Will, Living Will, & Power of Attorney: The Differences
Death is inevitable. As sad as this fact is, we need to keep our composure and plan our affairs appropriately. This is the hard truth everyone needs to face. Now, let’s assume you are over being depressed about the actuality of death and your ready to get your finances in order. How should you start? To illustrate a story, I recently had a client come into my office to inquire about drafting an estate plan for her mother. Needless to say the mother was well off. She had cars, boats, houses, expensive jewelry, a pool boy, and so forth. The problem was that her mother could no longer enjoy all of these various luxuries because she had just experienced a stroke which severely immobilized her. She was unable to manage her own property at that point.
So with the various properties that the mother had in her possession, rent was required to be collected from tenants and another property was listed for sale. The daughter of this wealthy woman had as much knowledge about estate planning like most people typically do, which was not that much. Thankfully, she knew to contact an Estate Lawyer in New York. The daughter stated she was under the impression that a Will would give her the fiduciary capacity to sell the property, collect all outstanding rent income, date the pool boy, and take care of all the various incidental needs of the properties. Boy was she wrong (except for dating the pool boy part). If you do not know anything about estate planning, find yourself an estate lawyer and befriend them. They make wonderful company, know some great restaurants in New York City, and provide valuable financial planning advice. But to get back to the story, it became clear to me that many individuals are not aware of the various estate planning tools that exist and how the mechanics of these tools work. There are four substantially helpful estate planning vehicles that I typically draft, which are Wills, Trusts, Living Trusts (Health Care Proxy), and a Power of Attorney. This article will not discuss Trusts, as it is a lengthy topic that requires in depth analysis.
A very traditional financial planning vehicle that everyone should have, to a minimum, is a will. There are verbal wills and written wills. There are wills that have no witnesses and wills that have many witnesses. In the State of New York, make sure your will is typed, notarized, and has several witnesses attesting to the creation of the will and the clauses set forth by the testator (the person creating the will).
A will becomes effective at the moment of one’s death. A will has to be submitted to Surrogate’s Court and probated. Probate essentially means verifying the validity of the will. Now keep in mind, wills can be challenged and the probate process can drag on for quite a bit of time.
Health Care Proxy
A health care proxy, also known as a living will, allows you to designate an agent who will be able to make end of life decisions on your behalf and determine which treatment you will receive, if any, if you suddenly cannot make these decisions for yourself. It only applies during someone’s life and does not determine inheritance rights. A copy of the proxy should be placed on file with your primary physician and held with your designated agent. The agent is only able to step in and make decisions if you become incapacitated in the sense that you cannot voice your own preference. So if you are in a coma, physically disabled to such an extent that you cannot speak or move, or are mentally incapacitated, a living will (healthcare proxy) is a very important tool to have.
Power of Attorney
A power of attorney allows you to designate an agent to take care of your finances. That agent can sell your real property and withdraw funds from your banking institution.
This is certainly a very useful instrument but dangerous as well. There is a possibility the person you designate as the power of attorney can have ill intentions. What danger does this pose? Well the obvious one is they have every legal authority to deplete all your assets. To safeguard this, establish a specific power of attorney, not a general one. This will limit the power of the designated individual. Ensure you appoint a person that you trust.
When it comes to limiting the power of attorney, you can specify a single task that they need to do such as registering a car or making a single deposit at a banking institution. With a general power of attorney, they can do whatever is necessary including paying taxes, getting homeowners insurance, paying medical bills, hiring a real estate agent, and paying the legal fees (should be on top of the list of things to do… I am kidding of course).
Be aware that a Power of attorney drafted in The State of New York is not valid in foreign countries. A power of attorney is null and void upon the death of the principal (the person who created the power of attorney). The power of attorney only takes effect during someone’s life and just like the health care proxy, does not determine inheritance rights. It is completely separate from any estate & probate matters. If you were given a power of attorney by someone and you were taking care of their assets, whatever power and authority you had is completely halted and ends the moment they pass away. The appointed executor pursuant to the Last Will and Testament of the decedent takes over, or the estate administrator if there is no will.
Be mindful of what is available to you from an estate planning standpoint. You can certainly do your own research to see what accommodates your situation best. We highly recommend you get in touch with an estate & probate lawyer to guide you through the process. Our office, Mishiyeva Law PLLC., offers free consultations and is always willing to guide people in making the right decisions for themselves and their families. We are located on 85 Broad Street 18th Floor New York, NY 10004 and our phone number is (646) 535-1667.