When you create an estate plan, you choose people to make decisions for you, such as agents, guardians, executors, or trustees. Often, people do not give much thought to those decisions, just naming their oldest child or whoever pops into their mind. The choices for these roles are perhaps the most important decisions to make. Good choices can help to ensure your wishes are carried out while bad choices can create turmoil and waste assets.
In a Will, you will name a personal representative also known as an executor. The responsibility of that person, persons or institution is to settle your estate according to the terms of your last Will and Testament with the supervision of the Register of Wills. In an Inter-Vivos Trust (also known as a Living Trust) or a Testamentary Trust (a trust created under your Will), a trustee is named to carry out the terms of the trust, generally without court supervision. The trustee’s role may be simple in that the trustee facilitates the distribution of assets after your death. Or the trustee’s role may be long term and technical, such as overseeing the filing of tax returns, overseeing the management of a special needs trust or spendthrift trust.
In a General Durable Power of Attorney, you appoint someone to make decisions for property while you are living. For example, your “agent” could file income tax returns for you, change beneficiary designations on life insurance and retirement plans, etc. The powers granted can be limitless, depending on the comfort of the grantor. Many institutions, however, are skeptical of accepting property powers of attorney. They may require it be specific only for the purpose for which it is being used, such as purchasing a home, in which case they may want terms of the contract detailed in the document itself. Also, the agent’s role under a power of attorney ends at your death.
In a Health Care Power of Attorney, you appoint someone to make medical decisions for you in the event you can no longer do it yourself. A Living Will can be used to express wishes you have regarding life-prolonging measures. Organ donation and specific religious preferences, such as a blood transfusion, can be outlined in this document.
Federal laws and regulations have created privacy protections for your medical information. These laws are known as “HIPAA” (Health Insurance Portability and Accountability Act). Now physicians, hospitals, health insurers and other “covered entities” must comply with strict rules or face fines and potential criminal penalties. An innocent mistake would incur a fine of $100. More serious breaches of privacy, such as releasing information for malicious harm, could result in fines up to $250,000 and 10 years in prison. Understandably, health care providers are being extremely careful about the release of medical information in the face of such penalties. That is why it is important for you to execute a medical release form that tells your health care provider who may access your medical records.
Making your decisions as to who will act as your trustee, executor, power of attorney and health care agent should be given careful consideration. The trustee, executor, and power of attorney may be a family member, friend, attorney, CPA or financial institution. There are pros and cons to any choice you make and you will want to discuss your options with your trusted advisors. The health care agent may be a friend or a relative. Generally, attorneys, CPAs and financial institutions will not act in this capacity due to the emotional and legal complications that surround personal, medical decisions.
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