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Hope for the Best, But Plan for the Worst

Timothy R. Hughes, Esq.
Hughes & Associates, P.L.L.C.

Each of us shares the same difficulty facing the risks of life and planning for them.  Unfortunately, all too many fail to plan properly for negative events.  The sudden, or even expected, demise of a person can lead to major financial, business, and legal issues for beneficiaries or businesses.  Similarly, unexpected disabilities can lead to the same types of difficulties.  The best protection is to plan in advance for these situations.

Living Wills/Advanced Health Care Directives

Most people I encounter have no desire to prolong their life in a vegetative state.  The image of a family trapped in a situation where a loved one is maintained by ventilators and feeding tubes is not a pretty picture.  Many people have a very difficult time letting go when faced by decision of eliminating life prolonging medical treatments.

The best way to avoid this situation is to clearly and articulately describe your wishes in writing.  Living wills address this situation.  Many states have enacted specific legislation providing for advanced health care directives where you can offer your family specific guidance about exactly what procedures you want and do not want.

These documents offer your loved ones and doctors clarity regarding your wishes.  They also eliminate the guilt or pain that your loved ones inherit when they believe the decision is theirs rather than yours.  Even with living wills or advanced health care directives, it is highly recommended that you discuss these matters in advance with your family members.  Expressing your wishes clearly in person not only makes these difficult decisions easier when the time comes, but also increases the likely enforceability of your living will or advanced health care directive.

Finally, living wills or advanced health care directives offer you the chance to designate exactly who acts as your agent in evaluating and deciding your health care options.  It can be very important to have a single voice selected regarding these matters.  Developing a consensus may be difficult if not impossible if you are unable to speak for yourself.  If you have designated someone who knows and understands your wishes clearly, this greatly increases the chances that your family will in fact follow your desires.

Powers of Attorney

Just as the living will or advanced health care directive provides a means for selecting someone to handle medical decisions, a power of attorney is a vehicle to empower someone to act in your stead with regards to financial matters.  If you are incapacitated, it can be of critical importance that someone is able to sign checks, pay bills, and maintain your financial affairs.

If you are incapacitated and have no power of attorney, there are legal means to handle these matters.  Specifically, your family would generally need to petition the court to have a guardian appointed who would have the court ordered power to handle your legal and financial affairs. 

The problem with this method is threefold.  First, it can be time consuming to petition a court, obtain expert legal opinion support the petition that you are incapacitated, present evidence to the court relating to the same, and finally to get the order entered.  Further, there is the possibility that another member of the family may object to that particular guardian or claim you are in fact not incapacitated.

Second, just as the process of obtaining a guardian through the court takes time, it also takes money.  Going through the appointment process is far more expensive than simply drafting and signing a power of attorney in advance.  Finally, the process of guardianship appointment contains a far greater likelihood of increased tension and conflict amongst family members.  Just as with the advanced health care directive, a clear written statement of who is calling the financial shots through a power of attorney executed in advance can go a long way towards eliminating family squabbles and disputes.

Estate Planning

There are state-specific rules about how your estate will be divided if you die “intestate”, or without a will.  Naturally, these legal rules may have no relation to how you would like your estate to be handled.  In addition, if you possess a fair amount of assets, your estate may present complex legal and tax implications.  You should plan for these situations in advance to try and minimize your estate facing significant tax liabilities that can potentially be avoided by advance planning.

Many people, particularly those with complicated family situations, tend to avoid addressing these issues.  For example, a person may be divorced and have children from a previous marriage.  That person may have remarried and have children, or step-children, from the second marriage.  The decision of how that person wants to split their inheritance to take care of their loved ones is naturally complicated by the family history. 

This type of complex family history dramatically emphasizes the need for clear estate planning.  A history of multiple marriages increases the chances for division amongst your loved ones over how your estate should be divided.  The best way to reduce infighting over your estate is to provide clear distribution instructions in your will.

Business Impact

If you own all or part of a business, all of these issues raised above become even more complicated.  Your business ownership interests may pass to family members who are not qualified to run your business.  This may impact the value of their inheritance interests rapidly.  You should plan in advance for business ownership transition to ensure that your business partners and family are both able to maintain the business and to provide for your loved ones wellbeing in your absence.

Conclusion

Facing the certainty of our own demise is difficult for all of us.  It is all too easy to simply avoid the topic and not plan properly.  That path can lead to serious problems in business, conflict amongst family members, and a failure to provide for your loved ones.  It is difficult enough for your loved ones to deal with your permanent absence.  A clear plan of action through advanced health care directives, powers of attorney, and sound estate planning can eliminate many financial and legal pressures that only make a bad situation far worse.