Estate Planning

Estate Planning Issues

Estate Planning involves much more than just having a last will and testament or a grantor revocable trust (living trust). We shall discuss wills, trusts and probate in another section of the website. In this section, we are going to discuss pre-marital and post-marital agreements, durable powers of attorney and advance directives. These documents as well as wills or trusts are all extremely important parts of proper estate planning.

Pre-Marital and Post-Marital Agreements

When folks marry for a second or subsequent time, they usually wish to protect children, relatives or other beneficiaries from their prior relationships. There is nothing inconsistent with wanting a happy and fulfilling marriage with a new partner while at the same time wanting to protect those children or relatives. How is this accomplished?

We always recommend that a man or woman embarking on a new marriage should have a pre-marital agreement (also called a pre-nuptial agreement). Such an agreement can and should carefully and clearly set out the assets that each has and how those assets are to be distributed upon the death of a spouse or upon some other termination of the marriage such as a divorce or annulment. If a couple has already married and do not have a pre-marital agreement, then we recommend a post-marital agreement. The pre-marital agreement is best because it is entered into before the marriage takes place and thus, the terms and conditions are set out in advance. We don’t have to be concerned about an incapacitated or recalcitrant spouse if that matter is taken care of before the wedding occurs. Nevertheless, a post-marital agreement can also be effective in the event there is no pre-marital agreement. Both, when properly prepared and properly executed, are going to be enforceable. A pre or post marital agreement can and should contain just about any provision that the parties want in regard to how they will conduct their marriage. For example, there can be provisions relating to cost-sharing of food, rental or mortgage payments, utility payments, travel expenses as well as provisions relating to what assets are to be distributed to the heirs or beneficiaries of a spouse when he or she dies or when a marriage is otherwise terminated. In the event of a divorce or annulment, there can be provisions relating to the payment of or the waiver of alimony and attorneys fees. What we want you to keep in mind is that the best way to protect your heirs in the event of a new marriage, is to have an agreement that clearly sets out your goals, intentions and plans after your new marriage has commenced.

There are two issues that should be discussed. First, in order for a pre or post marital agreement to be enforceable, it is best if each party attaches as an exhibit to the agreement a complete and up to date statement of his or her assets and income. The reason for this is that since a spouse may be waiving, releasing or relinquishing important rights, it is necessary to know what those rights are that are being waived, released or relinquished. By attaching a copy of a financial statement, the intended spouses prove their awareness of what the other person’s assets and income are. The second issue is also very important. Both parties to a pre or post nuptial agreement should have their own separate attorneys. One attorney should not represent both parties to the agreement. The reason is that since each party is perhaps waving, releasing or relinquishing rights in the assets and income of the other, it is important that each party receive separate legal advice. We do realize that frequently folks feel that they have such a simple situation that they don’t wish to have two separate attorneys. We don’t blame them. Nevertheless, one attorney should not represent both parties. Therefore, if one does not wish to have an attorney, the attorney who represents the other party should still not represent both.

Durable Powers of Attorney

First: A quick lesson in terminology. A durable power of attorney is a document that creates a relationship between the person who creates the durable power of attorney—he or she is usually referred to as the “Principal” or as the “Maker,” and the one who acts for the Principal or Maker, and that person is referred to as the attorney in fact. For purposes of a durable power of attorney, the words “Principal” and “Maker” mean the same. A lot of times you will hear someone say that he or she is the “Power of Attorney” for someone. That’s not technically correct. The Power of Attorney is the document, not the person. A durable power of attorney should stay in force even in the event that the Maker has become incapacitated, but only so long as that person has not been adjudicated incapacitated by a Court. A durable power of attorney automatically expires and is thus null and void, simultaneously with the death of the Maker.

According to Florida Statute 709.08, in order to be valid in the State of Florida, the durable power of attorney must contain the following language: “This durable power of attorney is not affected by the subsequent incapacity of the principal except as provided in section 709.08, Florida Statutes.” The durable power of attorney can contain language that is not the same as this so long as it clearly shows the Principal’s intent that the authority that is conferred by the durable power of attorney is exercisable notwithstanding the Principal’s subsequent incapacity. This is the major difference between a durable power of attorney and a general power of attorney that does not survive the incapacity of the Maker.

This is as critical and as important a document to have as any other document you can name. A properly drawn durable power of attorney will authorize the attorney in fact to conduct the affairs of the Maker in a number of ways, all of which are designed to enable the attorney in fact to carry on the affairs of the Maker the same as if he or she could or would do. A durable power of attorney that is to be used in Florida should be signed by the Maker and should be witnessed by two persons and should also be notarized. The notary can be one of the two witnesses, but if so, the notary needs to sign the document twice—once for being a witness and once for being the notary. Different states have different requirements that are related to the validity of durable powers of attorney so if you have one that was not drawn in Florida, it’s very, very wise to make sure it is valid here, BEFORE you need to have it used. For example, if you want to use a durable power of attorney to convey real property in Florida, the document MUST be witnessed by two persons and must also be notarized. We can’t tell you how many times we have been involved with real estate transactions where a power of attorney prepared in some other state had to be used. The laws of some other states might not require that a durable power of attorney must have 2 witnesses to be used to convey real property. But the state of Florida does, so keep that in mind if you are planning to use a durable power of attorney to transfer the title to real property within the state of Florida.

We believe that if you reside in the state of Florida, you should have a durable power of attorney drawn in this state, regardless of what your previous attorney told you. But I’m a Florida attorney and we would say that, wouldn’t I? No matter what, if your durable power of attorney is to be used in Florida it is very wise to check to make sure it meets all of Florida’s requirements.

Here are some of the provisions that we believe should be placed in a durable power of attorney: They are, in no particular order:

  1. Provisions to sell, mortgage, encumber and convey real estate.
  2. Provisions to enter safe deposit boxes, to negotiate, cash, make bank deposits, receive and otherwise use and handle checks, drafts, and money market funds.
  3. Deal with the department of motor vehicles, Internal Revenue Service, post office, social security administration, veteran’s administration, Medicare and those agencies that provide welfare services including but not limited to S.S.I., S.S.D.I., and Medicaid.
  4. Provide for the ability to make gifts and to do whatever may be necessary and appropriate to carry out estate planning for the purpose of affecting the wishes of the Maker of the durable power of attorney.
  5. It is sometimes appropriate to have a durable power of attorney address such matters as Medicaid planning and disability planning, including the ability to create or modify an existing trust, if there is one. Also, in Medicaid planning, it is absolutely necessary to have a durable power of attorney provide the authority to establish, create and where necessary, amend or modify certain types of trusts, known as qualified income trusts, elective share trusts, irrevocable income producing trusts, special needs trusts and spousal sole benefit trusts. Additionally, there is something known as a lifetime personal needs contract and it is necessary that a durable power of attorney permit the attorney in fact to execute one of these for the maker or creator of the durable power of attorney.
  6. We also recommend that the durable power of attorney contain language that is similar to the language used in a designation of health surrogate document, which will enable the attorney in fact to make health care decisions, if necessary. This is not critical, if there is a living will with health surrogate designation document, but sometimes, it’s wise to be extra cautious.
  7. We also like my clients to have durable powers of attorney that contain a provision for the right of the attorney in fact to obtain a do not resuscitate order, should that unfortunate situation arise.
  8. The durable power of attorney that we prefer to use contains language that allows the attorney in fact to execute documents that are held in a Totten Trust and also a living trust.

Every now and then, someone will tell us that they know they need a durable power of attorney in the event something catastrophic happens, but they do not trust their children or heirs sufficiently to give them the awesome powers that are contained in a durable power of attorney. Please remember, however, that this is not any type of honor to bestow on someone. A durable power of attorney imposes a burden and what must be done is to try and determine who can best fulfill that burden. If you cannot trust your children, or any other person for that matter, with the powers to be given by a durable power of attorney, then you should discuss this  with your attorney.

Advance Directives

Florida Statute 765 provides that an Advance Directive is a written witnessed document or oral statement in which instructions are given or expressed concerning any aspect of a person’s health care. This includes, but is not limited to a living will, the designation of a health care surrogate or the making of an anatomical gift. An Advance Directive that has been executed in another state but that complies with the law of the State of Florida will be recognized as being valid. The Statute also provides that any competent adult (over the age of 18) can make a living will or written declaration for the purpose of directing the withholding or withdrawal of life-prolonging procedures in the event that such person has (1) a terminal condition; (2) an end-stage condition; or (3) is in a persistent vegetative state. A living will must be signed by the principal (the one making it) in the presence of two subscribing witnesses, one of whom is neither a spouse or blood relative of the principal. If the principal is physically unable to sign the living will, one of the witnesses must subscribe the principal’s signature in the principal’s presence and at the principal’s direction. Further, another section of Chapter 765 provides that a person may designate a surrogate to make health care decisions for a principal. A designation of health care surrogate shall be signed by the principal in the presence of two subscribing adult witnesses. A person unable to sign his/her name may, in the presence of witnesses, direct that another person sign the principal’s name as required by the statute. The person who has been designated as the surrogate shall not act as witness to the signing of the document designating him/her as surrogate. At least one person who is a witness must not be either the principal’s spouse nor blood relative.

We strongly advise that the Advance Directive be witnessed by two persons and that it also be acknowledged by a notary public.

We believe that everyone should consider having an Advance Directive, that it should be in writing and that it should be prepared by the attorney of your choosing. I know there are many pre-printed forms, but we are believers in using the services of professionals when it comes to decisions that involve great impact. After all, these are such highly personal matters, that it behooves us to take the utmost care to be sure we have fully and carefully set forth what we want.