As unpleasant as it may be to think about, death is inevitable. Further, during our lives, our mental and physical health may deteriorate to the point that we may not be able to make our own financial and health care decisions. As a result, every adult should consider having at least the following three basic estate planning documents: Financial power of attorney, health care power of attorney, and a will. Let's explore these in more detail.
Financial Power of Attorney
A financial power of attorney ("FPOA") is a document in which you, the "principal," give another person—your "agent"—the authority to act on your behalf in regard to your financial matters. Typically, this document is used when you are mentally and/or physically unable to handle your own financial affairs.
For example, a child could pay the bills of an elderly parent using the parent's FPOA to access the parent's funds. Or a child could sell a parent's car if that parent could no longer drive.
In choosing an agent, however, it is critical to name a person you totally trust to handle your financial affairs. While that agent has a legal obligation (called a "fiduciary" duty) to handle your money in your best interest, that agent, if he or she is unscrupulous, could steal your money and use it for his or her own purpose.
The power you give an agent under a FPOA ends upon your death.
It also is important to remember that a spouse, simply because he or she is your spouse, does not automatically have the legal power to sign documents on your behalf. For example, if you and your spouse jointly own your home, and you want to sell that home, both of you must sign the deed. If you are mentally incapable of signing the deed, your spouse does not automatically have the authority to sign for you just because he or she is your spouse; he or she must be named as your agent in your FPOA in order to act for you.
Health Care Power of Attorney
A health care power of attorney ("HCPOA") is a document in which you name an "agent" to make your health care decisions for you when you are not able to do so yourself. This HCPOA also includes a section commonly known as a "living will" in which you are able to set forth the types of care and life supports you do or do not want whenever you no longer can communicate with your health care providers and they have determined there is no hope of recovery for your end-of-life health condition.
This is a document, which is only effective upon your death, in which you direct who receives the assets you alone own at the time of your death; for example, this recipient of your assets could be an individual or a charity. A will does not direct your share in any assets you jointly own with someone else (such as a joint bank account—your share generally passes to your joint owner on your death), nor does a will direct who receives life insurance, IRAs, 401k plans, and other financial assets where you have named a beneficiary in a beneficiary form. As a result, when a husband and wife own virtually all their property jointly as husband and wife (called "tenants by the entirety"), many times the will of the first spouse to die is not needed because the assets generally pass automatically to the surviving joint owner—the surviving spouse. But the will of the surviving spouse is extremely important because most of his or her assets probably are not jointly owned when he or she subsequently dies.
A will also allows you to name the person, called your "personal representative" or "executor", who will be responsible for wrapping-up your financial affairs upon your death. Further, a will allows you to name a person or a financial institution to handle your minor children's money if they should inherit property from you while they are under the age of 18 (or older if you wish). And a will allows you to name the person to raise your minor children upon your death if you are their last living parent.
This article was written by J. Edgar Wine, Esq.,who is a managing partner with the law firm of Dick, Stein, Schemel, Wine & Frey, LLP. He is a member of the Planned Giving committee with the Fulton County Medical Center.
To learn more about the ways you can make an impact on the Fulton County Medical Center with a gift in your will, contact Mike Straley at (717) 485-6842 or email@example.com.
The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes include federal taxes only. State income/estate taxes or state law may impact your results. Annuities are subject to regulation by the State of California. Payments under such agreements, however, are not protected or otherwise guaranteed by any government agency or the California Life and Health Insurance Guarantee Association. A charitable gift annuity is not regulated by the Oklahoma Insurance Department and is not protected by a guaranty association affiliated with the Oklahoma Insurance Department. Charitable gift annuities are not regulated by and are not under the jurisdiction of the South Dakota Division of Insurance.
A charitable bequest is one or two sentences in your will or living trust that leave to Fulton County Medical Center a specific item, an amount of money, a gift contingent upon certain events or a percentage of your estate.
an individual or organization designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan
"I, [name], of [city, state ZIP], give, devise and bequeath to Fulton County Medical Center Foundation [written amount or percentage of the estate or description of property] for its unrestricted use and purpose."
able to be changed or cancelled
A revocable living trust is set up during your lifetime and can be revoked at any time before death. They allow assets held in the trust to pass directly to beneficiaries without probate court proceedings and can also reduce federal estate taxes.
cannot be changed or cancelled
tax on gifts generally paid by the person making the gift rather than the recipient
the original value of an asset, such as stock, before its appreciation or depreciation
the growth in value of an asset like stock or real estate since the original purchase
the price a willing buyer and willing seller can agree on
The person receiving the gift annuity payments.
the part of an estate left after debts, taxes and specific bequests have been paid
a written and properly witnessed legal change to a will
the person named in a will to manage the estate, collect the property, pay any debt, and distribute property according to the will
A donor advised fund is an account that you set up but which is managed by a nonprofit organization. You contribute to the account, which grows tax-free. You can recommend how much (and how often) you want to distribute money from that fund to FCMC Foundation or other charities. You cannot direct the gifts.
An endowed gift can create a new endowment or add to an existing endowment. The principal of the endowment is invested and a portion of the principal’s earnings are used each year to support our mission.
Tax on the growth in value of an asset—such as real estate or stock—since its original purchase.
Securities, real estate or any other property having a fair market value greater than its original purchase price.
Real estate can be a personal residence, vacation home, timeshare property, farm, commercial property or undeveloped land.
A charitable remainder trust provides you or other named individuals income each year for life or a period not exceeding 20 years from assets you give to the trust you create.
You give assets to a trust that pays our organization set payments for a number of years, which you choose. The longer the length of time, the better the potential tax savings to you. When the term is up, the remaining trust assets go to you, your family or other beneficiaries you select. This is an excellent way to transfer property to family members at a minimal cost.
You fund this type of trust with cash or appreciated assets—and may qualify for a federal income tax charitable deduction when you itemize. You can also make additional gifts; each one also qualifies for a tax deduction. The trust pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. When the trust terminates, the remaining principal goes to FCMC Foundation as a lump sum.
You fund this trust with cash or appreciated assets—and may qualify for a federal income tax charitable deduction when you itemize. Each year the trust pays you or another named individual the same dollar amount you choose at the start. When the trust terminates, the remaining principal goes to FCMC Foundation as a lump sum.
A beneficiary designation clearly identifies how specific assets will be distributed after your death.
A charitable gift annuity involves a simple contract between you and FCMC Foundation where you agree to make a gift to FCMC Foundation and we, in return, agree to pay you (and someone else, if you choose) a fixed amount each year for the rest of your life.