People often ask us: “When is the best time for estate planning?”
The best answer to that question is: Before you die, or become incapacitated! If you can tell me when you are going to die, I can tell you the ideal time to engage in the art and science of good estate planning.
Let me share with you some real life issues we have dealt with over the past few weeks, in reverse chronological order.
Real Life Story No. 1 – Estate Planning Completed Just in Time
This past Thursday morning, we met with one of our new clients to sign his estate planning documents. His estate planning package contained a fairly typical set of documents for a 68 year old man who is unmarried, with no children. He signed his Last Will and Testament, a Durable Power of Attorney (which included a Designation of Preneed Guardian), a Designation of Health Care Surrogate, a HIPAA Release and Authorization, a Living Will, and a Designation of Authorized Person to Control Disposition of Remains.
We completed the signing of all the documents, along with answers to some questions he had, by about 11:30 a.m. on Thursday morning.
After he left our office (according to his family members), he had lunch and went hunting after lunch. During his hunting, he experienced sudden cardiac arrest and died. When he did not return home by the evening his family began searching for him and around 2 a.m. Friday morning found his body on a part of his property where he had collapsed.
If he had not taken the time estate planning, and signed his documents that Thursday morning, by Thursday afternoon it would have been too late to do estate planning.
Real Life Story No. 2 – Never Took the Time for Estate Planning = Intestate Estate
About three weeks ago, we received a telephone call from one of our clients to notify us that her daughter died the previous night, in her sleep, as a result of a heart attack. She was 56 years old.
This woman has been our client for about 10 years. She married one of our client about that time (10 years ago). Within a year or two of their marriage, her husband, who was a long time client of ours, died.
Her husband owned a couple of businesses, some real estate, and some financial assets. We prepared for him during his lifetime a revocable living trust, a pour over will, a durable power of attorney, designation of health care surrogate, HIPAA Release and Authorization, and a living will. His wife was the primary beneficiary, but he included as beneficiaries his children from his previous marriage.
We helped his wife handle the administration of his revocable living trust, and the probate of a couple of real estate assets he never transferred to the trust. Because of some of the issues associated with certain of the real estate assets, the probate process took a couple of years for those parcels of real property. Fortunately, his estate planning took into account of both his wife and his children from a prior marriage.
Throughout the administration of the husband’s trust and the probate of his will (all wills must go through probate), his wife commented on several occasions that she needed to come in and prepare her own estate planning documents.
A couple of years later, she came in for us to prepare a prenuptial agreement for her because she was getting married and wanted to protect the business and real estate assets she received from her first husband. She commented during the initial discussions and again when the prenuptial agreement was signed, that she needed to come into our office to get her estate planning prepared.
Later, we handled her mother and father’s issues as her father became incapacitated because of dementia, which progressed into Alzheimer’s disease. Eventually, we help her parents restructure their assets so the father could qualify for Medicaid to pay for his long term care in a skilled nursing home.
All throughout the process, she continuously said I will come in after we finish with my parents and get my estate planning completed.
After we filed the Medicaid application for her father and obtained the Medicaid benefits for him, she brought her mother back into our office for us to prepare her estate planning documents to ensure that all of her mother’s assets were not distributed to her father and cause him to lose his Medicaid benefits to help pay for the nursing home.
Throughout the process of her mother’s estate planning, she continuously indicated that she would come into our office soon to get her estate planning completed.
She never came in to get her estate planning prepared. She died without a will or trust. She waited until it was past the best time for estate planning for her.
The prenuptial agreement with her husband means that he will unlikely receive any of her assets because he waived his rights to her separate assets. Since she died without a last will and testament or a revocable living trust, the Florida intestacy statute will dictate to whom her assets will be distributed.
Since her mother and father are alive, they are her beneficiaries pursuant to the Florida intestacy statute. Half of her assets will go to her mother and half to her father. At the time of her death she still owned the business left by her first husband, as well as the real estate, and some financial assets.
As a result of not having dealt with her estate planning needs prior to her death, the assets that will be distributed to her father will cause him to lose his current eligibility for Medicaid to help pay for his long term care at the skilled nursing home. That could have been avoided by providing in her will or trust for a standby supplemental needs trust. Such a trust would allow her father to continue to be eligible for Medicaid benefits to pay for his nursing home.
The probate proceedings will be more difficult than probating her Last Will would have been. As a result, the costs and time spent on probate will be greater than necessary. The most unfortunate part is that her father will lose his eligibility for Medicaid. Too bad she didn’t take time for estate planning when she was still alive.
Real Life Story No. 3 – I Don’t Need to Take Time for Estate Planning Because I’m Not Old Enough – I’m Only 41 Years Old
We represented a business owner (who was 50 years old) whose partner had a massive stroke at the age of 41 that left him permanently incapacitated. Our client took the time for estate planning, even though he was less than 50 years old at the time. We prepared estate planning documents for him.
His business partner, at 41 years of age, decided he didn’t have time for estate planning documents. He believed he was too young for estate planning at only 41 years of age, and quite healthy. He also did not see the need for the business partners to have a shareholder’s buy-sell agreement that would determine the price and terms for one partner buying out the other partner in the event of the disability, death, or the desire of either business partner to withdraw or retire. There was no reason to take the time for estate planning and business planning in his opinion: “Why waste the time and money, when you’re in your 40s?”
The stroke occurred while he was dressing to go to a business convention in another city. He had no advance directives in place (no durable power of attorney, no designation of health care surrogate, no living will). He also did not have a Last Will or a Revocable Living Trust. So there was no one who had the legal authority to act on his behalf when the stroke occurred. There was no one who could handle his business affairs for him. His assets, if any, at his death will be distributed pursuant to the Florida intestacy statute, rather than as he directs in his own will or trust.
His sister came to his rescue – sort of. She filed a petition with the probate court in the county where he lived, to determine that he was legally incapacitated, and that she should be appointed as his guardian of the person and guardian of his property. After reviewing the medical reports that this man will never recover from the stroke and will be a resident of a skilled nursing home for the remainder of his life, the probate judge determined that he was legally incapacitated and appointed his sister as the guardian of his person and his property.
For several months after the stroke, our client continued to pay the incapacitated partner’s salary from the business, even though he was not legally or contractually required to do so. While paying his incapacitated partner’s salary, it was necessary for him to hire personnel to perform the activities and duties that the incapacitated partner had provided to the business prior to the stroke.
The incapacitated partner’s sister then approached our client to demand that he buy out the ownership interest of the incapacitated partner in the company. They were each 50% owners. The partner’s sister had no business experience. She demanded that our client pay an amount that was outrageously over-priced for the business. In the business operations, our client was the sales representative and manager of the company and was responsible for having generated all of the customers of the business, and all of the business’ sales. The incapacitated partner was responsible for the office administration, accounting, and providing the general management of the non-sales part of the business. The incapacitated brother’s sister demanded payment based on a valuation of her brother’s share of the business that was totally outrageous and unreasonable. Our client attempted to reach an agreement with her that was reasonable so that he could buy out his partner’s interest at a fair market value. But, his now former partner’s sister and guardian remained unreasonable in her demands.
There was no shareholder’s buy-sell agreement in place, there was no non-compete agreement in place, and there was no restriction on either of the partners that would preclude them from leaving the existing business and starting a new one. That is what our client finally did, after several unsuccessful attempts to reach an reasonable agreement with the incapacitated partner’s court appointed guardian. At that point, our client also discontinued the salary to his now former partner that he had been paying from the business operations. As a result, the incapacitated partner was no longer receiving a salary, and his ownership interest in a previously viable business was now worthless.
It was too late for him to now take the time for estate planning and business continuation planning.
The moral of this story: if you’re young, you still need to take the time for estate planning. Properly drafted estate planning documents, timely completed before the stroke, would have allowed this incapacitated person to name someone as his agent, pursuant to a properly drafted and Florida compliant power of attorney, who could properly handle his business affairs, and who was familiar with his business and its value. He could have paid for his own long term care, leaving him with choices to make for his care, rather than becoming a ward of the State of Florida.
Have You Taken the Time for Estate Planning?
The reality is even teenagers and young adults who are attending college, and those who have minor children of their own, need to take time for estate planning. Otherwise, parents of young adults, or loved ones you want to make decisions for you, may not be able to obtain medical information from health care providers, or designate the guardians for your young children should you die in an auto accident or have a debilitating stroke. With a proper durable power of attorney, you can choose who will handle your business, legal and financial affairs for a temporary or permanent incapacity. With a properly drafted will or trust you can ensure that your assets will go to the people you want to receive them, in a manner and at a time when they are responsible enough to handle the ownership and management of those assets.
If you don’t have a current estate plan that includes a last will and testament, or a revocable living trust, or both, a durable power of attorney, designation of health care surrogate, living will, designation of pre-need guardian, and a designation of a legally authorized person for disposition of remains, you really should see an estate planning lawyer and take the time for estate planning properly. If you’re in the Jacksonville to Palm Coast area of Florida, give us a call (Toll Free (866) 510-9099). We can help you make sure you have all the appropriate legal documents for your particular circumstances and situation.
Just be sure to call before you die or become incapacitated – it will already be too late then.