Estate Planning
CPAs: Watch Keepers for Elder Planning By Kevin Pillion, CPA, JD
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PAs can provide a value-added service by watching over clients’ estate plans. For CPAs with elderly clients, this includes protecting them against two common and costly problems: 1) not having estate-planning documents, and 2) failing to update their existing documents, or to update the beneficiary designations on their retirement plans and insurance policies. Elderly people need at least five estate-planning documents, which are discussed here. Also discussed is the Living Trust.
Living Will
A Living Will, or Advance Health Care Directive, is a legal document that makes known a client’s health care wishes regarding life-sustaining care such as food, hydration or ventilators. It is used when the client is terminally ill or is in a persistent vegetative state. The absence of a Living Will places emotional stress on loved ones if the client has an incurable or irreversible condition that will result in death. The importance of having a Living Will was demonstrated in the famous case of Terri Schiavo. If she had executed a Living Will, the delay and litigious nature of her death could have been avoided.
Health Care Power of Attorney
A Health Care Power of Attorney, or Health Care Proxy, is a legal document appointing another person as a healthcare agent to make a client’s medical decisions when the client is unable to do so. This document is particularly important for widowed or unmarried clients. Without being named in a Health Care Proxy, loved ones may be denied access to the client’s doctors and medical records. They also may run into legal roadblocks that prevent them from making decisions regarding the client’s:
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• Medical treatment and medication; • Living arrangement (e.g. a nursing home); • Hiring and firing of doctors; or • Hospital visitation access.
Financial Power of Attorney
A Financial Power of Attorney, or Durable General Power of Attorney, is a legal document appointing another person as an agent to handle a client’s business and financial affairs while the client is alive. Such a power may be effective immediately, or only upon a client’s incapacity to make his or her own decisions. For confidentiality reasons, banks, investment companies and other third parties typically disclose personal financial information only to customers or their agents. They will not complete financial transactions, such as bill paying, for a loved one if a client is incapacitated and has failed to name the loved one in a Financial Power of Attorney.
HIPAA Waiver
The Health Insurance Portability and Accountability Act (HIPAA) is a federal law mandating that hospitals and doctors keep personal medical information private. Although this act is well intended, it prevents doctors from giving medical information to health-care agents. It also prevents hospitals from providing itemized bills to financial-power-of-attorney agents. HIPAA waiver language should be contained in the Health Care and Financial Powers of Attorney, or in a separate waiver document known as a HIPAA Authorization. If a client’s documents were prepared before 2003 or consist of do-it-yourself legal forms, it is likely they don’t contain the proper HIPAA waiver language.
WashingtonCPA September/October 2012
Last Will and Testament
A Last Will and Testament (Will) is a legal document specifying who receives a client’s assets upon death and who serves as the personal representative for administering the client’s estate. A Will usually necessitates a probate-court proceeding after the client’s death. Fifty-five percent of adults do not have a Will. Without a Will, a client’s assets will be distributed under a state’s intestacy laws and may not go to the people whom the client intended.These laws are particularly inadequate for a client who wishes to leave assets to a charity or friend, or to an unmarried partner.
Living Trust
A Living Trust is a legal arrangement in which a client gives fiduciary control of property to a trustee (which can be the client or someone the client chooses) for the benefit of the client’s beneficiaries. This arrangement has little, if any, impact on the client’s daily life, as the client controls the trust and its assets. The client can change or revoke the trust at any time. Living Trusts are not just for wealthy clients. They make financial sense for those who have more than $75,000 worth of assets subject to probate. The savings from the trust’s probate-avoidance feature typically more than offset the legal expense of creating and maintaining the trust. Elderly people can benefit from having a Living Trust if they want to: • Avoid court proceedings, such as formal and ancillary probate www.wscpa.org