Three basic legal forms will help to prepare you and your family for the future.
By Mark A. Lillenstein, F263772
November 2004
Several fellow FMCA members have asked me to lend them some wisdom from the legal perspective. While I am not sure I have much wisdom, I certainly have about 30 years of experience “” enough to have learned to do what lawyers do best: to think of what can go wrong and try to do things to avoid those nasties. That is what I will try to do for you.
Many of us are not spring chickens, and the facts of life are that we may need medical care and may need others to do things or make decisions for us. We are all mortal, and at some point we will need to give direction as to how our stuff is to be distributed after we are gone. We may need these legal forms because of a road accident, injury, or disease, the worst of which we legal beagles call “acute dwindle.”
We need to have someone in place to do things if we are not able; to make decisions regarding the type and scope of medical treatment we are to receive; and, should the worst happen, to tend to the distribution of our possessions. We can do this the hard way or the easy way. The easy way is to see a lawyer before the need arises. The hard way is to wait until it is too late and then face weeks or months of court proceedings and very great expense to have a judge do what we could have done quickly and inexpensively by having certain documents prepared and at the ready.
I call such documents the “legal triangle.” They consist of a power of attorney, a health care proxy, and a will. Their coverage can be pretty complete, and we should not go on the road (or anywhere else) until we have them in place.
I will try to treat each of these in a concise manner. Please bear in mind, however, that I’m providing general principles and that each state has its own variations. It is important for you to meet with an attorney licensed to practice in your own state of residence. The cost for this often is no more than a few hundred dollars (although when estate planning is included, the number obviously can run substantially higher).
I know that much of this information and many forms can be obtained off the Internet or purchased at office supply stores. Be careful if you go that route, because often the information and forms are generic, and using forms that don’t comply with your state’s laws can be dangerous and economically counterproductive. Some of the most time-consuming matters I have worked on (and, in doing so, earned the highest fees ever) have been associated with trying to unwind problems caused for the families of do-it-yourselfers who were trying to save a couple hundred dollars or less in legal fees.
With that in mind, here goes:
Power of attorney is a form that puts one or more people in a position to do almost anything you can do in the event that you are not able to or don’t want to act. It does not take any power away from you but puts others in place to act on your behalf. Most states recognize a “durable” power of attorney. This means that if you become disabled or incapacitated, the person or persons you designate can function for you. You can name one person or more than one, and if more than one, you can dictate whether they have to act together or may act individually.
You also can set up several people to act in succession, if any cannot or do not want to act. Some forms allow the person you designate to, in turn, pass the power on to another “” although you can quickly see how that can be a two-edged sword.
The person to whom you give the power of attorney is called an attorney-in-fact and is in a fiduciary capacity “” a position of utmost trust and obligation to act only in your best interest. The law holds this person to extremely high standards, and it is important for such an individual to be made to understand that before he or she undertakes to act on your behalf.
Several types of power of attorney are recognized by law, but no matter what type is granted, the power to act on your behalf stops immediately upon your death.
I am aware that many of us simply have our spouses sign our names on checks and other documents, sometimes to the point where if we go into the bank and sign our own checks, the signature may not be recognized. This is fine and dandy, but the day may come when one of us is incapacitated and unable to sign a business, insurance, retirement, or military document. Unless a durable power of attorney is in effect, the alternative may be months of court procedures to have a guardian or committee appointed, at a cost of thousands of dollars. I see it often, and it could have been avoided by a simple two-page form.
The health care proxy is a relatively new creature under our laws. In most states, a power of attorney, although it confers somewhat broad powers, will not include the power to make health care decisions on your behalf. That is why most hospitals will ask you to sign a general health care proxy when you are admitted. This simply tells the hospital and doctors who you designate to make decisions about your care and treatment if you are unable to do so. Obviously, if you are not conscious upon admission, this will not be possible to do. Many of us do not want to be kept alive by heroic measures with bulbs, tubes, and whistles while we are unable to indicate our wishes. If we wish to decline treatment in cases such as this, we need a means to do so.
A health care proxy that incorporates “living will” wording can do that. It not only designates the person or persons to whom the doctors must turn for decisions as to the type and level of care you are to receive in that situation, but it delineates your specific wishes as to what you do and do not want done. Although not a guarantee, it is a heck of a lot better than not having it. Otherwise, you run a much higher risk of being kept alive against your wishes, and all the while your family’s finances and emotions are being devastated.
Most of us know about a last will and testament, but few are aware that its real effect is to change state law. If you die without a will, your state has one for you. It is found in the statutes as a chart of “Intestate Distribution.”
Chances are your possessions will not be forfeited to the state if you do not have a will “” a common misconception “” but chances are good that the distribution plan your state has in store is not the one you would dictate. If you do not have a will, the state gets to choose who will be your administrator “” the equivalent of the executor when you die with a will “” and worst of all, if you have children under the age of majority, the state also will determine who will be their guardians. Again, the state may not pick the same person or persons that you would.
Two major categories of wills exist: “simple” and “trust.” A simple will is not simple because it is only a few pages long. It is simple because of the process that begins after you die. Your named executor takes steps, usually with the aid of a lawyer, to obtain the necessary consents, and petitions the court to accept your will and appoint him or her as the authorized representative. He or she then collects what you own or have owed to you, pays your bills and debts, and then distributes what is left (the “residuary”) as you have directed in your will. When that is done, and all documentation is filed, the representative asks the court to release him or her and close your estate.
A simple will is not the same as a trust will, in which you leave assets to a trustee, to be managed for the benefit of certain individuals (spouse, children, grandchildren, etc.). The trustee typically may pay income or principal to some or all of the “trust beneficiaries” as you dictate in your will, and what is left is then ultimately distributed by your trustee to the beneficiaries at a trigger point that you designate. Trust wills are most often used in conjunction with estate planning, which can give substantial tax savings, or to prevent children or young adults from suddenly receiving a large amount of your money, which they might fritter away or which could make them targets for con artists or others.
A simple will, with no trust provisions, can usually be prepared by most lawyers in a matter of days, and the cost is often no more than a couple of hundred dollars for wills for both spouses. Obviously, preparation of a trust entails substantial time analyzing your individual situation; determining which type of trust or trusts would be best; deciding which assets should be used to fund which trust; determining when and how much of the funds the trustee is to distribute; designating who will serve as trustee; and determining the type of investment pattern you may wish your trustee to follow. Consultation with appraisers, your accountant, and/or your tax adviser also may be needed. It may take weeks or months to complete and cost several thousand dollars, but it may be possible to save many times that cost in taxes alone.
This is just a brief overview of the “legal triangle” and what it can accomplish, but I hope it has helped to clarify some of the bewildering barrage of information and misinformation that is out there. Keep RVing, keep safe, keep healthy, and most of all, have fun.