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Do I Really Need A Will Or Living Trust & A Power Of Attorney?

By: Larry E. Bray, Esq.

What if you don’t have a will or trust? Well, that depends on your situation. If you are married with children and you predecease your spouse, although you would have liked all your assets to go to your spouse, absent that expression in a testamentary instrument like a will, trust, proper deed to real property, and so on, then your wishes will not be fulfilled. Absent a properly executed testamentary instrument, a testator’s assets will descend by the laws of intestacy. In other words, if you don’t say how you want it to go, then it (whatever “it” is) will go in accordance with how Florida Statute 732.108 says it should go. You would have lost all control over how your assets should be distributed and given the power to the Florida Legislature. The statute actually says that when a testator leaves a surviving spouse and lineal descendants, all of whom are also lineal descendants of the surviving spouse, the deceased’s estate assets shall be distributed as follows: the first $60,000 shall go to the surviving spouse and the balance of the assets shall be divided equally between the spouse on the one hand and the children on the other hand. Therefore, the spouse would only receive a portion of what you wanted him/her to get while the children (yes, even very young children) would inherit, outright, the rest. The statute makes no provision for a custodial account for the children nor does it set up a custodial trust. Therefore, if a child is too immature to inherit outright, yet is old enough to understand that he/she is technically entitled to some bucks that would go a long way toward a “HARLEY”, or maybe some cool rare “POKEMON CARDS”, this can reek havoc on the family. And I have seen the most loving of families grind themselves into bitter destruction over money and property. It is indeed unbelievable and heartbreaking to watch.

With regard to small children, if, God forbid, two spouses, with small children, go away on a trip together and leave little Josh (3) and Taylor (5) with grandma (78) and grandpa (81), and then, unbelievably, both perish in a simultaneous accident, what now happens to Josh and Taylor? Had this unthinkable event been planned for, a testamentary will or revocable living trust would have (a) designated a guardian for them and (b) set up a custodial trust and designated a trustee to hold the estate assets as well as any life insurance proceeds (otherwise payable outright). Here, at least advance planning allows your children to grab onto some sense of security by having a loving guardian take them in (someone who had already taken the time to think about it) and some financial security with the assets and insurance proceeds to be managed, invested and reinvested by a trustee responsible for the health, education and welfare of the children. Usually, the corpus of the trust is not to be touched unless it is deemed by the trustee as needed for designated purposes (ie. college or special needs) or at such a time that a child reaches a certain level of maturity, perhaps 22 or 25 or 30 years old. Again, planning is the key.

Both the testamentary will and the revocable living trust will accomplish the purposes addressed above. Which one you choose to create for other purposes depends on several factors which would need to be discussed with an experienced attorney who deals with estate planning. I will address the differences and pro’s and con’s of the will vs. living trust in a subsequent article as it is beyond the scope of this one.

As to a durable power of attorney, this allows your spouse, a grown child, parent or other trusted person, the ability to act on your behalf respecting financial matters, even in the event that you are unable to act because of physical or mental incapacitation. The powers that you grant can be limited. Or, they can be made to be so broad that the attorney in fact can do anything you can do except vote in a general election and contract for marriage. The reason that this instrument is called a “durable” power of attorney is that it continues in effect even after the grantor becomes incapacitated.

Again, the consequences of not having one in place depends on the situation. If you are married with all bank accounts and other assets being held jointly, and provided the incapacity is temporary, then perhaps there would be no consequences as the healthy spouse can take care of everything. On the other side of the coin, if a spouse becomes permanently incapacitated and is in need of round the clock care, but the family cannot afford such care, government assistance (perhaps Medicaid) might be needed. However, if the incapacitated spouse’s continuing income from social security disability and/or some other source(s) exceeds $1,675. per month, then a Qualified Income Trust (“QIT”) might need to be drawn and executed by the incapacitated spouse in order to shelter some of that income for Medicaid eligibility purposes (of course this is allowed by statute). But since the incapacitated spouse can’t sign anything any more, and since no attorney in fact had been designated to act in a durable power of attorney, there is now no way of getting that QIT drawn and Medicaid is now just wishful thinking. Likewise, for purposes of Medicaid eligibility or other governmental assistance, the incapacitated spouse seeking assistance can only have $2,000 in assets titled in his/her name. Immediate transfers between spouses would have been allowed here, but the incapacitated spouse can’t sign anything over and, again, there is no attorney in fact to do so on his/her behalf. I have several clients, albeit seniors, who find themselves in this situation and they walk around in circles saying to themselves, “if only I had”.

So, once again, whether or not you need any of these devices really depends on what your circumstances are. But I think it is safe to say that the bulk of people reading this are heads of families with children. If this describes you, then it would be wise to think about hedging some inevitable risk in your life.

Stay well.

Larry E. Bray, Esq.

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