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Lifetime Planning Considerations

(Part II of Integrating your Legal Plan with your Financial and Retirement Strategies)

by: Grady H. Williams, Jr., LL.M., Attorney

Last month we focused primarily on planning for death for our hypothetical couple, Mr. and Mrs. Smith. This month we are going to focus on lifetime legal planning for the Smiths. Clients need to integrate and coordinate their legal plan with their chosen financial and retirement strategies. Failure to do so can cause personal and financial loss during their lifetime, unnecessary legal expenses, court procedures, and uncertain results.

This article is not a substitute for your own private attorney-client consultation, and the purpose of this article is to inform and educate you as to general legal and practical planning considerations, not to offer you specific legal advice on your own situation. Moreover, reading this article does not form an attorney-client relationship between you and me or my law firm.

Example Case: The Smiths, both 68, are a long-time married couple, with 2 adult children, and 4 grandchildren. They jointly own and live in a $300,000 home. Mr. Smith has a $400,000 401k. Mr. and Mrs. Smith jointly own everything else except for their respective cars and some modest life insurance policies (term, $100,000 death benefit for each, payable to the survivor). Their joint assets include credit union accounts of $250,000, bank accounts of another $150,000, a mutual fund account of $80,000, and a non-qualified annuity with a current value of $200,000 and a basis of $125,000. Both also receive Social Security, and are on Medicare with a good supplemental plan.

In getting started, the Smiths will want to make sure they are really where they want and need to be on their financial and retirement strategy. For example, if the Smiths are more concerned with increasing their income for more travel plans each year, they would first map out an investment and distribution schedule with their planner, to allow them to accomplish that goal. In addition, since we are focused now more on lifetime planning goals, the issues of assuring safe and suitable senior housing facilities, senior amenities to complement their lifestyle choices and physical needs , and developing a long term care plan for the Smiths are now fully in play. The legal, financial, and practical aspects of the Smiths’ expressed preferences should be fully discussed with them.

If the Smiths have “no existing legal plan”, their joint ownership status will control their joint lifetime management of those assets. Banks, credit unions and financial institutions will typically allow one of two joint owners of a common account or investment to unilaterally undertake day-to-day management and ownership activities. That does not typically authorize a fundamental change, such as starting or terminating a joint account, or changing the ownership status, without the written consent of both owners. Some joint accounts might be set up with a child in place as an account specific power of attorney. If the Smiths have such an arrangement, and should one of the Smiths be unavailable, disabled or incapacitated, then the designated account specific power of attorney may be able to help authorize and consent in writing to such a fundamental account or investment change. In the absence of such an account specific power of attorney, the Smith’s lack of an existing attorney drafted Florida Durable Power of Attorney (“DPOA”) means that if either Mr. or Mrs. Smith requires any lifetime legal agent or fiduciary to legally act on their behalf, an expensive court-supervised guardianship of the property may be needed.

Most institutions will honor an attorney drafted Florida DPOA, which complies with Florida Statutes Chapter 709, Part II. However, varying internal practices and policies, proprietary signature cards and account agreements, and Federal privacy, anti-terrorism and money laundering legislation and regulations can all have the effect of defeating or limiting the utility of an attorney drawn Florida DPOA. If the Smiths are primarily concerned with maximum flexibility and independence from the court system during their lifetime, they may wish to utilize a joint revocable living trust to own and manage their non-qualified (i.e., other than IRA or equivalent) monetary and financial investment assets. The Smiths could serve together as the Co-Trustees during their lifetime, with one of them then serving for both of them in the event of the disability, incapacity or resignation of other. One of the Smiths’ children may be added as a Co-Trustee, or Successor Trustee, as desired, available for lifetime service in addition to or if needed, in place of, the surviving, unaffected spouse.

Trusts are administered without Court supervision in Florida, with very few exceptions, under Florida Statutes Chapter 736. The Trustee, Co-Trustee, or Successor Trustee of such a trust, if then authorized to serve in accordance with its terms, almost always gets more respect, utility and flexibility out of the trust ownership status of a monetary or financial asset, than does the holder of a Florida DPOA. In addition, a broadly drawn Florida DPOA can give its holder the ability to create, fine tune, improve upon, transfer assets to and from, and otherwise work better and more broadly with a Florida trust. This can include trusts specifically designed to be used in connection with elder law and Medicaid eligibility planning, such as Qualified Income Trusts, Special Needs Trusts, Qualified Trusts for Disabled Persons under age 65, and Pooled Trusts.

The Smiths should also utilize Florida advance health care directives. Both the living will (“LW”, and not the same as a Last Will and Testament) and the health care surrogate designation (“HCS”, i.e., medical power of attorney in some jurisdictions), are specifically authorized by the Florida Statutes. In addition, use of a “HIPAA” release or general medical consent is also helpful to authorize your health care and living will surrogates, as well as others empowered under your legal documents and members of your immediate family, to access and gain information concerning your health care status and treatment, and related financial information concerning your health care.

The Florida Statutes also allow for pre designation of your choice as your legal guardian. This instrument is known as a Preneed Guardian Designation (“PNG”). The Smiths use of a broadly drafted Florida DPOA, when coupled with a LW, HCS, and HIPAA, is intended to keep the Smiths out of guardianship court, however, if they end up there due to unforeseen or remote circumstances, a PNG consistent with their other lifetime legal planning documents may eliminate or limit the guardianship authority ordered by the court. Use of a joint living trust, coupled with a broad Florida DPOA, is the best bet for the Smiths to avoid a guardianship of the property during their joint lifetime.

Proper integration and coordination of a sound lifetime legal plan with a client’s chosen financial and retirement strategy can help maximize their resources, help ensure their independence from future court-ordered guardianship proceedings, and also ensure that any persons assisting them in the future are preapproved and selected by the client for the specific legal and practical tasks assigned.