Frequently Asked Questions in Estate Planning
What can be put in place to ensure health care decisions are made based on my preferences before I become unable to speak for myself or unable to make health care decisions for myself?
When addressing these circumstances, certain documents can fall under the umbrella term “advanced health care directive.” The person that executes an advanced directive is called the principal, and the person(s) designated to assist or make decisions for the principal is called an “agent.” An advanced health care directive may only be executed when the principal has the capacity to understand and appreciate the nature and consequences of proposed health care decisions.
A properly drafted “advanced directive” is a document that outlines the principal’s instructions for medical decisions to medical providers and expresses the principal’s wishes should the principal become incapacitated or reach an end-of-life stage. (Specific laws and rules pertaining to advanced directives in New Mexico can be found at N.M. Stat. Ann. § 24-7A-4) An advanced directive is effective when executed unless the principal provides that it becomes effective at a future date or upon the occurrence of a future event or upon incapacity.
A “Power of Attorney for Health Care” or “Medical Power of Attorney” allows you to name an agent to express your wishes for medical decisions. It is very important to designate an agent and successor agent that you can trust. An agent serves in the role of a fiduciary and must fulfill certain legal responsibilities. You should engage the services of an attorney that can explain the role of an agent and what it means to serve as a fiduciary.
It is very important to have a properly drafted power of attorney in which you state your own preferences regarding medical care decisions. If a situation falls outside the expressed preferences, or a particular preference is unknown, then your agent has the authority to make decisions based on what the agent thinks your wishes might be.
Another document to be aware of is known as a “living will.” It describes the care decisions you wish to receive should you become incapacitated, if you are likely near the end of your life, or there is little medical hope of you recovering. Your living will states medical care preferences, such as whether you would like to receive CPR should your vital functions cease, whether you would want dialysis for kidney failure, whether you would want to be intubated and put on a ventilator, and whether you would prefer the utmost level of life-saving care or would rather have palliative care meant to maximize comfort.
Another option is a Supported Decision-Making agreement, executed while the person has the capacity. This document serves as a written agreement with certain persons, who will assist an individual with making decisions.
In the event you do not have the capacity to make health care decisions and have not designated an agent to make decisions, a family member or other interested person may petition the district court to appoint a guardian to make decisions regarding health care, residential placement, care, supervision, and safety and welfare over the person. It’s important to express your values and desires for residence, health care, for example, so that if you have a guardian appointed, they will know what your desires were.
45-5B-101 et seq.
If I become unable to make financial decisions for myself, what can be put in place to ensure my bills are paid and my finances are handled?
While you have the capacity to make decisions regarding your finances, you may execute Financial Power of Attorney and/or a revocable living trust.
As the principal, you may designate an agent in a Financial Power of Attorney to have authority to make financial decisions on your behalf immediately, on a designated date, or once you are incapacitated. You must be very careful to designate an agent with integrity whom you know you can rely upon to make sound decisions, manage your finances effectively, and not do anything for the sake of their own personal gain.
It’s important to understand the terms of the power of attorney and consider whether you want to limit the authority or grant full authority to an agent. You will also want to consider a successor agent in the event the first agent is unable (or unwilling) to serve, or dies.
However, it may be more beneficial for individuals who have more than one piece of real property and multiple heirs to establish a revocable living trust while they are still alive and have the capacity. This arrangement forms a legal entity where your holdings are held by the trust. The trust formation document can stipulate conditions under which a trustee will be designated to manage it, such as who you would preferably rely upon to be the trustee. Power of attorney can be established within a living trust formation document, as well. Note that it is often best to fund the trust in advance of incapacitation, as arrangements to fund the trust only in the event of incapacitation may be complicated or blocked by certain legal actions.
A living trust is not necessary for many individuals, but those who have property, a business operation, or extensive investments may wish to establish a revocable living trust in addition to appointing an agent through a financial power of attorney.
How can I decrease the risk that I will be financially exploited when I am ill or older and unable to protect myself?
First, know that financial exploitation is legally considered elder abuse, which is a crime. Anyone who suspects that financial exploitation is going on should immediately report the situation to New Mexico Adult Protective Services or local law enforcement. A report can be made whether it is from the person being exploited, a family member of that person, or even just an outside party who has been made aware of the situation.
Second, know that there is no 100% foolproof way to prevent all possible abuse from occurring. Even someone who was deeply trusted may have a change of character years later. Instead of trying to prevent all financial abuse scenarios, individuals should focus on reducing the risk of exploitation through general means. These include periodically reviewing the available mechanisms they have in place to protect them should they gradually lose capacity as they age or as illness affects them.
Important mechanisms to know about include:
- A durable financial power of attorney — You can require in the language of the power of attorney that your proxy regularly provide accounting statements to a trusted third party, who can be given the authority to revoke the power of attorney in the event of certain acts. You should consult an attorney for appropriate language.
- Irrevocable living trust — An irrevocable living trust prevents the possibility of someone who is being manipulated from changing the terms of the trust to benefit their abuser. A trust can be created for the purposes of managing the asset holder’s finances should they become incapacitated, and it can also name beneficiaries to receive specific assets or portions of holdings in the event of the original asset holder’s death or a medically certified opinion declaring them incapacitated.
How can I plan that I will be taken care of in my old age or if I become too ill to take care of myself?
There comes a point in all of our lives when we will be unable to take care of ourselves, or when doing so would prove incredibly difficult. It’s very important to write down your desires and wishes for the future; it is unlikely requests made verbally will be upheld in Court.
For those of us fortunate enough to be able to prepare in advance for this moment, we should all also realize that we cannot 100% predict our future situation. Because of this uncertainty, we will inevitably have to depend upon others to assist us. “Others” may include designated legal proxies, trustees, legal and financial advisors, family members, trusted friends, and professional care staff.
Consult an experienced estate planning attorney, while you have testamentary capacity, to learn how you can document your desires, properly plan ahead, appropriately designate beneficiaries, and place important documents in one organized place.
Recognizing that we cannot prepare for every situation and that we will need to at some point rely on others, here are some general guidelines for preparing for your own care at an advanced age:
- Diversify your savings — A healthcare savings account is a good start, but you may also want to look into living trusts, investment accounts, and other mechanisms for setting aside the sizeable amount of money you will need for advanced age care.
- Talk to your family and trusted friends — The people close to you will always play some role in your care, so discuss the possibility of needing supervision or specific care early and often. Even with full professional support, having a loved one check in on you and aid in tasks like cooking or cleaning can better-ensure you receive the care you need to stay comfortable and contented.
- Speak to legal and accounting professionals — As every situation is different, specific professional recommendations can only come from someone who has reviewed your current situation and your intended future wishes.
- Decide if you would move or stay in your home — Depending on your circumstances, it may make sense to downsize to a home that is more manageable and accessible. If you intend to stay in your home, consider who can care for you full time in your home. Also consider modifications you may need, such as ramps, stairlifts, and halls wide enough to fit a transport bed or wheelchair.
- Long Term Care Insurance – You may invest in long term care (LTC) insurance, but make sure the terms of the policy align with your preferences. For example, will the LTC provide for a full time or part-time caregiver in your home? Will the LTC only cover nursing home care; or only for assisted living facilities or both? When you need the LTC insurance to kick in, who will assist you with making claims and processing paperwork to provide medical documentation you need the services?
- Be prepared to navigate the insurance market — Most people will rely on a combination of Medicare and either Medicaid or private insurance to cover the costs of critical care. Many public and private programs exist to provide aid to individuals, including assistance with bathing, cooking, cleaning, and other needs. Those who use Medicaid will likely be subject to estate recovery. Private insurance programs may contain coverage exceptions, meaning that in many instances, savings may be needed to supplement these coverage gaps. Review all of your options in advance, and revisit your intended choices periodically in case laws or insurance market conditions change.
How do I let my loved ones know whether I want to be buried or cremated?
The best way to have your wishes known for how your remains will be handled is to use several methods to communicate. First, the most important is to clearly write down what your wishes are. New Mexico has a cremation form if you wish to be cremated.
Second, speak with your spouse, children, and closest family members periodically about the decision you wish to make. Make your conversations consistent with what you have written down. These conversations establish a pattern that would make it more difficult for someone to raise an objection following your death and claim you had different wishes than those expressed in any document — legal or otherwise.
Describe your preferences in writing as part of your advanced directive planning. This plan can include comprehensive instructions on decisions, like what to do when you are medically incapacitated and how your remains will be handled upon your death.
In addition, list your preferences in your last will and testament, which means that these wishes must be legally considered before they can be disregarded or altered in any way.
Have your advanced directive and your will prepared by an experienced estate planning attorney to ensure that they are clear, comprehensive, and enforceable to the extent possible.
Those who wish to fund the handling of their remains in advance can do so through a Totten Trust, which will pay funds to a designated beneficiary upon the trust creator’s death. Such an arrangement can supplement life insurance benefits family members receive for burial/cremation, or it can directly fund a service of your choice for handling your remains.
Make sure to mention the Totten Trust in your will and to review the terms often, especially if the intended beneficiary is a mortician service that has since gone out of business or been bought out by another company.
How do I let my loved ones know what type of funeral arrangements I want?
Similar to the above answer, your wishes should be known through three main methods:
- Speak to close family members often — Verbalize your wishes, or communicate them in writing directly to family members so that there is no ambiguity (or chance of deniability) as to your wishes.
- Have an advanced directive prepared — This document can describe your wishes to a high level of detail.
- Have a trust prepared – This document may assist your Estate in avoiding probate through the Courts. A trust may protect your assets while also describing your desires for care while you are alive and what you want beneficiaries to receive after your death. Avoiding probate through the Court can also mean your desires may remain private and not be available to the public.
- Have a will prepared — Your will is a legal document that can state your wishes for how you intend for your survivors to handle your assets and your remains upon your death.
You should have your advanced directive, trust, and will prepared by an experienced, qualified estate planning attorney to ensure that they are enforceable and that there is a minimal chance of interference upon your death.
Often times when wills, advance directives, and trusts are prepared without the assistance of an attorney, they are frequently unclear and unenforceable. As a result, the last desires may not be able to be granted. This can also result in unnecessary cost and delay incurred on the heirs, not to mention the risk that your last wishes will not be honored as intended.