Vision for the Future: Legal Elements 002
This is the sixth installment in a number of articles which are based upon my book Special Needs Planning: A Simple Guide for Families in New York with a Loved One with a Disability published by Graylake Publishing and released in October, 2014. The book is a response to inquiries from family members and those who support them about how best to provide for a loved one with a disability. While my primary focus is the legal aspects of the process, I have realized in my work that the process for providing a secure future for a loved one is far broader in scope. In this installment, I will further explore the third element of a "Vision for the Future."
The legal plan involved with a "Vision for the Future" must consider the affairs of the care giver during his or her lifetime; not merely at his or her death. The care giver should insist that the attorney engaged to execute the legal plan consider at least three other documents beyond the Will or Trust.
1. Beneficiary Designations - Because a large proportion of a care giver's net worth is contained in life insurance, IRA's, annuities and qualified retirement accounts, the Estate Attorney will counsel care givers on the use of beneficiary designations. A beneficiary designation is a form completed by the owner of a retirement account, IRA, annuity or life insurance policy which is sent to the life insurance company or retirement plan administrator as instructions on where to pay the benefit or account balance upon the death of the owner. Death benefits of life insurance policies and the amounts in IRA's, qualified retirement accounts and annuities pass by beneficiary designations filed with the plan administrator or Life Insurance Company; not under terms of a Will! The terms of a validly filed beneficiary designation will supersede the terms of a Will, even if the Will is executed after the date of the beneficiary designation. In the context of Special Needs Planning, it is critical that the beneficiary designations are completed correctly so the money flows to the Supplemental Needs Trust established for a loved one with a disability and not to the loved one directly.
2. Power of Attorney - A Power of Attorney ("POA") authorizes another (called an "agent") to act on the care giver=s behalf in financial matters. The POA is widely used for financial and estate planning purposes and for avoiding the expense of guardianship in the event of incapacity. A POA is effective when it is signed, so access to a copy of the POA should be carefully controlled and monitored. A care giver may designate more than one agent to act under the POA. Additionally, the care giver may designate a successor agent to act in the case the first named agent is unable or unwilling to serve. In New York, the most used form of POA is the "Statutory Short Form Power of Attorney" because, if this form is used, all banks, brokerage-houses and financial institutions doing business in New York must honor it. The Estate Attorney will, in most instances, recommend that the care giver make the POA "durable" so that it will not be affected by the subsequent incapacity of the care giver.
3. Statutory Gift Rider - Despite the grant of broad authority to an agent in the Statutory Short Form of POA, the care giver must now take an additional step to grant to the agent the authority to make gifts in excess of $500 in a year or to make changes in the ownership interests to property. The New York statute now restricts an agent's authority to make major gifts to only those instances where the care giver has also signed a "Statutory Gifts Rider" (the "SGR"). The SGR is a separate document which accompanies and is attached to the POA, but which is read together with the POA as a single instrument. Properly drafted, the SGR allows the agent to make gifts to family members and others in excess of $500 in a year; to open bank accounts in the agent's name, to change ownership of bank accounts and to gift property. It is considered best practice to have a SGR executed at the same time the POA is signed.
4. Health Care Proxy - A Health Care Proxy ("HCP") is the document in New York which allows a person to select another person to make health care decisions in the event he or she is unable to do so. Since a HCP is effective only after a person is determined to lack capacity and because it is most useful in times of a medical emergency, a care giver should make multiple copies of the HCP and distribute them widely. If not contained in the HCP itself, the care giver should discuss his or her preferences regarding the administration of artificial nutrition and hydration. If the care giver=s views on the subject are not known by the health care agent, or they cannot reasonably be ascertained, the health care agent will not have the authority to make decisions regarding artificial means of administering food and water. While a care giver is not required to do so, he or she may include language in the HCP related to wishes or instructions about health care decisions and limitations upon the health care agent's authority. In this way, the care giver is able to provide for advance medical directives or a so called "living will,"
In the next installment of this Newsletter I will discuss the legal needs of a loved one with a disability as he or she enters adulthood.