by Eric D. Morton
This is our annual plea to our readers that they develop an estate plan. We recommend a will, trust, and other basic estate planning documents. Unlike many other legal documents, these will be used. We also recommend moving property in your trust. These steps avoid probate, particularly if you own real estate, and other complications. Here some examples from recent my own experiences and observations.
Trusts
We recommend that individuals leave as much of their property as practical in the name of their trust. Here are some examples of what we don’t recommend.
Transfer deeds. Leaving real estate in a living trust not only avoids probate but it simplifies the administration of an estate. There are some alternatives to trusts but these can complicate more than help. For instance, California and other states have transfer on death deeds. A property owner can name individuals who will own the property on the death of the owner. The named persons take title on the death of the owner. However, if those persons don’t agree on what to do with the property: sell it, live in it, or rent it, then conflict will arise.
Leaving real estate to individuals can be problematic other reasons. They will immediately become responsible for property taxes, home owners association dues, insurance, hazardous conditions on the property, etc. They may not have the money to deal with those problems and they may not have access to money in the accounts of the deceased. If the property is in a trust, then the trustee can carry sell it or take other actions to keep the peace among the beneficiaries.
Joint accounts. Many elderly people will add a child to a bank account for ease of paying bills and managing money. If the account is in their individual names, then the child will own all the money in the account in the death of the parent. The money will not become part of the estate or trust of deceased parent. This can cause complications, particularly if there is a large sum in the account. We had a client whose mother put the client on the mother’s bank accounts. The mother liquidated a number of assets and deposited the proceeds in the account. When the mother died, there was a substantial sum of cash in the account. Our client wanted to distribute the money equally to her siblings. However, because the client legally owned the money, the distribution would not be considered an inheritance but a gift. Our client would have owned considerable gift taxes. We have also seen parents put one child on a bank account with considerable sums with the intention that the child will share with the child’s siblings. After the parent died, the child on the accounts refused to share anything since the child legally owned all the money.
Powers of Attorney
If a person is sick, a general power of attorney can be very important in keeping that person’s affairs in order, pay bills, and other matters. When a person is incapacitated, it is crucial that a trusted person have the power to take cares of the incapacitated person’s affairs. We strongly advise our clients to have a general power of attorney for such an scenario. We have seen instances of powers of attorney being used. It is important to have the power of attorney in place well in advance. Once a person is incapacitated, it’s too late to execute a power of attorney.
HIPAA Authorization
The Health Insurance Portability and Accountability Act (HIPAA) protects the medical records of patients. California has a similar law, the California Confidentiality of Medical Information Act (CMIA). Under these laws, one health care provider cannot share records or other patient information with another health care provider without the authorization of the patient. This can be difficult when the patient is very ill and multiple doctors and clinics need to share information. The patient may not be able to coordinate and provide authorizations to all the providers.
A HIPAA/CMIA Authorization is a form in which an individual names other person to act as the individual’s personal representative for the release of patient information and records. We have seen this form in use by the families and spouse of very ill individuals and it is invaluable.
Power of Attorney for Health Care
This is a statutory form in which an individual can name another person to make healthcare decisions for that individual. This is important to have in the event that one is incapacitated. In addition to naming an agent for healthcare decisions, one can make specific requests as to the level of care to be provided in the event of an irreversible illness, and organ donation directions. We have seen this in use many times. The loved ones of terminally ill persons are grateful.
As stated above, we generally recommend that individuals have a living trust, a will, general power of attorney, power of attorney for health care and HIPAA/CMIA authorization. These are documents that have practical use and the loved ones of very ill or deceased persons will be grateful for them. We also recommend obtaining the counsel of an attorney in creating an estate plan.
Eric D. Morton is the principal attorney at Clear Sky Law Group, P.C. He can be reached at 760-722-6582, 510-556-0367, and emorton@clearskylaw.com.
