Florida Estates & Trusts

INTRODUCTION

The purpose of this article is to introduce you to an important concept in financial planning and to convince you that disability planning is as important as estate planning, particularly for a younger person.

This concept is a document called the Durable Power of Attorney which gives authority to an agent which continues despite the disability or incapacity of the maker of the power, or springs into existence when the maker of the power becomes incapacitated.  It can be a substitute for a court-appointed guardian or conservator.

While the need for estate planning has received wide attention, planning for disability has not.  The reasons are apparent.  Death is inevitable, but few people realize just how likely a period of prolonged disability is, or the magnitude of the financial and personal management problems which will result if a disability occurs.  Insurance statistics tell us that a 22-year-old person is 7.5 times more likely to suffer a disability of 90 days or more than to die.  Forty years later, at age 62, he or she is still 4.25 times more likely to suffer such a disability than to die.  At age 20, 789 persons out of 1000 can expect to suffer a disability of 90 days or more in his or her lifetime; at age 40, 635 persons out of 1000; at age 60, 221 persons out of 1000.  Looking at it another way, one out of every two Americans will suffer a period of prolonged disability in his or her lifetime.  Certainly these statistics should be enough to convince anyone that there is a need for disability planning.

Why then hasn’t there been adequate attention focused on the need?  Very simply, until recently, there hasn’t been an adequate legal solution.  In the past, the only solutions to assist in both management and personal health care decisions for a person who became incapacitated was the court appointment of a guardian or conservator, or in limited cases, a living trust.  This was because the authority of an agent under a general power of attorney also expired when the maker or principal became incapacitated, except in Louisiana, which followed the civil law.  The relatively new solution is the Durable Power of Attorney, which adopts the civil law concept that a power of attorney, which expressly adopts the concept, survives a principal’s disability or incapacity and will now be regarded as durable.  Its effectiveness continues despite the incapacity of the principal, or in the several states which have authorized the so-called “springing power,” it becomes effective when the principal becomes incapacitated.  If you have a power of attorney at the present time, it is quite possible that it is not durable and must be revised if you want the benefit of this recent legislation. Furthermore, if you do not have a Durable Power of Attorney and become incapacitated, the only recourse will be for your family to ask the court to appoint a guardian for you.  Such a procedure is cumbersome, public, time-consuming and expensive.  Hopefully, this information will convince you that it is desirable to discuss the need for a Durable Power of Attorney with your lawyer today.

WHAT CAN I AUTHORIZE AN AGENT TO DO FOR ME?

While the focus may be planning for disability, you do not have to be disabled to have an agent act on your behalf under a power of attorney.  For example, you may hire a bank or investment advisor to manage your securities.  You may have given a power of attorney to someone to sign checks drawn on your bank account because it is more convenient.  The important thing is that you do not want these types of services stopped when you need them most, namely, when you suffer a serious disability.  This is precisely what the Durable Power of Attorney insures against because the agent you have selected will still be authorized to act on your behalf.  In addition, it is important to remember that it is not necessarily a permanent disability that requires a Durable Power of Attorney.  Many people who suffer serious illnesses recover, but nevertheless undergo a prolonged period where it might be difficult if not impossible to manage their financial and personal affairs.

The three major areas which you should consider for inclusion in a Durable Power of Attorney are financial management, personal care and health care decisions.  In each of these areas, you can authorize your agent to do almost anything you can do yourself which does not violate some specific local law provision.  Your attorney should be able to discuss these local restrictions with you.  These local restrictions are not numerous but some are peculiar.  It is important in preparing a Durable Power of Attorney that you be specific so that the third party who is asked to rely on the instruction of your agent will know that you expected this particular action be taken on your behalf by your agent.  You shouldn’t rely solely on a boiler-plate form.  The document should be refined to meet your specific needs and you should be prepared to spend the time to identify specific areas of authority which may be unique to your situation.

Let’s consider some of the areas of concern which might be included in a Durable Power of Attorney:

A.  Financial Management Considerations

The following list is intended to begin your thinking process but should by no means be regarded as all inclusive, and you should exclude any which you think inappropriate.  You might consider authorizing your agent to do the following:

1. To make deposits or withdrawals from your bank account or cash management accounts or to open new ones in your name.
2. To buy or sell your stocks, bonds or other assets as prudence dictates.
3. To buy, sell, mortgage or lease real estate which you may own and to fulfill agreements which you have made.
4. To have access to your safe-deposit box or open new ones in your name.
5. To sign your tax returns and to represent you if your tax returns are audited or hire professional help to do so.
6. To make decisions concerning any retirement plan you may have including IRA (individual retirement accounts), IRA roll-overs, existing pension or profit-sharing benefits, or other employment benefit which may be provided by your employer.
7. To fund a trust which you may create as a stand-by trust, or which you may authorize your agent to create for you when it is appropriate.
8. To borrow on your life insurance policies to avoid sale of your other assets.
9. To deal with your life and casualty insurance policies including increasing or decreasing coverage when appropriate.
10. To deal with your business interests including the right to enter into or modify partnerships or shareholder agreements which may be needed to protect your interests.
11. To continue a gift-giving program to your family if this should appear to be appropriate in the future.
12. To complete or continue any charitable gifts for a cause in which you believe.

B.  Personal Care Decisions

In the event of a prolonged disability, there are a number of decisions which must be made for you which are not directly relevant to your financial management or health care.

For example, what should be done with your pets?  You may have made a provision in your will for their care in the event of your death.  But what if you can no longer care for them in your lifetime?  The Durable Power of Attorney will help you solve such problems. Some of the other personal care decisions you might include are:

1. To pay the salaries of your employees, nurses and similar persons.
2. To receive your mail and to cancel or continue your credit cards or charge accounts.
3. To take custody of your valuable papers, including your will, insurance policies, securities or accounts.
4. To institute, settle, appeal or terminate any administrative proceeding or other litigation in which you are involved or is or has been instituted on your behalf.
5. To deal with trustees of trusts in which you have an interest and to exercise where appropriate any rights you may have in such trusts.  (Your attorney’s specific advice is very important in this area.)
6. To nominate a person to act as your guardian or conservator should one be necessary despite the existence of your Durable Power of Attorney.
7. To resign any position which you may hold as an officer of a corporation, an executor or trustee or a politically elected or appointed officer or similar position.
8. To arrange for your travel and entertainment if that is appropriate.
9. To make appropriate arrangement for your spiritual and religious needs consistent with your beliefs.

C.  Health Care Decisions

When mental incapacity arises, attention is often directed to the asset management problems, but equal and sometimes greater problems related to health care decisions are also presented.  As a general rule, there should be no impediment in using the Durable Power of Attorney in authorizing your agent to make health care decisions for you.  In March 1983, the President’s Commission for the Study of Ethical Problems in Medicine and Biomedicine and Behavioral Research submitted an extensive report entitled “Deciding to Forego Life-Sustaining Treatment” which encourages the use of durable powers to appoint persons who are authorized to make medical and personal decisions on your behalf.  Certainly with all of the attention the Karen Quinlan and subsequent cases have received, you realize that this is an emerging area of the law where it is difficult to predict what is legally permissible in a particular state at the present time.  This is particularly so with respect to the termination of life-support systems.  The courts are proceeding on a case-by-case basis.  However, nearly all cases decided in the last several years have recognized as a basic right the right to refuse life-sustaining treatment.  In addition, they encourage persons to express their views prior to the onset of a serious illness.  No doubt, however, you have specific views one way or the other.  Therefore, it is important that you express them as clearly as you can and appoint someone whom you trust to carry out your specific intentions.  The decided cases are recognizing your right to decide what treatment you want and what treatment you do not want. Many of the court cases you have read about recently in the newspaper might never have arisen if the patient involved had taken the time to express his or her views and appoint a person to act on his or her behalf.

Perhaps too much attention had been placed on the ultimate decision of terminating life-support systems.  That is a decision you must make for yourself and you might decide, on the contrary, that your agent should make every effort to keep you alive.  However, there are many other decisions which you should be considering as they relate to your personal care during a disability which have nothing to do with death, but which are important to your care during the long-term disability.  Your attorney can help you express your personal thoughts.

In the personal health care area you may consider authorizing your agent to do the following:

1. To have access to any and all medical and related information and records.
2. To disclose your medical and related information to others.
3. To employ and discharge medical and related personnel on your behalf.
4. To consent or refuse consent to medical care, on your behalf.
5. To consent or refuse to consent to psychiatric care, including the right to voluntarily commit you to a psychiatric care facility if it becomes necessary.
6. To arrange for the appropriate relief from pain.
7. To arrange for your care and lodging in a hospital, nursing home, or hospice.
8. To do anything else which may be appropriate in your specific circumstances which you should be prepared to state explicitly.

If you are concerned about an illness or injury that results not only in mental incapacity but also permanent coma or terminal condition with no reasonable possibility of recovery, and are also concerned about being kept alive by medical treatment that will not improve your condition, you may want to authorize your agent to require that such treatment be discontinued.  If you want your agent (assuming you are unconscious and cannot decide for yourself) to have the power to withdraw futile medical treatment, you should decide whether food and water should also be withheld.  Your decision on both of these questions can and should be reflected in your power of attorney.  You may wish to discuss all of these matters with your physician.

WHO SHOULD I SELECT AS MY AGENT?

This decision is one of the most important you must make and often requires more care than the selection of your executor or trustee.  Clearly the person must be someone in whom you have implicit faith and trust.  But this alone may not be enough.  Is the person you have in mind available, and if so, would he or she be willing to serve if called upon?  Does he or she have the specific experience required to manage your business or investments?  What if the person you have in mind is unable to serve when called upon even though expressing a willingness to serve now?  Clearly, picking the first person who comes to mind is not the answer.

Possibly expecting one person to possess the skills, time and fortitude to deal with all the problems that could arise involving you and your financial affairs if you were to become disabled is asking for the wisdom of Solomon.  Consequently, while in most situations one agent should be sufficient, in some cases you may want to have one agent handle your financial affairs and a second responsible for personal and health care decisions.  You are not restricted to one agent and if you feel more comfortable you can have two or more.  If so, then you must define their duties and specifically provide how third parties are to rely on your instructions.  Even if you can select the one person appropriate for you, you must not overlook the possibility that when the time comes, or even later, your agent may not be able to act.  You must, if at all possible, provide for other persons to take over when those initially named can no longer act or, at a minimum, provide in the Durable Power of Attorney for your agent to appoint his own successor.  If you are concerned about financial management, or have extensive security holdings, you could consider authorizing your agent to transfer these assets to a stand-by trust with a professional or bank trustee.  In this way, your agent will continue to handle your financial affairs but will not have the day-to-day worry about investment decisions.  The easier you make it for your agent, the more likely he or she will be willing to act once the time arrives when you can no longer act for yourself.

While banks by law can act as agents in most jurisdictions, they are reluctant to do so even in the financial area.  They prefer the traditional trust arrangement.  The relationship which is contemplated by the broad concepts incorporated in the normal Durable Power of Attorney is beyond the scope of what the normal professional trustee, particularly the corporate trustee, does.  Therefore, in your selection process you will probably be limited to your family, friends, business associates and professional advisors.  However, a bank will probably accept the appointment if its role is nothing more than transferring your stocks and bonds to a previously established stand-by trust where it has been named trustee.

Some persons you select may have a legal conflict of interest to your own interests.  This should not present an obstacle if you know they can be trusted to protect your interests and you are willing to waive the conflict.

Once you have completed your selection process, you should ask the person you have in mind if he or she is willing to serve if called upon to do so.  In this way, you will be prepared to tell your attorney that the named agent is willing to act.  Remember, if the agent you name refuses to serve or is otherwise unavailable, the only alternative after the disability occurs is the appointment by the court of a guardian or conservator.  This is precisely what you want to avoid.  It is expensive, time-consuming, and far less flexible than the Durable Power of Attorney.

CONCLUSION

The statistics indicate that the likelihood of disability in the lifetime of many Americans is real.  The Durable Power of Attorney provides a flexible means of dealing with financial, personal and health care decisions, and may avoid the expense of inflexible guardianships or conservatorships.

If you agree and have decided that you need a Durable Power of Attorney, call your attorney today for an appointment.  If you do not have an attorney, call your local bar association or lawyer referral service.  They will be able to refer you to an attorney experienced in financial and estate planning.