Legal documents every adult should have

Rhonda Griswold, a Cades Schutte law firm partner, joins producer/host Coralie Chun Matayoshi to discuss essential documents every adult should have, regardless of age, including a Power of Attorney, Advance Healthcare Directive, and Will, as well as the benefits of creating a Trust.

Q. Benjamin Franklin once said that nothing is certain except death and taxes, and although nobody wants to think about it, there are certain documents that every adult should have to make sure that their wishes are known. Let’s start with the Power of Attorney – why do you need it, what are the different types, and who should you appoint?

A power of attorney is an essential document that allows your designated agents to handle your financial assets and make financial decisions for you if you become incapacitated.  Most powers of attorney are drafted so that the powers do not go into effect until you lack capacity to make your own financial decisions (as verified by your doctor).  This is called a “springing” power.  For those who want immediate help with financial matters, you can provide that your power of attorney goes into effect immediately.  Powers of attorney are usually very broad and give the agent broad powers and authority because we never know what the situation might be.  This is called a Durable General Power of Attorney.  That said, sometimes you might only need an agent to handle a specific transaction, such as the sale of a piece of property.  In that case, you could have a Special Power of Attorney that only gives power for that particular transaction and such powers of attorney usually have a time limit and are only in effect for a designation period of time.  As for agents, name someone you absolutely trust because a dishonest agent could use this power to take your assets.  You can also name co-agents and you definitely want to name successor agents in case your initial agent cannot act.

Q. What is an Advance Health Care Directive and why should every adult have one?

An Advance Health Care Directive is a document where you (1) name agents who are authorized to make health care decisions for you if you become incapacitated, (2) set forth your end-of-life decisions, and (3) state whether you wish to be an organ donor.  You can also provide additional instructions regarding your health care and end of life wishes, such as religious protocols, care home wishes, comfort provisions and medications.     A “POLST” is a Physician Orders for Life-Sustaining Treatment, which is completed by you and your doctor or other certified health care professional.  The POLST, which is usually on bright green paper, is a medical order designed to give instructions to first responders and other emergency medical personnel as to what measures should be taken, or should not be taken (e.g. Do Not Resuscitate – DNR), in the event of an emergency medical situation.  The POLST is intended for elderly or seriously ill patients and is not a substitute for an Advance Health Care Directive (which everyone should have).

Q. What is a Will and what happens if you die without one?

A Will is a legal document that names a Personal Representative (Executor) to handle your estate after your death, and states who receives your assets at your death.  A Will must be presented to the Probate Court in either a formal or informal proceeding and is not valid until it is either approved by the Court (in a formal proceeding) or by the Registrar (in an informal proceeding). A Personal Representative under a Will has no legal authority to act until the Will is admitted into probate.  If you don’t have a Will, then who gets your estate is determined by statute (Hawaii Revised Statutes Sections 560:2-102 and 560:2-103).  The statute may not reflect what you might want.  For example, if you are married and neither you nor your spouse have any children, then under the statute, at your death, your surviving spouse would receive the first $440,000 and 75% of your estate, and your parent(s) would receive the remaining 25% of the estate.  Oftentimes, this comes as a surprise to the surviving spouse and is probably not what the decedent intended. If you have a blended family (e.g. children from prior marriages), the statute has other formulas which again are probably not what one would want if they took the time to prepare a Will.  Certain assets are not covered by the Will.  Life insurance and retirement accounts, for example, should have designated beneficiaries.  Joint accounts and real property owned with rights of survivorship will also go to the surviving owner and are not part of the probate estate.

Q. What is a Trust used for?

A Revocable Trust is an arrangement where you are 1) the “settlor” of the trust (the person who establishes the trust), 2) the trustee (the person in charge of managing the trust assets), and 3) the beneficiary of the trust. The revocable trust serves as a vehicle to manage the trust assets during your lifetime if you become incapacitated, and then to distribute the trust assets to your designated beneficiaries at your death. If you have a trust and all your assets are in the trust at your death, then your family will not need to go to Probate Court to probate the Will. If you have wealth that might be subject to estate taxes, the trust can be structured to minimize those taxes. The trust can also provide provisions for your minor children to ensure that they do not receive the assets until they have reached a mature age or, for adult children, to provide creditor protection and to make sure the assets ultimately go to the grandchildren.

Q. Are there other things you can do to make it easier for your family in case of a sudden emergency or death?

The Personal Representative of your Will or Successor Trustee of your Trust may consider opening a small joint account for immediate post-death expenses because it may take weeks in Hawaii to obtain the death certificate. This way, they can access the account immediately after your death to pay funeral expenses and the mortgage (if any). Otherwise, the accounts may be frozen, and no one will be able to access the account until the death certificate is obtained. If such an account is set up, bear in mind that the funds in the account do not actually belong to the joint owner and that, whatever remains in the account after the bills are paid, will be distributed as part of your overall estate. This can be documented with a note in the attorney’s file or a written agreement between the joint owners.

To learn more about this subject, tune into this video podcast and other on this subject:

What’s The Law: Estate Planning – How do I pass my home down to my kids?

Disclaimer: this material is intended for informational purposes only and does not constitute legal advice. The law varies by jurisdiction and is constantly changing. For legal advice, you should consult a lawyer that can apply the appropriate law to the facts in your case.