This is the first blog of a series regarding Estate Planning. This segment will give a broad overview of issues to be considered. The later blogs will provide more specifics. I will attempt to first show the forest. This will be followed by a series examining specific trees within the forest. We will discuss the following:
- INCAPACITY PLANNING AND POWERS OF ATTORNEY
- IOWA INTESTACY LAW- BASICS
- WILLS VS. TRUSTS
WHAT IS INCAPCITY PLANNING? Incapacity planning is pretty self-explanatory. It is planning for the unforeseen medical issues that may arise rendering you incapable of paying your bills, making medical decisions, and making decisions regarding life-sustaining measures, among many other issues that may come up.
Frequently, we have potential clients call into the office telling us they need a power of attorney for one of their parents. The first question we must ask is whether the parent is incapacitated. The definition of incapacity is found in Iowa Code Section 633.3. Generally, the question is whether the parent is still of sound mind and capable of making decisions for himself or herself. If the parent is already incapable of making decisions regarding his/her health and welfare, it is too late for a power of attorney. A power of attorney is a contractual relationship where the principal grants authority in writing to an agent to perform specific or general duties. The power of attorney becomes effective at a certain date or upon a certain event happening—usually when a physician has rendered the principal incapable of making essential decisions. Thus, if someone says the parent (principal) is fully capable of making decisions, we require a physician to certify this. If we are speaking to the principal, we will ask a series of questions to be sure the person understands the process and may still require a physician’s certificate.
If it is too late for a power of attorney, we must consider whether a guardianship and/or conservatorship is appropriate. For a guardianship, a person is appointed and supervised by the court to take care of the needs of the person who is incapacitated. A conservatorship is where a person is appointed by the court and supervised to take care of the financial matters for the person who falls under incapacity.
A guardianship and conservatorship is much more expensive and difficult. Often times a court will appoint one to protect the interests of the protected party (incapacitated person). The court could appoint a Guardian ad Litem to investigate and inform the Court of what is in the protected party’s best interest and an attorney to inform the Court of the protected party’s wishes. A guardianship and/or conservatorship requires annual reporting to the court regarding the welfare and finances of the protected party. This can sometimes be onerous and expensive.
It is crucial that you make these considerations as early as possible. You should talk to an experienced attorney before making these decisions.
WHAT IS IOWA INTESTATE LAW? In general terms, one dies intestate, if they pass away without a Last Will and Testament or Trust. The Iowa Code determines who will receive the assets in one’s estate. We will explain intestate law and highlight the importance of estate planning in our future blogs.
WILLS VS. TRUSTS. Both Wills and Trusts are documents or mechanisms to state how your assets will pass upon your death. A will takes effect upon the individual’s death. A will must be submitted to the court upon death, at which time the court will appoint an executor. The executor is tasked with distributing the assets according to the will and paying all necessary debts. This is called the Probate Process.
A trust will distribute only the assets which have been placed in trust. The assets must be transferred into the trust. This is usually done during your lifetime. If all your assets have been transferred into the trust, it will allow you to avoid the Probate Process. There are different types of trusts that can be used to accomplish various goals that we will discuss in our Estate Planning Blog Series.
Both wills and trusts are effective methods of transferring your assets, upon your death. You should thoroughly discuss your wishes with an experienced attorney to determine which method might be best for you.
This information does not develop an attorney-client relationship and is not legal advice. You should consult with an attorney for advice on any incapacity planning or estate planning needs.
