Planning for Terminally Ill Clients

     While we hope the estate planning we engage in will be as good thirty years from now as it is today, and that we will not need to use it until then, it is a sad fact of life that an unexpected serious illness requires us to reconsider our planning.

    Most of my clients have a Durable Power of Attorney that is only effective upon their incapacity. This means that the person designated to make decisions has no power until two doctors certify that the client is incapacitated and cannot care for their own physical or financial well-being. It may be a good idea for seriously ill clients and those with a terminal illness to provide for an Immediate Durable Power of Attorney. This allows the person designated to make legal decisions even if the client is not incapacitated, but simply unable to physically deal with financial issues. It gives the person designated flexibility in working with banks, brokers and others on behalf of the seriously ill client.

     An additional concern we have started to encounter is that some banks and brokers are unwilling to accept Durable Powers of Attorney executed longer than six months ago. These entities consider these documents "stale,” and are concerned they may not reflect the current viewpoint of the client. While the Michigan statute has no time limit on a Power of Attorney properly executed, it is usually cheaper to revise the Durable Power of Attorney rather than argue with the entity. For that reason, it may be advisable for a seriously ill or terminal client to "refresh" the Durable Power of Attorney so it is acceptable to banks and brokers.

     Just as Powers of Attorney frequently only function following a client’s incapacity, most clients are the sole Trustee of their Living Trust, and a successor Trustee does not have any authority until the client becomes incapacitated or dies. Again, it may be a good idea for a seriously ill or terminal client to modify their Living Trust to provide for a Co-Trustee immediately rather than only on the death of the client. Again, this Co-Trustee will help the client deal with matters relating to assets owned by the Trust.

     Finally, when reviewing documents in these circumstances, it is also a good idea to review the Patient Advocate Designation and evaluate those people named to make medical decisions in the event the client is unable to make their own decisions. Since those people may be called upon to make decisions sooner than later, it is important that the client remain confident in their ability to follow the client’s wishes. 

   On Thursday we will discuss reviewing dispositive provisions of the estate plan in consideration of the fact that a person's life may be cut short.

Alan Ferrara