Estate Planning Regardless of the Fiscal Cliff
You may have heard about the “Fiscal Cliff,” as everyone is talking about it (see OWM Law Newsletter - October 2012 addressing the potential for significant tax increases and government spending which would occur as of January 1, 2013). While it is certainly recommended that you should have appropriate documentation in place to address the issues related to the Fiscal Cliff, every individual should have certain documents regardless of whether or not we "go over the Fiscal Cliff."
The first estate planning document which every individual should have is a financial power of attorney. This document allows an individual, the principal, to appoints another individual, the agent, to act on the principal's behalf with respect to financial decisions. The agent could be authorized to access bank accounts, stock, bonds, and other financial assets, transfer real estate.
A financial power of attorney can be durable, which means that it is effective from the moment it is signed, and is not affected if the principal later becomes incapacitated. The other alternative is to have a spring financial power of attorney which would "spring" into effect once the principal has become incapacitated.
The main purpose for this document is to allow the principal to appoint an agent to take care of the principal's financial matters in the event that the principal becomes incapacitated. If an individual becomes incapacitated and does not have a power of attorney, it may be necessary to have a guardian of the estate of the incapacitated person appointed. This can be a much more drawn out and lengthy as well as expensive process. Due to the additional time and expense, it is strongly recommended that individuals have a financial power of attorney in place.
The second document is a health care power of attorney with living will. The health care power of attorney functions in a similar fashion as the financial power of attorney, in that the person making the document, the principal, appoint another individual, an agent, to make medical decisions on the principal's behalf in the event that the principal is incapacitated. The second part of the document, the living will, which may sometimes be called the advance directives, allows the principal to direct whether or not they want to receive certain medical procedures in the event that the principal is incapacitated and suffering from an end-stage medical condition. It is important to have this document in place so that the principal's wishes are known at at time when they can no longer speak for themselves.
In the event that there is no health care power of attorney in place, it may be necessary to have a guardian of the person appointed. As with the guardian of the estate, it can be a long and expensive process when compared to the cost of drafting a health care power of attorney with living will.
In my opinion, these two documents can be more important than even a will, as they address circumstances which affect us during our lifetimes and allow individuals to care for us during our lifetimes. As such, every individual should have these documents in place.
David A. Megay, Esq. speaking at SCORE Business Planning Seminars on 1/7/13, 4/22/13, 9/9/13 and 11/4/13 (contact SCORE at 610-327-2673).
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