Simply put, you authorize someone to make sure your finances and business affairs run smoothly in your absence.
Think of a circumstance under which you would rather not leave a plan in place for your loved ones to follow, in the event something happens to you. Better yet, say it out loud. Sounds rather silly, doesn’t it? An estate plan is as much for your loved ones, if not more, as it is for you. Giving them the roadmap to navigate any variety of scenarios, ranging from a medical emergency to a death everyone sees coming, is incalculable in the ways it eliminates the anxiety and fear that comes when a loved one asks, “What do I do next?” The roadmap consists of a variety of foundational documents, which include:
Durable Power of Attorney: By executing this document you, the “Principal,” designates others, typically known as an “Agent,” or “attorney-in-fact,” to serve in a fiduciary capacity and oversee your financial affairs in your physical absence, or when you lack the mental capacity to do the same. The Agent would have legal authority to do what you yourself would do, but for your incapacity. The document’s validity, and the Agent’s ability to act, is not rendered invalid as a result your subsequent incapacity.
You may have someone very specific in mind for this type of role but if you fail to execute a Durable Power of Attorney while you have the capacity, oftentimes a probate court will need to become involved through what is called a conservatorship proceeding (sometime referred to as “lifetime probate”). This type of proceeding can take the control you once had and throws it out the window, all the while your loved ones are involved in a process that takes time, energy, and financial resources away from the emergency at hand. On top of all that, the Court may choose to appoint someone you wouldn’t vote for as trash collector to oversee your affairs.
Simply put, you authorize someone to make sure your finances and business affairs run smoothly in your absence.
Healthcare Directives: Typically, three separate documents operate to give notice about who can make certain medical decisions for you should you become unable to communicate your specific instructions, and who specifically may be permitted to access your medical records and information.
Any such directive, whether executed under T.C.A. Section 34-6-201, et seq., or T.C.A. Section 68-11-1801 et seq., allows you to, among other things, nominate someone to operate as your fiduciary and make certain medical decisions that you yourself cannot communicate. Other powers may include the right to direct organ donation, autopsies, and to oversee the disposition of your remains.
Living Wills, which can also be known as “advanced care directives,” operate to take the burden away from loved ones and your healthcare fiduciary of making end-of-life treatment decisions. Saving your loved ones from going through the anguish of making such a decision is a vital part of any estate plan. You may remember the Terry Schiavo case from the early 2000s, where Mrs. Schiavo’s husband and parents fought for several years over whether what, if any, type of treatment she should receive, given her vegetative state. Had Mrs. Schiavo had executed a living will, the seven years of protracted court battles, amplified family discord, and unnecessary involvement from state and federal politicians could have been avoided.
The final document complies with the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which, in part, permits you as a patient, to designate, along with your healthcare fiduciaries, other friends and families to have access to your medical records. The HIPAA form does not confer authority to make medical decisions, but only a right to receive your medical information. Such a document brings clarity to the hospital and its staff in who can lawfully receive information about your health.
Last Will and Testament: Frankly, everyone, including you, has a Will. The question is whether you took the affirmative steps to put one in place. If not, rest easy knowing that the Tennessee General Assembly has written one for you. There, doesn’t that ease your anxiety, knowing that politicians have looked after you? No, you don’t feel comforted? Well, if you have never personally executed your Last Will and Testament, then upon your death you will be considered to have died “intestate.” Dying intestate means that through what is called “probate,” a court and state law determines how your assets are distributed, not you. Your family dynamic may be ill-suited to such rigid adherence to state law.
If you have personally executed an otherwise valid Will, then you will be considered to have died “testate,” meaning a court will follow your plan for the ultimate distribution of your assets. If you have minor children, having a Will is even more important in that it allows you to nominate the persons you would want to be the legal guardian of your minor children, in the event you and your spouse were gone. Without the Will, the court is left without your guidance as to who in your circle of influence is in the best position to raise your children. Although a court weights a variety of factors in determining what is in the best interest of a child, oftentimes input from you, the parents, goes a long way with a court.
Wills are effective only after someone passes away and determined by a court that it meets certain statutory formalities.
Revocable Living Trust (“Trusts”): In creating such a trust, three parties are required: the Maker, the Trustee, and the Beneficiary. Luckily for you, you get to play all three roles. The design here is to transfer assets to your trust, use those assets during your lifetime just as you would as if the assets weren’t transferred to the trust, create a plan for the ultimate distribution of your assets upon your death, and avoid probate during life and at death.
Whereas Will-centered plans necessitates the involvement of a court, a Revocable Living Trust-centered plan can avoid it entirely, ensuring the private administration of your affairs. Privacy is one of the primary reasons to set up such a trust because probate is all a matter of public record. As a result, a trust can potentially avoid all the complications and expense of probate. Trusts can also simplify multi-jurisdictional issues, providing inheritance protection for beneficiaries, and can generally simplify asset transfers.
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