Time to think about estate planning

Published May 2, 2007

Many clients come to me with extremely different ideas and thought processes concerning their estate plans. Some are very well informed; others simply have questions.

Some clients have been through an estate-planning conference before and are prepared to answer the questions that will be asked. The vast majority are simply seeking guidance about how to reduce to writing their ideas for administering estates. The one certainty is that each estate plan and family situation is different.

The information in this article is general in nature, and I would encourage readers to meet with their attorneys to discuss the factual and legal issues concerning estate-planning objectives.

The two most common requests estate planners receive are to prepare a will (or Last Will and Testament) and to help avoid probate. A will is a person's written declaration of how his or her property is to be disposed of after death. In order to be given validity, a will must be probated. Probate is the court-supervised process of proving that a writing purporting to be a will was signed and executed in accordance with legal requirements.

The important element of estate planning left unattended when a person only executes a will is how his or her needs and objectives change based on circumstances. A will only has legal effect after the person who made the will dies. Until death, a will can be changed or destroyed, resulting in revocation. Before dying, a large percentage of us will suffer from an extended period of incapacity.

When there has been no planning for incapacity, an incapacitated person's affairs are administered through a court-appointed guardian with close court supervision. Due to the court supervision, in addition to the public nature of the proceedings, guardianships are typically accompanied by considerable legal fees, bond premiums and court costs. Addressing incapacity from a planning standpoint is much less difficult than the emotional issues that inevitably accompany our own incapacity, or the incapacity of a loved one.

A Power of Attorney is a very common estate-planning tool that acts as a delegation of the authority to make legal and/or medical decisions. There are a number of different types of powers of attorney available. Essentially, your duly-appointed power of attorney (or agent) can proceed with arranging medical treatment or make decisions concerning your money or property rights. Although a useful estate-planning document, you should understand that your agent will have broad authority to sell or otherwise dispose of your property, and to spend your money without advance notice to you or approval by you. For these reasons, the person who you designate as your power of attorney should be selected with great care. It is important to note that spouses do not automatically have Power of Attorney over one another. This is a common misconception.

Powers of attorney cease to be of legal validity upon the death of the person making the power of attorney. For this reason, powers of attorney should not be viewed as a substitute for a Living Trust. When established, properly-funded living trusts become the plan for how your affairs are to be managed during life and after death, without court supervision. In addition, living trusts avoid probate costs and provide for the management of assets in the event of incapacity.

"The only constant is change, continuing change, inevitable change, that is the dominant factor in society today. No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be." -Isaac Asimov.

Or, if you prefer:

"The times they are a-changin'" - Bob Dylan.

These statements hold true for all things. Estate planning is no different.

The Florida Legislature recently made significant changes affecting how trusts are prepared and administered by enactment of the new Florida Trust Code (FL. Statute Chapter 736, effective July 1, 2007). Similarly, Congress is constantly changing the structure and application of tax laws, which may be a factor for some individuals and their estate planners. Accordingly, clients should be prepared to make periodic reviews of their estate-planning documents with qualified professionals to ensure changing circumstances or objectives are planned for in an appropriate manner.

J. Todd Taylor, is an attorney with the law firm of Delzer, Coulter, Hengesbach, Taylor & Bell, P.A., with offices in Hernando and Pasco counties. Guest columnists write their own views on subjects they choose, which do not necessarily reflect the opinions of this newspaper.