend, and discuss our wishes with that person.

Fee for acting under a Living Will? And can I ignore funeral instructions?

The role of the executor is challenging, there is no question about that. I know that many of you reading this blog are executors looking for practical information about how to deal with the estate you're working on. The following question (which is really two questions) came in from a reader in exactly that situation, so I'm sharing it with you in case you're in a similar spot.

Here's the question:

"Can an executor charge fees before the person passes away if that person is in charge of the living will. Also does the executor have to follow the will to the tee for the funeral arrangements?"

 

First of all, a person whose authority comes from a will can't do anything with that will, including taking a fee, while the testator (the person whose will it is) is alive.

 

When you talk about the Living Will, I am going to assume that you're actually talking about a type of health care directive or advance directive. These directives usually include the kind of end-of-life instructions you see in a Living Will, but they also do much more. They usually appoint someone to make decisions, and as you say you are "in charge of" the document, this sounds more like what you are dealing with.

 

The law in Canada generally does not allow a person acting under a health care directive to charge a fee. You can, however, usually recover reasonable expenses. Please understand that this has absolutely nothing to do with the will. You have to follow the law as it applies to the health care directive, which varies from province to province.

 

As for your second question, the executor doesn't have to follow the will to a tee regarding the funeral. In fact, legally the executor can totally ignore what the will says about the funeral, because the funeral wishes in a will are a wish only. They are not legally binding. The law says that if the executor has the legal responsibility to dispose of the body, then he or she must have the legal right to decide the best way to do that.

 

Please keep in mind the emotional fall-out that can happen if you decide not to follow the will. It may upset people, to put it mildly. Consider what damage will be done to family harmony, and think about how you will deal with this. I'm not saying that you can't do the funeral the way you think best; I'm saying you may have to gently explain to family members why you made a different decision.

 

I'm glad you decided to ask for input before taking these steps. Sometimes just asking helps avoid real problems.

Death by forgery: case shows how not to conduct advance care planning

This is one of those completely odd news stories that just make me shake my head. According to a story from the American Academy of Estate Planning Attorneys, a Missouri woman is being accused of 1^st degree murder and forgery. The murder weapon: her father’s power of attorney, allegedly forged, naming herself as the agent. The actual murder: directing that her father’s life-sustaining medical treatment be discontinued. The accused, Susan Elizabeth (“Liz”) Van Note has pleaded not guilty to the charges. I'm very glad that my own law practice has had very few of this kind of client!

To read the rest of this story, and yes it gets weirder, click here.

Can my health care PoA be "durable"?

Here's another good reader question. This one is asking about whether health care directives can be "durable" powers of attorney. I find that people get confused about how the concept of durability affects a document, so I'd like to answer the question here for everyone to read. Here's the question:

"Can any type of power of attorney document be durable? Like can I have a Durable Heath Care Power of Attorney Form?"

There are two basic kinds of documents that name someone to act for another person when that person loses capacity to make his or her own decisions. One is a document that gives someone - called the attorney - the authority to make decisions about money and property. Most of the time that document is simply called a Power of Attorney, though in some places it's also called Power of Attorney for Property.

The other kind of document is one that gives someone the authority to act under health, medical or person decisions. This goes by many names, including Personal Directive, Health Care Proxy, Advance Health Care Directive and Power of Attorney for Health Care. This is the type that the reader's question addresses.

The basic reason for making either of these documents is to have someone of your choice lined up to make decisions if you can't do that any more due to loss of mental capacity. The word "durable", also called "enduring" or "continuing", means that the document endures through your loss of capacity, should it happen. That's the whole point of it - to have something that covers you in that situation.

In other words, yes, these documents can and should be "durable".

A person who acts under a standard health care document ONLY does so when the person can't speak for himself or herself, therefore that document must be durable. If the document wasn't "durable" and collapsed when you lost capacity, it would be little more than a waste of paper.

Don't stop at having a will - plan for incapacity as well

This week I'm travelling across the western and central part of the province, participating in learning sessions with bank branch staff and meeting with clients to talk about estate planning. I've been surprised to find that although many clients have wills, so far not a single one has an Enduring Power of Attorney and Health Care Directive in place.

This worries me. A will is only one part of estate planning. Certainly it's a major part, but on it's own, a will isn't going to help you meet all of the challenges you and your family may face down the road. Planning for a possible loss of mental capacity is essential. It's no less important than your will, as it fills a completely different need than does your will.

Almost all of us know of someone - a relative, neighbour or friend - who has experienced a loss of mental capacity because of aging, illness or accident. One client I met recently has told me that his aging father's dementia quickly caused personality changes. The father is now suspicious and angry (perhaps frightened at what is happening as well) and lashes out physically and verbally. The client's mother is upset and exhausted. The client is anxious to help but since there is neither a Power of Attorney nor a Health Care Directive in place, he has no legal authority to do anything to help his parents unless he applies to the court.

Having a will in place doesn't help an individual in this unfortunate position, because a will doesn't kick in until a person dies. Imagine seeing your parents going through something so upsetting, and being helpless to act without the cost and delay of asking a judge to grant you permission to take control of your parent's affairs. Or. imagine that you're the one experiencing loss of capacity, and your children have to try to deal with it without you having preparing any documents to help them. This is definitely doing things the hard way.

If you are thinking about having a will prepared, I urge you to have the two documents that deal with mental incapacity - the Power of Attorney to deal with finances and a Health Care Directive to deal with medical decisions  - done at the same time. And if you already have a will, maybe it's time to dust it off, bring it up to date and have your incapacity documents prepared as well.

Don't leave this very important area of planning to chance. None of us knows what will happen in the future, but given the number of individuals who experience a loss of mental capacity, it's a risk worth planning around.

What wishes should a Power of Attorney for Personal Care express?

In this article, Mark Handelman of Whaley Estate Litigation does a great job of talking about Powers of Attorney for Personal Care (also called Personal Directives or Health-care Directives). I recommend that you read it if you are wondering how to communicate your end-of-life decisions.

When you see an estate planning lawyer, you will of course talk about your wills and how your property is going to be distributed after your death. You should also expect to discuss your plans for mental incapacity. You should name someone to look after health care decisions and someone (perhaps the same person but it doesn't have to be) to look after financial decisions. Most lawyers who specialize in estate planning will ensure that you have this whole package in place.

Best of all, Mr. Handelman includes some sample wording, and some legal humour as well. Click here to read this very good article.

Seniors hospital admittance emergency kit – What should you have ready?

This article from http://www.stillvital.com/ gives a comprehensive list of what you will need should a senior in your life be required to be admitted to the hospital. I notice that a health care directive is the first item on the list. This is why these documents need to be done early while the senior is still mentally healthy. Click here to read the full list.

Do Not Resuscitate

This brief but thought-provoking article from Contemporary Retirement Coaching raises an important issue: too many people fail to leave a health directive document that lets others know of their wishes in an end-of-life situation. Do you have a medical directive in place? Click here to read the article.

How to resolve end-of-life care conflicts

Though I sincerely wish that none of you ever find yourself in the midst of a dispute over end-of-life care for a loved one, I know it does happen. Perhaps this article from today's Globe and Mail will shed some light on the situation. Click here to read the article.

Five reasons to have a health care directive

Much of estate planning focuses on wills, as well it should, but planning for incapacity is equally as important. Of the documents that I consider the "basics" of an estate plan, the health care directive is the one that most people seem to believe is optional. In my view, there are many good reasons to put a health care directive in place, and here are my top five:

1.  When you complete a health care directive, you choose who will be your decision-maker and spokesperson. If you don't do this document and you lose capacity, you may have no say in who is named by the court to represent you.

2.  In many jurisdictions, you can choose the level of help you want. This may range from supported decision-making for a specific type of decision (such as selection of housing) through to complete legal representation. By choosing the level of assistance you believe you need, you may head off well-meaning but intrusive help that you don't particularly welcome.

3.  Health care directives are too often simply a cookie-cutter document, but by using an estate-planning specialist to prepare yours, you can include instructions that are important to you and helpful to your family. For instance, you could express wishes about living somewhere you may worship at the church of your choice, about eating Kosher, about keeping your pet with you, about refusing blood transfusions, or about which of your children you'd like to live with.

4.  Making and documenting your decisions ahead of need is a gift to your family members. Never underestimate the value to your spouse, children and extended family in preventing distress, guilt and disputes.

5.  Having this document prepared ahead of need while you're healthy is a heck of a lot cheaper and easier than having someone in your family go to court to be appointed as your health care guardian.

When you have your will prepared, or next time you have your will updated, you should have a health care directive (aka health care proxy, personal directive, or advance directive) prepared as well.

Former girlfriend made life or death decision for "Grease" star

The recent death of Jeff Conaway (aka Kenickie from the movie Grease) shows the importance of keeping your documents up to date. Would you want a former girlfriend or boyfriend making your critical life and death decisions? Click here to read an article from the real/estate blog.

Patients with DNR orders may face poorer outcomes

Here is some real food for thought, especially for those of you out there who haven't bothered with signing a health care directive. The results of a recent study suggest that patients with a DNR ("do not resuscitate") order were at least twice as likely to die shortly after surgery.

Click here to read the article from http://anthonyssong.blogspot.com/.

I recommend that all adults have a health care directive in place. As I've said many times before, think twice - or maybe three or four times - before you include a DNR direction. DNR does NOT mean "if I am in a vegetative state let me go, or a chronic disease has wasted me down to nothing, end my suffering".

It means that you do not want to be resuscitated at all, ever, under any circumstances. Even if you are otherwise healthy but have a heart attack or stroke from which a person might normally expect to recover. If your document says "DNR" you don't get a chance to say "oh but THIS time I want to be resuscitated, this isn't what I meant".

This might be a good time to look at your own health care directive and remind yourself of what it says.

Friday Funnies - Health Care Directives

In honour of it being Friday (the 13th no less), I'm sharing with you this cartoon about Health Care Directives. Yes, it's true, you can be light-hearted about such serious topics without the earth opening up and swallowing you. Then go and get your documents prepared. Thanks to Rania Combs at texaswillsandtrustslaw.com for the cartoon.

Failure to plan for incapacity may lead to more intrusive help later

Nobody really wants to envision their future selves as incapacitated to the point of not being able to manage their own money and health care. Unfortunately, refusing to think about it doesn't prevent it. We don't know in advance whether will we suffer from an injury or health issue that will cause a loss of mental capacity, but it's essential that we have a plan in place to deal with it if it happens.

The usual documents put into place to deal with future incapacity are an Enduring (or Continuing or Durable, depending on where you live) Power of Attorney and a Personal Directive (or Health Care Directive, Advance Directive or Health Care Proxy). When you put these documents into place, you choose who will represent you when you lose capacity. You can set guidelines and limits on what they can do. You can express your wishes about how you want to live.

Having these documents in place greatly decreases the chance that anyone will have to apply to the courts to be appointed as a guardian or trustee (or committee) for you. Instead of having a court-appointed person who has absolute control over every aspect of your health care with no input from you, you can name someone you trust and give them some guidelines.

Instead of having a court-appointed trustee who is not of your choosing and who can sell or re-arrange your financial matters as he or she thinks best, you can give some instructions on what to do with specific assets or business matters. You can build in terms that allow other family members to be informed of what is happening or build in added accountability for your representative. You can retain more dignity and independence.

The bottom line is that with these documents in place, you retain some choice and control. Without them, other people might one day have to choose for you, and impose their wishes and ideas on you whether you like it or not.

Financially, setting up documents in advance is better too. Each of the documents here will only cost a couple of hundred dollars. Applying to the courts to become a trustee, with all of the paperwork and time involved, is much more expensive (and that comes out of your pocket, not the pocket of the person who is applying).

Planning for incapacity is just as important as planning for your eventual death. Make an Enduring Power of Attorney and Personal Directive a part of your estate planning.

How do you donate your body to science?

If you've ever wondered about leaving your body to science - which generally means a medical school - click here to read some thoughts and advice from the folks at All About Estates.

In my practice, I have met a few people who have requested that their bodies be left to science for research and educational purposes. The number is small compared to the number of people who want to donate organs or tissues for transplant purposes. Note that the comments made in the All About Estates post are for people who want to donate their whole bodies. Many people also address organ donation in their Personal Directive or Health Care Directive.

An estate planning checklist (or, Stop Going Out in a Blizzard in Nothing But Your Boots)

What's the difference between estate planning and getting a Will made? It's approximately the same difference as going out in the middle of a -40 Alberta blizzard wearing a parka, mitts and boots, versus going out into that same freezing weather wearing nothing but the boots. The parts that are covered will be fine. The uncovered bits, not so much.

The elements of an estate plan, pared down to their essence, are:

1. A Will. Important issues are the choice of executor, the choice of a guardian for minor children, distribution of your assets to your beneficiaries according to your wishes, and the inclusion of powers for the executors and trustees.

2. A Continuing, Enduring or Durable Power of Attorney. Important issues are the choice of attorney to represent you, how or when the document is to come into effect, and controls on the attorney. May include addressing immediate needs due to incapacity.

3. A Health Care Directive. Again important is the choice of agent to represent you, and the clear expression of your wishes. For older individuals, may include discussion of various supported living arrangements to address limitations.

4. Title to various properties. Important decisions are joint ownership and tenancy in common, right of survivorship, tax effects, potential disputes, and effect on overall estate plan.

5. Insurance coverage. Major issues are ensuring liquidity to cover tax liability, creating new wealth for distribution and keeping up with changing lifestyle insurance needs.

6.  Beneficiary designations. Tax savings are important. Also important are obligations to a spouse, the impact on the overall estate plan and creditor-proofing. Affects RRSP, RRIF, TFSA, ESOP, LIRA, DRIP, pension and life insurance.

7. Business succession planning. Important issues are choice of family successor, other possible exit strategies, tax planning, future income and timing. Should tie in with shareholder's or buy-sell agreement and company-owned life insurance.

8. Tax planning. Looking for ways to minimize taxes and maximize funds for distribution in the estate.

9. Trusts. Important issues are income-splitting for tax purposes, protection of handicapped adults, protection of children, and preserving assets to be inherited by a beneficiary at a later date.

10. Charitable giving. Important issues are giving back to the community, creating lasting legacies and creating tax credit.

11. Retirement planning. Includes discussion of dissipation or sale of current assets, business succession timelines, planning for incapacity and changing insurance needs.

12. RESP. Appoint a successor director of the plan.

13. Family dynamics. All of the items on this list are discussed in the light of the roles, abilities, shortcomings and personality of the various members of the family. Issues that may crop up are subsequent marriages, children from different marriages, separation agreements, divorce, common law arrangements, illegitimate children, disabled children, children vying for a place in the family business, belligerent or overbearing children, disputes between spouses or children, estranged family members, greedy or untrustworthy family members, and children with addictions.

As you can see, the items listed here overlap and loop back to each other. The idea is to make sure that everything works effectively together to achieve your goals. So use this checklist for your own planning and stop going out in just your boots.

Is AND better than DNR?

I've had a problem for a long time with the over-use and misuse of the DNR ("do not resuscitate") message found in health care directives. It's poorly understood by the public for one thing. And according to this article in the New York Times, there is no consistency in use between hospitals, doctors and nurses. A new phrase - "allow natural death" - is being proposed instead. Click here to read the article. Let me know what you think.

Make sure your family knows who has been named to act

Earlier this week I met with a client to discuss estate planning, and as part of that process he let me know who he wanted to appoint as the executor under his Will, his attorney under his Power of Attorney and his agent under his Personal (health care) Directive. As the fellow doesn't have a wife or children, he chose a close friend to act as his health care representative.

The client said, "I suppose I should ask her whether she's ok with this". Yes! He should check, and so should everyone who makes legal documents naming someone who will be expected to take action when the situation calls for it.

It's dangerous to name someone as executor, or as a representative under any legal document, without their knowledge and consent. Don't just assume that your decision will be fine by them. If they don't know they've been named to the job, they aren't going to do anything to help you. They won't even know they are supposed to help. This could lead to you ending up with someone else in their place if your documents aren't found and your representative identified and located. At the very least, you could end up with delays and arguments while it's sorted out.

When you name someone as your executor, you should let them know. If they aren't happy with that, they should tell you that, so you can choose someone else. You should also tell your executor the following:
- whether there is a co-executor to work with them
- where you keep the original Will
- your wishes for burial/cremation, and any pre-arrangements you've made
- if you have minor children, tell your executor who's been named as guardian

Come right out and ask your chosen person how comfortable he or she is with looking after your estate. You might get an answer that surprises you. Sometimes a person will say that they don't want to do it alone and will only agree to the job if there is a co-executor. Sometimes people feel exactly the opposite way and fear that having a co-executor will lead to disputes. You won't know if you don't ask.

The same applies for anyone that you've named under a Power of Attorney or Health Care Directive. You must let them know they've been named. Either give them a copy of the document that names them, or tell them where the documents may be found. As these documents involve looking after you (either financially or medically) while you are still alive but incapable of making your own decisions, talk over any special wishes you have. Some of the special wishes I've seen are a wish to live in their own home as long as possible, a wish that if the person must live in long-term care it has to be a place where he might worship in his chosen religion, and a wish that college tuition for an adult child continue to be paid.

Your special wishes will be included in your document if you discuss them with your lawyer, but even if they are included, it's a good idea to talk them over with your representative under the documents.

Are we ready to die with dignity?

This Globe and Mail article is right when it says that end-of-life decisions are not talked about enough between family members. I know it's not a fun thing to talk about; I've witnessed enough tears in my office just talking about end-of-life matters in general to know that nobody's enjoying the topic. But it's so important, as this article mentions. Please click here to read it and gain some perspective on these issues. The attached photo is also from that article.