A properly funded living trust or a financial power of attorney may be used to avoid guardianship. For healthcare decisions, you should have an advanced directive (also called a living will) and a healthcare power of attorney. A living will allows you to spell out ahead of time your wishes about your care in the event of incapacity at the end-of-life. This gives you a way to tell your family what you want, which may avoid family disagreements later on when you may not be able to speak for yourself. A healthcare power of attorney names your healthcare proxy (also called a healthcare surrogate). This is someone you trust to make healthcare decisions for you if you are unable to do so. Stross Law Firm is located in Pinellas County where the Terri Schiavo case occurred. Mrs. Schiavo did not have a living will expressing her wishes. If she had one, she might not have been kept on life support for over 15 years.
Zsa Zsa Gabor’s family has argued over the ailing star’s medical care and finances. Both her husband and daughter applied to be her guardian. If a person does not have legal documents in place, someone must apply to the court to be guardian in order to take care of everything. Even the simplest guardianship is an expensive and lengthy process, but a contested guardianship, like Ms. Gabor’s, can be much worse.
When thinking about an estate plan, people primarily consider what will happen to their loved ones when they are gone. With the growing number of Alzheimer’s and dementia diagnoses, it is also essential to consider what may happen while you are still alive but can no longer take care of your finances or yourself physically. The good news is that everyone, famous or otherwise, can avoid guardianship with proper planning.
Here is an example of what could happen if a living trust is not funded and the trustmaker becomes incapacitated. In this scenario, Mr. Jones signs a living trust but tells his estate planning lawyer that he will fund everything on his own. He puts the signed documents in his filing cabinet when he gets home, but does nothing more, so none of his assets are retitled to the trust. Ten years later, Mr. Jones is diagnosed with dementia and is unable to take care of his own finances anymore. He named his son, Bob, as successor trustee.
Mr. Jones intended to have Bob step up to take care of things when he couldn’t. Bob takes the living trust document to the bank, along with written notes from two doctors stating that his father no longer has the capacity to make financial decisions. Bob asks for access to the money in the accounts so he can pay his father’s bills. The bank officer says that the accounts are in his father’s name individually and not in a trust account, so Bob cannot access the money.
The medical bills are piling up. Bob can’t afford to pay for his father’s care without his father’s funds. Mr. Jones’ financial power of attorney was signed prior to the 2011 change in law and the bank will not accept it. Bob has to hire a guardianship attorney in order to become his father’s guardian and gain access to the money. The costs include filling fees, attorney fees, hiring physicians to give reports to the judge, and the cost of an accountant for creation of an annual accounting to the court. Bob has to front these costs himself, until he is appointed as guardian. He goes into significant credit card debt to take care of these costs and his father’s bills in the meantime. He has to take time off from work to handle this.
Funding the trust in the first place, when it was created, would have saved Bob time and money because then he could have just stepped up as successor trustee. This situation could have been prevented. Avoiding guardianship is a goal that can be accomplished with a properly funded living trust.
Will your estate plan work as intended? It might not if your living trust is not funded properly. Sounds like work, doesn’t it? We have a program that shifts the work of reviews and updates to our staff. Stross Law Firm now offers an estate planning maintenance program, Peace Of Mind A Life Plan for Everyone, so that you can rest assured that your loved ones will be taken care of.
This is the last article in a four part series discussing funding a living trust. You can read the first article here. Provided here are links to the second and third articles that provided other examples of what could happen if you only partially fund your living trust.
This article is not intended to provide legal advice or encourage anyone to do living trust funding without the guidance of an estate planning attorney. Call us at 813-852-6500 to schedule a free 30 minute consultation with an estate planning lawyer.