A Will, Durable Power of Attorney and Health Care Proxy – The Basic Estate Planning Package
©2013 Attorney Douglas R. Peterson
I. Wills and Probate
A. What is Probate?
Probate is a procedure under law for the orderly disposition of the property remaining in the ownership of a person who has died. This procedure provides for the appointment and regulation of a person by the Probate Court who is authorized to wind up the estate of the deceased person.In the case of a decedent who is intestate (no will) this person is called an “administrator.” Where there is a will, this person is usually referred to as the “executor.” Under the new Uniform Probate Code both are referred to as “personal representatives”.
The executor or administrator basically does the following things:
- Gathers together all the assets of the estate
- Pays proper bills including debts of the decedent,funeral expenses and proper administration expenses;
- Files all necessary income and estate tax returns ad pays any taxes due; a
- Distributes the balance to those entitled under the will, or, if there is none, as provided by the laws of descent and distribution (intestacy laws).
B. What is a Will?
A will is a written document by which a person makes provisions for the disposition of the property in this probate estate; provides directions for the management of his probate estate at death and designates who shall serve as executor (personal representative) to carry out his wishes (“execute” the will).
The requirements of a valid will include the following:
- That it be in writing and signed by a legally competent testator who has full knowledge and understanding of its content;
- That it be signed in the presence of at least two subscribing qualified witnesses (witness requirements vary from state to state);
- That it make appropriate disposition and direction with proper language (the legal effect of language can vary from state to state); and
- That it be admitted to probate upon death.
C. Why is a Will Necessary
Most people attempt to avoid probate to the extent possible through the use of joint property, insurance policies or trusts, retirement accounts, payable on death (POD) bank accounts or transfer on death (TOD) investment accounts all with designated beneficiaries.
Why is a will needed?
- Assets often remain probate assets (sole name) by oversight or neglect (autos and savings bonds for example);
- Assets can spring into being which by their nature are probate assets (e.g. damages for personal injuries or an inheritance
- The surviving spouse faces the likelihood of probate once their husband or wife dies; or
- Other special circumstances exist making simple probate avoidance impossible.
D. What are Some Other Important Reasons for Having a Will?
In addition to the necessity of providing for the orderly transfer of one’s estate at death, the will can play a vital role in other critical matters people often have an interest in affecting after their passing, such as:
- Through the use of trusts, included in the will or otherwise, prudent and effective management of estate assets for the benefit of beneficiaries who may have a variety of issues such as being minors, disabled, or just awful at handling finances may be provided long into the future, or assets may be preserved without disqualifying the beneficiary from receiving benefits, or assets may be kept away from ex spouses or others the testator does not want to have access to or influence over;
- Guardians can be nominated for minor children, adult incapacitated children and spouses to continue to care for them after death, or on a standby basis for other situations before the testator’s death such as absence or become incapacitated himself/herself;
- Enforceable “reciprocal” wills can be executed by couples requiring the survivor to make certain dispositions of assets when they have both passed;
- In appropriate cases wills in concert with effective asset structuring and estate planning can be used to minimize or eliminate estate taxes;
- Wills can provide for appropriate dispositions under unanticipated circumstances such as common disasters leaving no immediate family survivors;
- Under the new Uniform Probate Code, wills can be used to contain specific binding instructions on a testator’s last wishes for disposition of his or her remains and can provide for disposition of items of personal property by means of a list that can be modified from time to time without the requirement of amending the will.
II. Care and Estate Management before Death
A. What is Guardianship?
In Massachusetts a guardian is a person appointed by the Probate Court to act on behalf of an incapacitated person who is legally incompetent. A person may be incompetent by reason of minority or by reason of being unable due to a diagnosed condition to take care of themselves. We are here concerned solely with guardianship of incapacitated persons which is the standard now under which most elders are placed into guardianship.
Guardianship involves a Probate Court legal proceeding wherein a petition is presented to the Court alleging that the person is incapacitated and requesting that some appropriate person be named guardian. Under the Uniform Probate Code provisions that went into effect in 2009 a person may by durable power of attorney nominate the person who will be their own guardian, and by will or other writing witnessed by two people nominate another person to be guardian for an adult child or spouse whom he or she believes is incapacitated and that person will have standing to petition to be appointed.
The petition cannot be acted upon until notice is given to the alleged incompetent person and the heirs-at-law and next of kin and the Department of Mental Health including publication in a local newspaper. This process may take several weeks.
In the meantime it is possible to obtain the appointment of a temporary guardian. In dire emergencies the appointment can be made without prior notice in the discretion of a judge.
In all cases evidence must be presented establishing the incapacity of the alleged incompetent person who will become subject to guardianship if the petition is granted). In uncontested cases this usually takes the form of a medical certificate of a physician or licensed psychologist which must be based upon an in-person consultation within thirty (30) days. The medical certificate is no simple matter in that it requires a complete analysis of the person and their ability to function in a variety of situations in their daily life. Since enactment of the new laws effective In 2009 guardianship is no longer an either/or proposition. A guardian’s authority can be limited leaving the person free in certain areas to make their own decisions.
In contested cases the issues most often are either the alleged incapacity itself, the extent of the incapacity, or the suitability of the proposed guardian.
In addition to having the actual legal custody of the ward, the guardian also has the authority to manage the estate of the ward. However, these managerial powers are quite limited and any drastic changes of the estate (such as a sale of property) must be approved by the Probate Court in a separate proceeding.
After appointment the guardian must prepare and file for approval with the court a treatment plan and present it in Court at a hearing at which the incapacitated person must be present absent extenuating circumstances. It must be renewed and reevaluated at least annually. Guardians do not have the inherent authority to make institutional placements, or to order the administration of powerful psychotropic medications or medical treatment which could result in death or serious injury. Such authority may be sought from the Court in a separate proceeding. The guardian may also seek instructions from the Court, particularly if concerned about liability.
A guardian of an incapacitated person has very limited authority with regard to property of the incapacitated person and must follow accounting procedures in the law. If the property is significant, conservatorship should be sought.
Guardianship proceedings can be time-consuming and expensive. The filing fees for the petition and bond are increasing as courts scramble to fund budgets. In addition to attorneys’ fees for getting the information, preparing the probate papers, properly serving notice and appearing in Court, many medical professionals asked to evaluate a person and complete the complex form medical certificate are charging high fees for the time and effort involved and for appearing in court if necessary. Because of the requirement that the certificate must be dated within 30 days of the court hearing, a certificate can go stale and must be updated, In addition the new law states that a judge may assess the legal fees of any or all parties, including an attorney for the incapacitated person (who is entitled to a lawyer under the law) to the petitioner personally Even in a relatively simple case the costs of merely obtaining the appointment of a guardian can run into thousands of dollars. A contested case could well exceed five figures. ($10,000). Thereafter there are expenses of preparing, filing and having hearings on treatment plans.
A guardianship is terminated by death of the incapacitated person, resignation of the guardian, or allowance of a petition for termination brought by the incapacitated person or another person in interest.
B. What is Conservatorship?
A conservator is a person appointed by the Probate Court to manage the property of the estate of a person (protected person) who: (1) is unable to manage property and business affairs effectively because of a clinically diagnosed impairment in the ability to receive and evaluate information or make or communicate decisions, even with the use of appropriate technological assistance, or because the individual is detained or otherwise unable to return to the United States; and (2) has property that will be wasted or dissipated unless management is provided or money is needed for the support, care, and welfare of the person or those entitled to the person’s support and that protection is necessary or desirable to obtain or provide money A conservator has no custody or control of the protected person’s person as he or she is deemed to be capable of still taking care of himself or herself unless he or she is subject to guardianship.
Otherwise all of the comments made above with regard to procedures on guardianships (including limitations being placed on the conservator’s authority) also apply to conservatorship proceedings including the availability of temporary conservatorships.
Once appointed, the conservator must file a bond with sureties based on the value of the estate of the protected person. If a corporate surety is required (and it often is) an insurance company premium must be paid at the outset and annually thereafter and annual accounting must be prepared, filed, and allowed through court procedures. If they are not, the insurance company will not renew the bond and the conservatory will be subject to removal. These procedures are not inexpensive. The new law effective in 2009 permits individuals to nominate persons to be their conservators in a written durable power of attorney and to authorize them to act without furnishing a surety bond.
The authority of a conservator is severely limited to management and investment of assets and payment of support, care and expenses. Sales of assets or making of gifts or doing any estate planning is not possible without court approval, and in the case of substantial gifting or even divorce for Medicaid long term care planning, is not likely to be granted.
C. Durable Powers of Attorney – Alternative to Probate Court
Power of Attorney is authorization given by one competent person to another to act on their behalf. It is a form of agency, the attorney-in-fact being an agent of the person giving him or her the power (principal).
Powers of Attorney are always in writing. Although a verbal authorization for some purposes may be valid, no third party would reasonably rely upon it in any significant transaction.
Under the common law relative to agency, a power of attorney is revocable by the principal and is terminated by the death or mental incompetence of the principal. For this reason powers of attorney could not be used to manage the affairs of an incompetent person.
In 1981 the Massachusetts Legislature enacted Chapter 201B of the General Laws relative to durable powers. This law changed the common law to provide that a power of attorney would not be terminated because of the disability or incapacity of the principal if by its terms it was said to be “durable” (had specific wording to that effect included in it).
Since that time, powers of attorney have become increasingly more popular estate management tools. The power of attorney can designate persons who will serve as guardian or conservator should the need arise or should someone in the family attempt an end run around the power of attorney.
The attorney-in-fact can do for the principal whatever he or she is authorized to do by the written instrument. Usually a general form is used which purports to authorize the attorney to do virtually anything of a legal or financial nature. Their authority is much more extensive and flexible than that of a conservator.
A power of attorney is a very effective way to deal with estate management for an incompetent person. It is faster and much less expensive to get into operation than a guardianship or conservatorship.
However, great care must be taken in preparing the instrument to assure:
- Compliance with General Laws Chapter 109B;
- That it contains the appropriate and desired powers;
- That it contains appropriate safeguards for the attorney-in-fact, the principal and third parties dealing with the power; and
- That it is properly executed.
The most tragic problem with these instruments is the person who waits too long before attempting to execute one. The principal must be competent at the time it is executed or it could be determined to be invalid. The second most tragic problem with these instruments, is the choosing an inappropriate person to exercise the power or to update or revoke the power if a decision which was appropriate when originally made has been rendered problematic by subsequent events such as estrangements between family members.
In December of 1990 legislation went into effect permitting an individual to authorize another person to make medical decisions for oneself in Massachusetts pursuant to a Health Care Proxy, which in effect is nothing more than a limited power of attorney – the attorney-in-fact being described instead as a “proxy” with powers limited to medical decisions. The requirements for setting up a proxy, exercising it and revoking are all controlled by statute, however, in Chapter 201D of the Massachusetts General Laws.
Since the passage of that law it is not clear what, if any, medically related powers may still be granted under durable powers of attorney for purposes of treatment in Massachusetts. There has been case law in Massachusetts to the effect that health care proxies are not the exclusive method of handling the issue although provisions of the New Uniform Probate Law may cast doubt on those cases since 2009. In practice, health care providers will naturally be looking for the proxy. On the other hand, people often don’t realize the extent to which the proxy covers more routine health care issues not related to life or death decisions. In addition, many other states and foreign countries do not recognize “health care proxies” per se and have their own preferred forms although virtually all states and many foreign countries (particularly European countries) recognize some form of durable power of attorney. Accidents and illness can take place in these other states and countries. For all these reasons it may still be advisable to have the matter covered by separate durable powers of attorney.
III. Health Care Proxies
A. What is a Health Care Proxy?
A health care proxy is a type of legal document created by Chapter 201D of the General Laws of Massachusetts which went into effect on December 19, 1990.The health care proxy appears to be a hybrid: part power of attorney, part will. In operation it is a limited power of attorney delegating to the health care agent named therein, the power to make “health care” decisions as defined by the law. In form it is like a last will in that it must be signed in the presence of two witnesses with proper attestation.
In addition to providing a means by which a person can authorize his chosen agent to make these decisions if he or she becomes incompetent to do so, the health care proxy is a valuable tool for physicians and health care providers because the law relieves them from liability for relying on the directions of the health care agent (partaking of the nature of a living will in that respect).
B. How Does a Health Care Proxy Affect Other Arrangements Such as Powers of Attorney or Guardianships?
When properly executed, the health care proxy will take priority over any power of attorney or legal guardian. However, the agent may be overridden by a specific Court order obtained by the guardian or other person in interest. For this reason in some circumstances special care in drafting the proxy or additional documentation such as a living will may be advisable.
C. What are the Formalities for a Valid Health Care Proxy?
- It must be in writing;
- It must be signed by the principal while competent to do so;
- It must be properly attested to by two (2) appropriate subscribing witnesses;
- It must identify the principal and the health care agent;
- It must indicate that the principal intends the agent to have authority to make health care decisions on the principal’s behalf; and
- It must indicate that the agent’s authority shall become effective if it is determined that the principal lacks capacity to make health care decisions as provided in the law.
If the principal intends to place any limitations on the agent’s authority, he must specifically describe those limitations in writing.
D. What About a Living Will? Is the Health Care Proxy a Complete Solution to the Problem?
Although the health care proxy law goes a long way toward solving the problem for physicians and health care providers in Massachusetts, for the principal (patient) there are still unanswered questions.
First is the problem of out-of-state applicability. Few other states have laws similar to the Massachusetts law and it is unclear what effect a Massachusetts health care proxy would be given in another state.
During the 1970’s and 1980’s many states attempted to deal with the problem through uniform laws authorizing living wills. Although this is definitely the kind of problem which probably ought to be dealt with by uniform state laws, to date such attempts have been unsuccessful.
If a person is going to spend a considerable amount of time in another state (or country for that matter), separate documentation should be drawn up which complies specifically with the laws of that jurisdiction. For other situations a durable power of attorney and/or living will declaration which supplement the Massachusetts health care proxy may be advisable.
Second, it is important to note that in its simplest form a health care proxy merely authorizes the chosen health care agent to make health care decisions. Unlike a living will or other advance directive it does not necessarily specify or even suggest the principal’s intentions as to what decisions are to be made in any given set of circumstances.
Although it is possible to incorporate living will-like language into the proxy, and although the law itself requires that any limitations on the agent’s authority be specified in the instrument, indications from the health care providers are that they prefer short uncomplicated documents and would tend to be uncomfortable with anything more than a simple short form proxy such as have already been prepared and disseminated by many organizations and providers.
Therefore, unless you are confident that your health care agent has fully discussed the matter with you and understands your wishes and feelings on the matter, it may be advisable by means of a separate living will declaration or other writing (such as a letter to your agent) to attempt to explain your wishes.
Moreover, the law in this writer’s opinion is unsatisfactory in that it leaves substantial openings for problems, disputes and litigation if your intentions have not been made clear, in writing. It is still possible that there could be a family dispute in a life-threatening situation in which the health care agent’s decision is challenged and the matter brought to Court. In such a situation written evidence of your wishes and intentions such as a living will could be persuasive, if not conclusive.
The third consideration is obvious, what about individuals who have no close friend or relative to trust with a health care proxy? For them, a living will placed on file with their medical records may be the best answer.