Although almost anything is more fun than focusing on aging and death, planning your estate is an important task.
An estate plan includes more than bequeathing your property after death, but selecting people to act as your medical or financial agent in the event of incapacity, creating a “living will” to set forth your end-of-life decisions, and creating a burial or cremation plan. Creating these documents allows you to determine who will act on your behalf while you are living and how to distribute property after your death.
A medical or health care power of attorney is a declaration of whom you want to make medical decisions for you when you cannot make them for yourself. This person is known as the “agent.” You may grant your agent broad authority or limit it, and you may give specific directions and guidance as to your wishes and beliefs.
If you become incapacitated without having a medical power of attorney in place, medical decisions will be made by a “health care proxy” who is selected by consensus among your “interested persons,” who are defined as “the patient’s spouse, either parent of the patient, any adult child, sibling, or grandchild of the patient, or any close friend of the patient.” This process is cumbersome and difficult and can be expensive if it becomes necessary to appoint a guardian through a court proceeding.
For most people, no care decisions are more profound than those made near the end of life. Generally, both a medical power of attorney and a living will are used in making end-of-life decisions. A living will can be used after two doctors certify in writing that life-sustaining procedures will only prolong the dying process. Living wills are not often used, as many physicians are reluctant to provide the required certifications. However, if you include your end-of-life decisions in both your medical power of attorney and living will, your agent will be able to advocate for you.
A financial power of attorney, known as a general durable power of attorney, allows you to designate an agent to handle your finances and property. The agent has the obligation to make decisions based on your preferences and may not override your wishes.
The agent is required by law to provide an account to you or anyone else designated in the power of attorney. The agent has a fiduciary responsibility, which means he or she must act with the highest degree of good faith on your behalf and must follow all of your instructions and must act in accordance with your best interests. If an agent fails to act in accordance with your wishes, or in your best interests, the agent can be held liable.
You are not required to select a family member to be your agent to make medical or financial decisions. If there is dissension among your family members, serious consideration should be given to choosing a professional to act as your agent.
There are a growing number of “case managers” willing to act as medical decision makers. You can require that they consult with your family before making a medical decision, if practicable. Professionals are also available to handle financial affairs, and this is often the better choice.
Transferring property after your death can be done through beneficiary designations, a trust agreement or through probate. Some of your property may pass to your spouse or beneficiary by operation of law.
For example, if you own real property in joint tenancy with rights of survivorship, the survivor will become the sole owner of that property by recording a death certificate. Likewise, if you have a joint bank account, the survivor will be entitled to everything in the account.
The question of whether to use a will or a trust is determined by your specific needs. Many people want to use a trust agreement to avoid probate. Keep in mind, however, that in Colorado, probate actions are relatively inexpensive and simple.
A trust plan avoids probate only if you properly convey all of your assets from your individual name into the name of the trust. But it is not unusual that over a period of time the property you initially conveyed into the trust was sold, you remarried, purchased another home or you have assets that have not been conveyed into the trust and probate is still required.
If you die without a will and have property that does not pass to designated beneficiaries, your property passes by intestate succession in probate. The Colorado statute is specific and may not distribute your assets in the manner you would like.
A will allows you to determine what will happen to your property after your death.
A will created with the assistance of an estate planning attorney can significantly simplify the probate process. An experienced attorney can help you address difficult issues, including designating a guardian for minor children, establishing a comprehensive estate plan to provide for children from a previous marriage, and making sure that your beneficiary designations are in line with your overall estate plan.
A well-drafted estate plan is worth the time and expense, allowing you the opportunity to make your own medical decisions during your life and distributing your property after your death.
Tracy J. Cross is a Durango attorney whose practice focuses on state planning, probate, business organizations, real estate transactions and homeowners association matters. Reach her at tcross@mydurango.net.
