October 1, 2003

Michael P Haubrich, CFP

After the Conversation

Last month I discussed the concept of “caring conversations,” which is how I refer to important, intergenerational discussions about long-term care planning. Those conversations identify each family member’s individual needs for the long-term care recipient and, from that point, we can work specific plans that are consistent with those needs can evolve.

We begin with reviewing or establishing basic estate planning documents – Health Care Power of Attorney (HCPOA), Financial Power of Attorney (FPOA), wills and/or trusts. With these we ensure that beneficiary designations, payable-on-death designations, asset transfers, gifting and any risk transfer strategies using insurance are consistent with and appropriate to the family needs.

Of these documents, the one that I see frequently minimized or ignored is the Health Care Power of Attorney, including the Declaration to Physician. Often clients will name someone who appears a logical choice but who may not be available or capable to perform their duties in this role. I see children named who live too far away to be activity involved in the day-to-day decisions for someone who may need constant custodial or health care. A HCPOA needs to be aggressively involved and available to investigate, question and advocate on behalf of the patient. A passive HCPOA could result in health care providers following their established protocols for decisions and care, which may be contrary to the wishes of the patient.

Likewise, the FPOA is very important in the context of long-term care planning. Two decisions need to be carefully considered – the powers that are granted and the person given those powers (attorney-in-fact). This person appointed needs to be trustworthy, competent with money, and committed to your best interests.

Powers granted involve the right to make gifts to family members, which could include the attorney-in-fact. This gifting power is one of the keystones to Title 19 planning strategies. Again it is imperative to select an appropriate attorney-in-fact since the risk of “running off with your money” is present when this power is given.

Does this happen? You bet. For this reason, some estate planning attorneys refuse to use gifting powers in Title 19 planning – they do not want to expose themselves to the malpractice risk if the attorney-in-fact absconds with their client’s assets. I recommend you have an elder law attorney draft this document to ensure it contains language that ensures your objectives. You will not be able to use the state approved POA form if you wish to grant gifting powers – it is specifically excluded.

Another popular estate planning document is the living trust. A living trust is trust established during the lifetime of the grantor (maker).  A trust is a right of property, real or personal, held by one party (trustee) for the benefit of another (beneficiary).  Generally the word "living" implies that it is also revocable while the grantor is alive. 

Living trusts are established as an alternative to probate for transferring property at death. They allow a person to maintain privacy, avoid probate and can be used as an asset management tool while the grantor is living.  The probate process lacks privacy; all documents are filed in probate court and are available to anyone wishing to see them.  Privacy can be maintained by transferring trust assets directly to beneficiaries.  Assets in the trust pass directly through the trust to named beneficiaries, thereby avoiding probate.  The grantor appoints a trustee who has legal title to the trust's assets.  That trustee may be an individual (including themselves) or a corporation (such as a bank trust company).  The trustee provides management services such as bill paying, collecting dividends and/or other income and buying and selling assets.  This can be a lifesaver for individuals as they may become less capable due to physical or mental impairment.

For state approved copies of the HCPOA and Declaration to Physician go to http://www.dhfs.state.wi.us/forms/AdvDirectives/ADFormsPOA.htm. Last month’s “To Your Wealth” column is available at www.toyourwealth.com under News and Info.