Durable Power of Attorney for Healthcare

None of us enjoy contemplating what would happen to ourselves or those close to us in the event we become incapacitated. Rather than think about those things, we tend to think “it will not happen to us,” or otherwise postpone thinking about it. This is a dangerous mentality, because failing to plan for these situations can lead to drastic consequences. A Durable Power of Attorney for Healthcare is an important way to mitigate the consequences of incapacitation.

A Durable Power of Attorney for Healthcare (DPOA HC) is a document that gives someone else the power to make healthcare decisions for you in the event you become incapacitated and are unable to make your own healthcare decisions.

A DPOA HC sets forth what types of decisions can be made on your behalf if you become incapacitated. For example, a DPOA HC covers decisions regarding life support, medical facilities and treatments, funeral arrangements, and other decisions.

A DPOA HC also sets forth who is going to make these decisions for you. The person you select to act on your behalf is called the healthcare agent. You should select someone who you trust and who you know will be there for you in the event you become incapacitated. It is also prudent to select a trustworthy back-up agent in case your initial agent is unable to make decisions.

One advantage of a DPOA HC is that gives you peace of mind knowing that if you were to become incapacitated, that you have someone you trust handling your healthcare decisions. Further, it will reduce the likelihood of family members and loved ones quarreling over what decisions should be made and who is going to make the decision. A DPOA HC also saves time and money because without one, you may have to go through a court process to determine your mental capacity and have the court appoint a person to make decisions for you.

To work effectively, a DPOA HC must meet statutory requirements and otherwise be carefully drafted. We, at the Morris Estate Planning Attorneys, can provide you with the type of professionalism, skill, and service you need to execute a valid DPOA HC and ultimately make an otherwise difficult circumstance more manageable for you and your loved ones.


What is Probate?

Probate is the legal process to transfer assets when someone passes away. Through probate, clear title and ownership are established as to the assets of the deceased person.

Generally, probate is required if the person died with an executed will (testate), or if the person died without a will (intestate). If the person dies testate, then the probate court will distribute the assets of the estate in accordance with the will. If a person dies testate, then the will either names an executor to oversee the estate, or the court will appoint an administrator if the will does not name an executor. If the person dies intestate, then the probate court will distribute the estate according to the state intestacy laws. Normally, intestacy is not recommended because the person loses control over how his/her estate will be distributed.

In most cases, people want to avoid probate for several reasons. One, probate is usually time-consuming and can take anywhere from six months to two years, depending on the size of the estate. Second, probate can be expensive, as the estate has to pay executor/administrator fees, attorney fees, and court-filing fees. Third, probate is often inflexible because the probate court controls the process. Finally, there is a lack of privacy in probate because it is a public process. However, depending on the size of the estate, some smaller estates can avoid excessive costs and time through certain expedited forms of probate, such as a set-aside proceeding or a summary administration.

There are various ways to avoid going through probate. For example, assets held in a living trust avoid probate and are distributed according to the terms of the trust. Also, jointly-owned assets, such as joint bank accounts, usually avoid probate as long as the surviving owner is alive. Probate can also be avoided through life insurance and retirement plans, as long as there are valid beneficiaries designated.

Whether you need help with estate planning so you can avoid the probate process, or whether you need help going through the probate process, the Morris Estate Planning Attorneys have the experience and expertise to help you.

What is a Living Trust?

A trust is a legal relationship where assets are transferred to a trustee for the purpose of using those assets for the benefit of one or more beneficiaries. The creator of a trust is known as the settlor, grantor, or trustor.

A Living Trust, also known as an inter-vivos trust, is a trust that is created during the lifetime of the trustor and for the benefit of the trustor during his or her lifetime. After the death of the trustor, the trust assets are distributed and managed by the trustee for the benefit of the beneficiaries named in the trust.

One advantage of a Living Trust is that it avoids probate, which can be expensive and time-consuming. It also allows people to do a variety of tax, asset, and estate planning. A Living Trust also keeps your estate private and allows people to manage and/or distribution assets quickly and efficiently.

Living Trusts have generally become more popular than wills and are the staple instruments in estate planning. However, in order for Living Trusts to be effective and efficient, they must be carefully drafted with expertise. The Morris Estate Planning Attorneys will do that for you.

Asset Protection Planning: Spendthrift Trusts

In the recent economic recession, many people have or will lose significants amounts of wealth. Perhaps with the right estate planning, some could have preserved at least a portion of that wealth. In any event, there are certain estate planning tools people can use to protect their assets.  One of these tools is a spendthrift trust.

A spendthrift trust protects the assets of the trust from the creditors of a beneficiary. A spendthrift trust also protects against beneficiaries trying to reach the assets of the trust in violation of the terms of the trust. In Nevada, spendthrift trusts are known as “Domestic Asset-Protection Trusts (DAPT)” or “Nevada Asset-Protection Trusts (NAPT).” Nevada has very favorable laws for protecting assets through spendthrift trusts, as settlors can create spendthrift trusts even if they are beneficiaries of the trusts, and in doing so, they can protect their assets from creditors.

In order for spendthrift trusts to work correctly, they must meet certain requirements. In Nevada, some of the requirements are that the trust must be irrevocable, the trust must not be created fraudulently, and distributions from the trust can only be made by an independent person other than the settlor. The trust must otherwise be legitimate and comply with the law, and not be commingled with assets outside of the trust. There are also other requirements.

If the requirements are met, then typically creditors will not be able to reach the assets of the spendthrift trust. However, if there are transfers to or from the trust that were fraudulent or in violation of a court-order, the law does not protect those transfers from creditors. In Nevada, there is a “look-back period” that limits the amount of time in which a creditor can challenge any transfers to or from the spendthrift trust as being fraudulent or in violation of a court-order. Usually, the look-back period is two years.

Spendthrift trusts are a very important tool for asset protection, but must be drawn with expertise and satisfy various statutory requirements. Failing to do so will compromise the spendthrift trust and potentially allow creditors to reach the assets. The Morris Estate Planning attorneys have the expertise to draft these trusts and ensure that your assets will be protected.

Life Insurance in Estate Planning

We are all aware of one of the most basic purposes for obtaining life insurance–to provide families, relatives, and/or close friends with financial support in the event that a person passes away. However, life insurance also serves other important purposes and can be used in a variety of ways in estate planning.

Irrevocable Life Insurance Trusts (ILIT)

An ILIT is a trust that allows life insurance to be excluded from the value of an estate and ultimately reduces estate taxes. One of the primary purposes of an ILIT is that is provides liquidity to pay any estate taxes that are owed on an estate. For example, if an estate owes estate taxes, instead of liquidating assets of the estate to pay for those taxes, an ILIT allows for insurance proceeds to pay any estate taxes.

There are specific requirements to exclude life insurance from an estate. These requirements include the settlor giving up control of the trust to neutral trustee and not retaining any incidents of ownership over the life insurance policy. If the requirements are not met, then the life insurance proceeds could be included in the estate and defeat the purpose of the ILIT.

Buy-Sell Agreements for Businesses

Life insurance can also be useful in a business setting when owners of a business pass away. For example, owners of a business can take out a life insurance policy on their lives and make the other owners beneficiaries, so that the other owners can have the funds to purchase the deceased owner’s interests in the business. This is typically done through a buy-sell agreement. A buy-sell agreement will specify how the deceased owner’s interest in the company will be purchased and what type of life insurance will be used. In some scenarios each owner might obtain a policy on the life of the other owners, or the entity itself could obtain a life insurance policy on the lives of the owners. Either way, life insurance can effectively be used to provide liquidity to purchase the interests of deceased owners.

Purchasing Beneficiary Shares

Life insurance can also be useful for the beneficiaries of an estate. For example, if there are four children of an estate entitled to an asset but only three of them want to inherit that asset, then the settlor can purchase a life insurance policy and make the other child a beneficiary of that policy, so that child can still have an equal share in the estate, but not have to inherit the undesired asset. In this scenario, the life insurance serves a tool to buy out beneficiaries’ interests in an assets that they do not want to inherit.

These are only some of the ways that life insurance can be used in estate planning. The use of life insurance also requires care to ensure that the proceeds go to the right beneficiaries and otherwise accomplishes the goals of estate and business planning. Morris Estate Planning attorneys have years of experience working with clients and their businesses to make sure they are structured correctly. If you have questions about life insurance and how it should be used as part of your estate plan, please contact us.