When it comes to creating an Estate Plan, most people often tend to focus on the Will. In our office, this is a common reason people why contact us. The Will’s importance has been overly magnified by Hollywood movies with dramatic “readings of the Will” that seldom (if ever) take place in the real world. While the Will is a necessary part of any good Estate Plan, it takes a backseat to other documents that have greater importance and impact in most people’s lives.
Is a Will enough? No, and here’s why:
Wills have their place in Estate Plans, but they are limited documents. Wills only take effect 1) when you die, and only after 2) given validity through the Probate Court process. Essentially the Will is like a letter to your local Probate Court Judge on what would like to have happen to your stuff and who oversees handing it out.
So what happens if you get sick and can’t manage your finances or tell the doctors what kind of medical treatment you would like or not like? Who helps you then? In Michigan, most people wrongly assume that their spouse or kids can automatically make these kinds of decisions for them. In fact, the law does not provide for this at all. This is where certain lifetime documents come into your planning.
A Will & Lifetime Documents
There are at least 3 “Lifetime” Documents that each Estate Plan should contain: 1) Durable Power of Attorney – Finances, 2) Healthcare Power of Attorney (also known as a Patient Advocate Designation) and a 3) HIPAA Release.
Durable Power of Attorney – Finances
A Durable Power of Attorney allows you to name someone who you trust to manage your finances and handle your assets for you if you cannot do these activities yourself. The Durable Power of Attorney can be effective immediately or may spring into action when you become incapacitated and could be limited to certain activities or broadly cover a variety of assets or activities. A well-drafted Power of Attorney should have at least one (preferably multiple) trusted back-ups in the event your number one cannot help you. This may avoid the need for a formal conservatorship through the Probate Court, which can be expensive and time-consuming.
This document is vital to ensure that even if you cannot act for yourself, that someone you trust is handling your money for you. For long-term care planning, it is important that your Power of Attorney contain extraordinary powers, which allows your trusted person an opportunity to protect your assets in the event you need a nursing home.
Healthcare Power of Attorney (also known as Patient Advocate Designation)
A Healthcare Power of Attorney allows you to name someone you trust to make medical decisions for you if you become incapacitated. This ensures that you have the person you trust in your corner to tell the medical staff what kind of medical treatment you want or don’t want. In Michigan, this document allows your trust person to make decisions for you after two doctors have evaluated you and determine you can’t make decisions for yourself.
Most people think of incapacity as being unconscious and physically unable to tell the doctors what they want to happen, but the reality is much broader. If you have memory issues, such as advanced Alzheimer’s Disease or Dementia, you may not be able to make an informed decision about what kind of treatment you want, or more importantly, what kind of treatment you don’t want. This can avoid the need for guardianship through the probate court, which can be expensive and time-consuming.
HIPAA is the acronym for the Health Insurance Portability and Accountability Act that protects and maintains the confidentiality of your health information. The purpose of the law is fundamental to maintaining your privacy, but when it comes to your trusted person making an informed decision about your medical treatment, HIPAA can put a few more hurdles in place. These hurdles can be skillfully maneuvered with the help of a HIPAA Release. A HIPAA Release allows your healthcare providers to communicate information about your condition and recommended treatment. It is specifically helpful when your Patient Advocate is trying to help with your medical treatment decisions.
The Bottom Line
While the Will is an important document, there are many other documents that serve a greater purpose than simply who gets your stuff when you die. It is important to have a comprehensive plan that meets your individual needs for a variety of circumstances.
If you do not have an estate plan already in place, or if you would like a second opinion on the documents you’ve already created – please contact our office to schedule your estate planning consultation.