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Estate planning and elder law benefit all ages

If a trip abroad were in your future, you’d undoubtedly make careful plans, from financial arrangements to who’ll take care of your house and dependents during your absence. But despite the realities of aging and death, many of us are less proactive when it comes to estate planning or the ways elder law may affect our daily lives.

Life can change in moments. Estate planning and elder law attorneys agree that everyone needs three documents:

• A will

• A health care power of attorney

• A financial power of attorney

“At any age you can become incapacitated or have a temporary illness,” says Craig Wisnom, an attorney at Tucson law firm Bogutz & Gordon, P.C., whose practice includes elder and estate law. “A power of attorney allows someone to keep your life going and make decisions for you. Otherwise, your family or friends may not be able to access your accounts, bills or mortgage.”

“Review the documents once a year, to make sure nothing drastic has changed,” says Wisnom. “Getting married or divorced should automatically trigger an update with an attorney.”

Legal planning can save stress and expense. For example, if you became incapacitated, your spouse may be unable to sell or refinance your jointly owned home because both signatures are required (with a power of attorney, just one person can sign). Your spouse would then have to file to become your conservator, involving a hearing before a judge or commissioner, several thousand dollars in fees and some weeks of delay.

It’s never too soon to make legal provisions, agrees elder law attorney Paul Bartlett, a member of the board of directors for Congregation Or Chadash and former Jewish Federation of Southern Arizona Jewish Community Relations chair. He points to the case of Terri Schiavo, a Florida woman who lay in a vegetative state for 15 years while her husband and parents wrangled over end-of-life decisions.

Your will

If you die with no will, Arizona state law has a prioritized list designating who inherits your assets, starting with your spouse and children. Clearly, if you’re long-separated from your spouse and live with someone else, that may not reflect your wishes. Until 2012, estate taxes applied to estates exceeding $650,000. Today, that limit is $5.5 million.

Estate planning and probate form a substantial part of Tucson attorney James Whitehill’s practice. Whitehill is a 20-year member of the Jewish Federation of Southern Arizona board of directors and is president of the Jewish Community Foundation of Southern Arizona board of trustees. A past president of Jewish Family & Children’s Services, he is active in Congregation Or Chadash and Congregation Anshei Israel.

“The only document admitted to court for probate process when a person has passed away is a will,” he says. “The law says it must be signed by the person who wrote it, witnessed by two people [non-relatives] who saw them sign, and notarized as to the identity of the signer and witnesses.” A handwritten, or holographic, will is legal if it complies with these rules, but has the disadvantage that any problems will only surface after your death.

Your will should name a personal representative, formerly called an executor. Ask the person ahead of time if they’re willing to undertake the task, and tell them where they can locate a copy of your will — perhaps in a sealed envelope in your file cabinet.

A living will expresses your end-of-life choices. If you had a terminal illness, would you want to be on life support, or be resuscitated in a medical crisis? Without authorized instructions, others may not make the decisions you’d want. You can also include funeral wishes.

Power of attorney

A medical power of attorney allows the person you designate to make health care decisions for you if you’re incapacitated. It’s important to note that the state of Arizona doesn’t recognize common-law unions, including nonmarried LGBT couples, says Whitehill. “If you rush to the hospital with the person you’ve  lived with for 20 years, but don’t have health care power of attorney, you may be told you’re not family” and be excluded from decisions regarding your partner’s welfare.

A financial power of attorney allows your appointee to make financial decisions, pay your bills and administer your bank accounts if you’re unable to do so. Powers of attorney may never be needed — but as we age, the likelihood of accident and disease escalates, says Bartlett.

“By the time people reach 65, there’s a 15 percent chance they will have Alzheimer’s. By age 80, there’s almost a 50 percent chance. And that’s only one disease.”

Not everything requires a legal document — like anticipating the day you’re no longer safe to drive. Bartlett asks clients, “Do you want to express your thoughts about that now, while you’re of sound mind, so people can take away your keys if you become a danger on the highway?” He draws up an unofficial “note to self” to be kept in a safe place, asking someone to “remind me I’ve resolved not to drive if I’m unfit.”

“Families report to me that it’s hugely helpful,” says Bartlett. “It takes away the feeling of disempowerment.”

Revocable Living Trusts

A revocable living trust is a way to assemble assets into one place, such as real estate and bank accounts. These must be retitled to the trust, rather than to you as an individual. Reasons people of modest means may consider a living trust include:

• Owning out-of-state real property

• Leaving money to someone who doesn’t handle money wisely

• Leaving money to a person with special needs receiving means-tested public benefits

• Enabling the spouse of an Alzheimer’s patient to retain more assets when qualifying for the Arizona Long Term Care System, which is the Medicare safety net.

RLTs cover three phases:

1. While you’re alive and well, the assets are yours to use as you like.

2. If you become incapacitated, your named “successor trustee” steps in and manages the assets in the trust.

3. When you die, those assets are not subject to probate, and are distributed as you specified in the trust.

A revocable living trust can have other advantages, says Bartlett. “Banks often have a policy of not honoring a power of attorney for various reasons; for example, if it’s more than a year old. If a person relies on a power of attorney and becomes incapacitated, the family may need to go to court to get a conservatorship.”  It’s a complicated and expensive process. The person you named is investigated by the court to ensure suitability. He or she must file a budget with the court, and submit a report of income and payments annually to show the conservatorship is sustainable. With a RLT, your successor trustee simply needs to show a copy of the trust to the bank.

Avoiding pitfalls

An experienced attorney can provide personalized advice, taking into account holdings, former marriages, ensuring stepchildren are taken care of, and countless other factors.

Some actions to consider:

• Banks or brokerage companies that won’t accept a power of attorney often have their own forms you can use to name a legal representative for your accounts.

• Make sure you’ve named beneficiaries for all your insurance policies.

• An IRA or 401K must be in the name of a person, and can’t be put in a trust while you’re alive. Make sure you’ve named a beneficiary; but remember the inheritor must pay taxes if they take the full amount.

• If your house is in the names of you and your spouse, the surviving partner is entitled to only half unless the deed specifies “ joint tenants,” or “community property” with right of survivorship.

• To allow your house to pass to someone after your death without going through probate, you can create a beneficiary deed in that person’s name. If the property is out of state, verify the laws in that state.

Long-term care

Bartlett also advises clients about long-term care. “There are some long-term-care insurance programs people really like,” he says, “like annuity and life insurance options. You can buy life insurance intended to benefit your kids, then if you need long-term care you can draw the death benefit. There’s also an annuity where the amount of the annuity triples if you need long-term care.” Consult a certified financial planner to explore options, he says.

If your resources are limited, you can apply to the ALTCS, says Bartlett. “A common myth is that you have to have gone through all your money, but a person can own a home valued at up to one-half million dollars and still qualify for ALTCS. The well spouse gets to keep half of the resources the couple owns up to about $120,000; and we often help them retain more funds by following ALTCS guidelines.”

And, says Bartlett, ALTCS also applies to home care. “About 52 percent of all people on ALTCS are receiving help in their own home. The program will provide up to 30 hours a week of light housekeeping, bathing, dressing and respite care.”

The bottom line

When it comes to planning your personal roadmap, the greatest error is not to have a plan in place, says Wisnom. It’s a frequent scenario. “A person becomes incapacitated, has no power of attorney, dies and has no will. Not doing anything can be biggest mistake most people make.”

Kaye Patchett is a freelance writer and editor in Tucson.