I have children. What if I am Incapacitated? Who will take care of them?

Estate Planning is about considering and addressing the contingencies that arise as the result of a person’s death or incapacity. Of the majority of people I meet who have children, the overwhelming majority are concerned with the care of their children under such dire circumstances.  That is because the vast majority of parents want what is best for their children and wish to create a situation where the tragic loss of a parent creates as little disruption in the lives of the child as possible.   This is especially true of the single parent who must balance a myriad of concerns and issues when considering the needs of their children.  Fortunately, there are methods for dealing with these concerns. They are through the use of a Guardianship Clause in a Will, the Standby Guardianship and the Designation of Person in Parental Relation.

In a Guardianship Clause of a Will, a parent names a guardian and an alternative to raise his or her child or children in case of the parent’s death.   The benefit of this is immense.  Naming a guardian is a major step in assuring that a child  is raised by a close and trusted friend or family member whom the parent believes  will best raise your child or children   Naming a guardian also has the effect of limiting conflict over that very question because guardianship clauses are given great weight by courts in guardianship proceedings.

Parents can also add an additional layer of protection for their children by creating a Standby Guardianship document.  This type of guardianship document is useful if a parent will be away on travel and becomes stranded because of war or natural disaster, or if the parent becomes incapacitated or even dies. The Standby Guardianship gives the named guardian the right to act as a child’s “parent” in the absence or incapacitation of the legal parent or guardian. It does not take away the rights of a parent, rather it provides the standby guardian the same rights as the parent.

The Standby Guardianship offers the parent flexibility because it enables a parent to establish a termination date, and can be done through writing if certain formalities are observed.   The parent’s intention to name the stand by guardian in the event of the incapacitation or death of the parent is required.  The child or children should be named, as well as the parent, the guardian and an alternative.  The temporary guardianship generally lasts for sixty days before permission of a court is required to continue the guardianship or at the death of the parent.

Finally, if a parent will be out of the country or away on an extended trip, he or she might utilize a “Designation of Person in Parental Relation” as a method of ensuring that a competent adult has the authority to make decisions related to a child’s school or health while the parent is away. The use of HIPPA authorization in conjunction with the Designation may be considered for most effective use.

The use of guardianship documents and clauses can be used in conjunction with other estate planning documents to provide for as many contingencies as possible. They are effective and can be drafted with the help of your attorney.

DAVID BOWIE, PRINCE AND THE IMPORTANCE OF ESTATE PLANNING

There have been a number of high profile deaths this year that illustrate the importance of having an estate plan. David Bowie and Prince both left behind large estates that will be distributed very differently. Bowie’s Estate will pass pretty much in the manner he wanted, while early indications suggest that the resolution of Prince’s estate may result in conflict.

There is an inherent difficulty in comparing the estates of these two performers because their circumstances, like the general public, were different from each other.  David Bowie was a little older and suffered from terminal cancer for quite some time. Prince had health issues, but he was younger and from what we know, did not suffer from a terminal illness. Prince may have felt that he had “time.”  The reality is we do not know how much time we have.  As a result, the manner in which their respective estates are to be distributed are quite different and illustrate some crucial points in estate planning that can apply to all of us. 

The truth is that we all have a plan when we die.  We either die with a will, or intestate (without a will).  When we have a valid will, the named executor is appointed and the will determines how the estate will be distributed i.e. who inherits our assets. When we die intestate, an Administrator is appointed by the court and the Administrator follows the rules for intestacy for the state in which the deceased lived.  David Bowie died with a will and we have heard very little about the related proceedings. The Surrogates Court of Minneapolis, on the other hand, recently appointed a bank to be the Administrator of Prince’s estate, and the bank as Administrator will rely upon the state of Minnesota’s laws relating to intestacy to resolve issues related to the Estate and ultimately distribute its assets. 

The question of whether Prince wanted his estate divided amongst his siblings is an open question. Nevertheless, the task of the Administrator in dealing with the myriad of issues related to his personal and business life will require a lot more time an additional expense than if he had planned ahead. Not to mention substantially delay the distribution of his estate. It’s unlikely to be a smooth or neat process.

There are potential substantial tax implications as well.  Both Bowie’s and Prince’s sstates exceed the current federal threshold for estate tax purposes. At least a portion of Bowie’s estate could potentially be passed to his wife through the use of marital deductions and other rules that permit married US citizen couples to shield their estates from taxes.  Prince’s estate - on the other hand – is likely to be diminished by federal estate taxes as high of 45% on the value of his estate exceeding 5.45 million dollars, the exclusion amount for 2016. 

These two examples are instructive for all of us even if we are not millionaires.  Having a plan in place removes uncertainty, lessens conflict and lowers the ultimate cost of managing our affairs when we are gone.  A Will combined with Health Care Advance directives and a financial power of attorney go a long way toward this goal.  If you are not willing to take the time required to put a plan in place, do it for those closest to you. You won’t regret it.

If you want to start thinking and planning about protecting your loved ones, take a look at our e-Guide on estate planning for families on our website (www.robertmaherlaw.com).