By Eric D. Morton
Of all the services that attorneys provide, the one that individuals will almost certainly need is estate planning. Certainly wills and trusts but also lesser known documents such as powers of attorney, durable powers of attorney for health care, and HIPAA authorizations. The importance of this planning and these documents has been been on my mind in the past few years. I’ve watched friends and family members battle serious illness and, sometimes, die. In those circumstances, an estate plan with these documents are invaluable. We urge everyone to have an estate plan. If you die or become seriously ill, an estate plan will ease the burden of your loved ones.
Revocable Living Trust
Avoid Probate! We hear this slogan in ads and in see it in direct mail flyers. It sounds like an attorney’s sales pitch (and it is) but it is also true. If you own any real estate (a condo or house), you must have a revocable living trust. If you own a condo or a house and you die with that property’s title held in your name, then your estate must be administered through the probate department of the Superior Court. This court supervised administration (commonly called a probate of an estate) takes at lease six months, and is expensive and time consuming. However, it is the only way to transfer title of real property solely held in the name of deceased person. A revocable living trust will prevent probate.
Individuals or married couples (legally called “trustors” or “settlors”) can create a trust which they can revoke in their lifetime. They are also the trustees of the trust (the person(s) who manage the trust property), and they are the beneficiaries of the trust during their lifetimes. They can do anything they desire with the property they put into the trust since the trust is revocable. Most importantly, the trustors transfer title to their real estate into the trust.
When the trustors die (or become incapacitated), a successor trustee takes over the management of the trust. Since real estate is in the name of the trust, the successor trustee can sell the real estate or transfer it to an heir, without going through probate. Other property can be held in the name of a trust, and a trust can be named the beneficiary of insurance policies and IRAs. A revocable living trust can save considerable time, expense, and frustration for family and heirs.
Will
Everyone should have a will, even if they don’t own real estate. In a will, a person (called a testator) names the executor of the testator’s estate and what should be done with the testator’s property. A will also names the guardians of the estate and person of any minor children of the testator.
Power of Attorney
If an individual is incapacitated, and unable to take care of the individual’s financial and business affairs, then the friends and family can do little. Bank accounts can’t be accessed and bills can’t be paid. When a person (called the principal”) executes a power of attorney, the principal designates someone (called the “agent”) to act on the principal’s behalf. The agent can pay bills and manage accounts, etc. A power of attorney can be important for the elderly in that a relative or friend can take care of an elderly person’s affairs. We sometimes recommend what is called a springing power of attorney. This power of attorney takes effect when the person someone is incapacitated.
Durable Power of Attorney for Health Care
A Durable Power of Attorney for Health Care (DPAHC) allows other person to make health care decisions for another person. A person who executes a DPAHC (the principal) lists a person or persons who can act as the agent for health care decisions in the event that the principal is incapacitated. The importance of this document can’t be overstated, particularly for persons who are elderly, or seriously injured or ill.
HIPAA Authorization
Under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and the California Confidentiality of Medical Information Act (“CMIA”), health care records are highly protected. Health care records can’t be released from one health care provider to a third party, including another health care provider, without the express consent of the patient. This can be difficult or impossible if the patient is very sick or incapacitated. A HIPAA authorization is like a power of attorney for the release of health care records. When a person is very sick and undergoing treatments from multiple health care providers, then a HIPAA authorization can be invaluable. The agent listed in the HIPAA authorization can arrange the sharing of records and information between doctors and other health care providers without constantly obtaining a release for the sick person.
We recommend that individuals make a estate plan with the help of an attorney. Part of the value of creating an estate plan is the planning itself. If forces one to think about guardians, who to give property to and when, and other issues. Estate planning also gives one peace of mind.
Eric D. Morton is the principal attorney of Clear Sky Law Group, P.C. He can be reached at emorton@clearskylaw.com, 760-722-6582, and 510-556-0367.