One of the biggest estate planning mistakes that you can make is to try to plan your estate using a boilerplate document that you download off the internet. This is demonstrated by a Pennsylvania court case that was resolved earlier this year.
Mercedes Goosley was in her 80s when she decided to give her son, Joseph, the legal right to make decisions on her behalf. She downloaded a durable power of attorney document that she obtained online, and she signed it and she had it notarized.
From that day forward, Joseph routinely handled her affairs. The document was signed in 2013, and she moved into Joseph’s home two years later, but she still owned her own house.
At that point, it was clear that she was relying on Joseph, and it would appear as though none of his five siblings had any objections. Mercedes entered a nursing home in 2017, and Joseph put her house on the market. A buyer was found, and the closing was supposed to take place in March of 2018.
All of this sounds like a relatively ordinary turn of events, but there was a complication. Joseph’s brother William was living in their mother’s home, and he was not happy with the sale.
William filed a lawsuit contending that the power of attorney that was signed by Mercedes Goosley was a springing durable power of attorney. This device will only go into effect upon the incapacitation of the grantor.
There had never been an effort to get a court to determine that Mercedes was in fact incapacitated. The premise of William’s lawsuit was the contention that the power of attorney was never legally conveyed to his brother, so the sale should be voided.
In the end, the court ruled that the power of attorney should be recognized because Mercedes did in fact want the power of attorney to go into effect immediately after the signing.
This legal battle could have been avoided if Joseph and Mercedes would have engaged an estate planning attorney to handle the matter initially.
You may make errors that lead to unintended negative consequences if you try to plan your estate yourself, but this is not the only potential problem. As a layperson, are you sure that you know which documents should be included in your estate plan?
A simple will is not the only asset transfer vehicle, and in many instances, it is not the best option. The estate administration process is not simple and straightforward when a will is utilized to transfer assets, and there are limitations.
With regard to administration, the executor that is named in the document would admit the will to probate. This is a legal process that takes place under the supervision of a court, and it is time consuming and expensive. There is a loss of privacy as well because the records are available to the public.
You may not feel comfortable leaving lump sum inheritances to members of the family that are not good with money. If you use a will, the people that are named in it will receive their bequests all at once with no asset protection or spending safeguards.
On the other hand, if you were to use a living trust as the centerpiece of your estate plan, the assets would be protected from the beneficiary’s creditors after your death. You could instruct the trustee to provide limited distributions over time to constrain spending.
The administration of a living trust is not subject to the process of probate, and this is another positive. This is one of a number of different trusts that can be utilized, so you should gain an understanding of your options before you decide that a will is the right choice.
There is also the matter of effective incapacity planning. You should state your life support preferences in a living will, and you should name someone to make medical decisions on your behalf in a durable power of attorney for health care.
As we have learned from the Goosley case, you should make sure that you execute the proper power of attorney for property management. If you have a living trust, you can name a disability trustee to administer the trust in the event of your incapacity.
Attend a Free Webinar!
We are conducting webinars over the coming weeks that cover some very important topics. There is no charge to join us, and you can see the dates and obtain more information if you visit our Essex Junction, VT estate planning webinar page.