Why It’s Never Too Early to Plan for Your Estate: Three Important Documents You Need Now

Only 24% of Americans ages 18-34 and 27% of Americans ages 35-54 have estate planning documents according to a recent survey. Why are so many young Americans without estate plan documents? In Caring.com’s recent survey, a large number of respondents (40%) indicated that they have simply not gotten around to it. Other reasons cited included not having enough assets to leave to anyone (33%), not knowing how to get a will or a living trust (12%), or believing estate plan documents are too expensive to set up (13%).

Despite popular belief, you do not need significant assets to create the three important estate plan documents that everyone should have by the age of 18: an Advance Health Care Directive, HIPAA Authorization, and Uniform Statutory Broad Power of Attorney. People with probate assets that in aggregate exceed $184,500 in California should consider making a living trust to avoid probate. Lastly, this article will touch on estate planning options that are important to consider if you have children or pets.

Three Essential Estate Plan Documents

1. Advance Care Planning: Advance Health Care Directive

An Advance Health Care Directive (“AHCD”) names an agent to carry out your wishes regarding your health care and life-prolonging measures in the event of your incapacity. If you become incapacitated and do not have an AHCD, a physician may turn to a decision maker from a group of your close friends or family, though this practice is not codified in statute. See this information sheet from the California Coalition for Compassionate Care for more general information.

In some cases, a court will appoint a conservator to make health care decisions for you. But what if your family disagrees over your health care? A Florida case from 30 years ago is still relevant today in illustrating the consequences of not having an AHCD.  

On February 25, 1990, Terri Schiavo, at 26 years of age, collapsed in her Florida home when she experienced a full cardiac arrest that deprived her brain of oxygen. The lack of oxygen caused massive brain damage that left her in what doctors diagnosed a year later as a persistent vegetative state. She needed a feeding tube and constant nursing care to survive. Incapable of thought or emotion, her brain could only perform the most instinctive of neurological functions.

Her condition resulted in a 15-year battle over the continuation of her life because she did not have an AHCD to inform her family and physicians of her end-of-life wishes. Terri’s husband, Michael Schiavo, who was the legal guardian of her person, petitioned the Florida court to remove her feeding tube, while her parents vehemently opposed the removal. Terri’s case lasted for years and caught the attention of the media and protestors throughout the nation.

In Schindler v. Schiavo, 851 So. 2d 182, the Florida court held that when families cannot agree on life-prolonging procedures, it is up to courts to make a decision that the individual would have made for herself based on clear and convincing evidence. Pursuant to court order, Terri’s feeding tube was removed and she passed away on March 31, 2005, after countless court motions and appeals at both the state and federal level. The Florida legislature even attempted to stop the removal of Terri’s feeding tube by passing “Terri’s law” in 2003, which was later ruled to be unconstitutional.

Terri’s case demonstrates the importance of having your end-of-life wishes detailed in an AHCD, especially if your wishes may differ from those of your family. Terri’s case also shows how family peace can be promoted by creating an AHCD. Further, her case demonstrates that the decision to prolong your life, especially if there is little to no hope of recovery, is a personal choice. Terri’s case caused a statewide, and even national, uproar when the right to choose whether to prolong her life should have been Terri’s decision alone.

California law recognizes the privacy of a person’s health care decisions. Execute an AHCD in order to exercise your fundamental right to control decisions relating to your life.

2. HIPAA Authorization

A HIPAA Authorization allows your physician to release your health care information to individuals of your choosing. This typically includes your agent under your Advance Health Care Directive, family and possibly close friends.

3. Uniform Statutory Broad Power of Attorney

A Uniform Statutory Broad Power of Attorney (“POA”) allows your named agent to take care of most financial transactions on your behalf in the event of your incapacity. If you are in a car crash that leaves you incapacitated, your agent could file an insurance claim on your behalf. Your agent could also pay your living expenses, such as rent, and file your income tax returns (if your assets are held in a trust, those assets are managed by the trustee, not the agent under the POA).

Implement a Living Trust to Avoid Probate

In California, if the combined value of your assets (excluding non-probate assets such as trust assets, property owned jointly with right of survivorship, payable-on-death accounts, and retirement accounts) exceeds $184,500, a court probate will likely be required at death. Consider creating a living trust to avoid probate at your passing. Without a living trust, your loved ones would have to deal with delay and expense of the probate process on top of grieving your loss.

Property held in a living trust can be transferred to your beneficiaries without the need to go to court, thereby maintaining the privacy of the administration of your estate. Other benefits of creating a living trust include continuity of asset management and postponing or reducing estate taxes. If you are considering creating a living trust to avoid probate, a legal advisor can help you ensure that your living trust is tailored to your needs.

Children and Pets

If you have minor children, it is extremely important to decide who will serve as their guardian in the event of your death. Often separate individuals are named to serve as guardian of the child’s estate and guardian of the child’s person, depending on who is better equipped to handle finances and who is better equipped to make medical decisions for your child as well as determine where your child will live and go to school.

If any of your beneficiaries are minors, consider creating a living trust in order to gradually apportion the funds to them over a period of time after the age of 18. Common provisions arrange for 1/3 of the principal to pass to the minor at the age of 25, 1/2 at age 30, and the balance at age 35 so that the young adult has time to learn how to handle finances. Without such arrangements, the minor will receive his or her entire share at age 18 and may not be equipped to handle it.

Another option, which avoids the expense of maintaining a trust for a minor, is a CUTMA (“California Uniform Transfer to Minors Act”) account, which keeps funds for the beneficiary until he or she reaches up to the age of 25.

Adult children should consider creating an AHCD, HIPAA Authorization, and POA like any other adult in order to be prepared if unexpected circumstances arise.

It is also important to determine how your pets will be cared for in the event of your death. You could ask a trusted family member or friend to take care of your pets and include a provision in your will providing your caretaker with funds to care for your pet. Or you could create a pet trust leaving funds to be used by your trustee for the care of your pets as you direct in the trust. If you do not wish to burden family or friends with looking after your pets, you could sign up for a charitable pet bequest program such as the Helen Woodward Animal Center.

Conclusion

There are three important documents which we recommend that all those individuals over the age of 18 should execute, an Advance Health Care Directive, HIPAA Authorization, andUniform Statutory Broad Power of Attorney. These documents allow the named agent(s) to carry out end-of-life wishes as well as carry out financial transactions in the event of incapacity. If the combined value of your probate assets exceeds $184,500 in California, you may consider creating a living trust to avoid probate. Finally, if you have children or pets, consider taking steps to ensure that they will be cared for if something were to happen to you.