Special Planning Considerations For Seniors
Estate Planning in Maryland As We Age
A recent Census Bureau study shows that the “senior” population (65 plus) is growing in the U.S. at a rate surpassing that of the total population under that age.
Seniors Are Redefining Aging
Although the older population is becoming a larger segment of the U.S. population, many refuse to self-define as “seniors” or “senior citizens” except when necessary to secure special senior discounts or other economic benefits. Part of the reason is that the social norms traditionally associated with old age are no longer applicable: individuals are remaining in the work force past the traditional retirement age of 65, many are able to stay active and healthy, and many are opting to stay longer in their own homes instead of retirement or assisted care communities. These “seniors” do not “feel” old and refuse to be pigeonholed as “senior citizens.” However described or categorized, there are special estate planning considerations as we age.
Special Considerations As We Age
Regardless of age or physical condition, of course, you need legal documents to implement your wishes as to how your estate will transfer upon your death. As you age this planning takes on a different focus. More and more, estate planning documents should act as a hedge against possible disability with an eye to protecting your financial independence and security. Also, documents communicating your preferences for medical care and end of life care if you become unable to meaningfully participate in treatment decisions take on a greater immediacy. “Although the core principles of estate planning remain constant regardless of a client’s age, establishing a safe and workable mechanism for surrogate decision-making if the client becomes disabled becomes an increasingly important part of the estate plan as the client ages.” Says, David Sessions, a principal of the Maryland estates and trusts law firm of Franke, Sessions & Beckett, LLC.
Revocable Trusts As A Hedge Against Disability
Much is made of the usefulness of revocable trusts to “avoid probate.” In Maryland, probate is not an onerous process that forces one into the use of revocable trusts for basic estate planning. Indeed, in Maryland as well as in other jurisdictions with efficient probate processes, wills (rather than revocable trusts) are more commonly used as the “standard” estate planning and transmittal documents. As you age, however, the revocable trust becomes an important document for disability planning as well as a document that can serve as a will “substitute.”
Traditionally, a will was the basic legal document to direct one’s estate to his or her intended beneficiaries. In Maryland, the Register of Wills (the administrative “arm” of the Orphans’ Court, Maryland’s probate court) oversees the transmittal of wealth passing under a will. This probate process in Maryland is not particularly burdensome. In other jurisdictions (California, of course, comes to mind) probate is so difficult that avoiding probate by the use of revocable trusts has become commonplace.
A revocable trust avoids probate because the trust, not a will, directs how your assets are transferred at death. The trust acts as a “will substitute” but without being subject to the probate process. It works to the extent you transfer your assets to the revocable trust. “Revocable trusts do, in fact, avoid probate if properly funded. Yet, revocable trusts tend to be over sold as the be-all and end-all of planning. In jurisdictions like Maryland where the probate process is not overly difficult, avoiding probate may not be a driving force in proper planning. A revocable trust, after all, is not just a will substitute but it is an actual trust created and funded during the client’s lifetime. It introduces a bit of complexity. As a disability planning technique, however, especially for clients with significant assets, geographically distant children, or other situations, a revocable trust is pretty much an essential tool,” says, Fred Franke, a principal of the Annapolis estates and trusts law firm of Franke, Sessions & Beckett, LLC.
There are other ways that probate can be avoided – for example, by naming a beneficiary to a retirement plan. The contract under which the retirement plan is created controls the disposition of the asset and it goes directly to the named beneficiary at your death, thereby avoiding probate. (A retirement plan should never be transferred to a trust during the lifetime of the participant or it will trigger a disastrous income tax event.) Other non-probate transfers include joint or tenants by the entirety titling of real property or other assets and pay-on-death or transfer-on-death accounts. Although these designations avoid probate upon an owner’s death, they do not include a mechanism for managing the asset during the owner’s lifetime.
Revocable Trusts And Trusts Contained In Wills
In jurisdictions like Maryland, most estate planning still involves wills for assets individually held. One can do almost everything in a will that could be accomplished in the revocable trust. For example, wills can create testamentary trusts that will come into being upon your death to hold assets in trust for minors, individuals under disabilities, or to provide asset protection for the beneficiaries. Estate tax planning also can be easily accomplished in a will. The primary benefit of a revocable trust in jurisdictions (like Maryland) where probate is not difficult has nothing to do with post-death disposition of assets. The main advantage of a revocable trust in these jurisdictions is as a disability planning tool. If you lose the ability to competently manage your assets, the revocable trust permits your assets to be managed and payments be made on your behalf by the individual or entity you designate as trustee.
Key Decisions When Creating A Revocable Trust
In a revocable trust you, as the settlor of the trust, generally are the initial trustee. Upon your disability, a successor trustee or trustees take over management of the trust for your benefit. The trust needs to provide a mechanism for that succession. Many trusts provide that the succession takes place if the settlor becomes “incompetent” or “incapacitated.” Because legal “capacity” is such a low standard, use of “incapacity” as a triggering event is not recommended. Instead, the trustee succession needs to be tailored to allow a successor trustee to act if the settlor becomes unable to prudently manage his or her own affairs (even if the settlor still technically has legal “capacity”). Successor trustee selection, of course, is another critical decision when setting up a revocable trust for disability planning. “Two of the most important decisions that a client makes when establishing a revocable trust are who becomes the trustee if the client is no longer able to act and how to structure that transfer of trusteeship. We are amazed at how often we handle trust litigation where insufficient consideration was given to how these essential aspects of the trust would work in practice. Often this is a failing by the lawyer advising the client and preparing the revocable trust. The estate planning lawyer should help the client with successor trustee selection and whether checks and balances ought to be built-in to protect the client’s interests.” says Jack Beckett, a principal of the Maryland estates and trusts law firm of Franke, Sessions & Beckett, LLC. If individuals are selected for the task of successor trustees, it may be best practice to have two acting at all times to provide a check and balance. There are other techniques to increase protecting the settlor from financial misconduct by scam artists and/or an unfaithful trustee. With all planning, no universal solution fits every person and you should work with your Maryland estate planning lawyer to work through a solution that will work for you.
Durable Powers of Attorney As An Essential Planning Tool
Another important tool for disability planning is the durable power of attorney. Maryland statutory law regulates aspects of durable powers of attorney. The Maryland statute (officially known as the “Maryland General and Limited Power of Attorney Act” clarifies that an agent under a power is to act in the principal’s best interest with care, competence and diligence. Additionally, unless otherwise provided in the power of attorney, an agent is to act loyally for the principal’s benefit. This is the traditional duty of a trustee (often referred to as a “fiduciary” duty). The importance of this statutory provision is that it imposes upon an agent the same duty of care as a trustee and therefore centuries of case law setting forth the parameters of the trustee’s duty is applied to the agent’s actions. Surprisingly, prior to the enactment of the Maryland statute, there is very little guidance as to the role of agents and the nature of their responsibilities.
Trust and confidence in your agent is obviously a must. As with revocable trust drafting, one technique is to provide that two persons act jointly. This provides a “check-and-balance” safeguard.
The power of attorney statute enumerates a list of individuals who can intervene to protect the principal if he or she cannot supervise the acts of the agent. Per Maryland case law, this broad list includes descendants of the principal. This provision provides an oversight mechanism. Clearly, picking reliable agents to begin with is better than relying on later court action to intercede to protect your interest.
Often clients prefer a power of attorney that is not effective when signed but “springs” into effectiveness upon the event of incapacity. This presents the same issue discussed above relating to how to construct a triggering event for the successor trustee to become engaged if the settlor cannot prudently act on his or her own behalf.
Powers of attorney are powerful but important documents. Indeed, they are commonplace and Maryland law supplies a suggested form. Often people simply sign a power of attorney without thinking through exactly what provisions it contains and how the document would work if ever needed. A power of attorney, however, is a very powerful document regardless of how ordinary they may be or regardless of the fact that the state statute provides a form. As with any estate planning document, you must make certain decisions to make sure that the document works for you. An experienced Maryland estate planning lawyer can offer options that you should consider, guide you through the use of a power of attorney as an integral part of estate planning process, and help you make decisions that address your circumstances while meeting your planning goals.
Advanced Medical Directives and Living Wills in Maryland
Maryland statutory law formally recognizes the right of persons to give advanced directives as to medical treatment to become effective if they become incompetent. These written advanced medical directives are popularly called “living wills.”
Although not a limiting provision, the Maryland advanced medical directive statute defines three set categories of medical conditions: “end-stage condition,” “persistent vegetative state,” and “terminal condition.” These three conditions are used in the Maryland statutory form to delineate one’s medical intervention preferences if you fall into one of those three categories in the future.
The Maryland statutory form is optional and other forms are also valid in Maryland. Because the statutory form is widely used in Maryland and therefore recognizable by Maryland health care providers, it is a good starting point when designing your advanced medical directive.
The statutory form, however, needs to be supplemented. The very nature of attempting to define three conditions and to specifically address only those three conditions limits the form’s usefulness. Another approach to an advanced directive is to move away from the “diagnostic approach” as used in the Maryland form and to move to one based on a series of typical scenarios of illness with preferences as to treatment options. This model makes it clearer what the person probably would want even if he or she does not match exactly the situation of one of the scenarios. This form would more clearly indicate the person’s preferences under a wider range of medical conditions than are set forth in the Maryland form.
Another missing piece to the Maryland form is that Alzheimer’s or other forms of dementia are not specifically addressed. Given the prevalence of these illnesses and the serious concerns that they reasonably raise, a comprehensive advanced directive should discuss that potentiality head on. Geriatric physicians have described at least three stages of dementia (mild, moderate, and severe), and each stage of the disease may well suggest a different treatment preference. A comprehensive medical directive should address this issue as well.
Health care directives also permit you to choose a surrogate and to empower that surrogate to make medical decisions on your behalf if you are unable to do so. Given that no one can predict the future, the most powerful approach to preserving your control over future medical decisions is to name a surrogate and empower that surrogate by communicating your wishes while you are still able to formulate those wishes. Because there is a Maryland advance medical directive form, the temptation is to simply complete that form and believe that your wishes are adequately expressed. As noted above, the Maryland form ought to be treated as a starting point which needs to be supplemented if you wish to be precise when communicating your heath care preferences. As with other estate planning matters, an experienced Maryland estate planning lawyer should be able to guide you through this process.
Once having completed a written health care document, having a conversation with your chosen health care surrogate is very important. This conversation, however, should not be just limited to your surrogate but a conversation that should be had with all of the family members and others who are important to you. It may be difficult to talk about your wishes for end of life care but the conversation is at least as important as putting the proper documents in place. If you are no longer able to participate directly in your own health care and/or end of life treatment options, you should have a skilled estate planning lawyer create the plan, and help communicate the details of that plan, that will guide those who must make those decisions on your behalf.
Contact a Maryland Estate Planning Lawyer for Personalized Attention.
As you grow older your estate planning needs change. The basic transmittal of assets to your intended beneficiaries does not change. What changes is a shift in focus from those issues to planning for potential disability and to put in place mechanisms to provide for handling of your finances if you cannot safely fend for yourself and to clarify how you want health care decisions to be made if you cannot make those decisions yourself.
The Maryland estate and trust attorneys at Franke, Sessions and Beckett LLC understand that needs change over time and are prepared to assist you in constructing a personalized estate plan for any stage of life. For over 35 years, the law firm of Franke, Sessions & Beckett LLC has concentrated on the law of estates and trusts – including meeting the unique needs of clients with complex estates. Because we do it all within the niche of estates & trusts, we are better prepared to help you construct an estate plan that will protect you, your family, and your assets. In order to schedule a consultation with an experienced Maryland estate and trust attorney, call 410-263-4876 to get in touch with our Annapolis office.