The root of the word “protection” comes from the Latin “protectus”, which meant to “cover” or be “in front of”, implying that the protector is in front of the danger before the danger happens. Thus, protection is all about planning ahead to anticipate possible risks before they happen.
If you need to plan ahead to protect, then it stands to reason that the best tools to use are those that give you the greatest flexibility in planning. You must be able to adapt as situations arise. Mike Tyson said is best when he said that “everybody has a plan until they get punched.”
So, what tools do you need to make sure you can adapt when life throws punches your way? Each and every one of your foundational estate planning documents are important—let’s not forget that everyone should have a General Durable Power of Attorney, a Healthcare Power of Attorney, a Living Will, and a Will. However, I’d like to highlight a couple estate planning documents that will give you the most flexibility to ensure that you’re protected.
Powers of Attorney
Both the General Durable Power of Attorney and Healthcare Power of Attorney allow you to appoint a trusted individual to act on your behalf as if they were you. Powers of attorney give that trusted individuals the ability to make decisions with regard to healthcare, finances, assets, and legal rights.
Why is this important? Well, it’s best to think in terms of what may happen in the future. If, God forbid, you were to become incompetent, incapacitated, or otherwise unable to act because a stroke, illness, or debilitating disease, you’ll need someone to act on your behalf. That person will not only serve to ensure that your wishes are carried out, they will also ensure that your assets are protected and you receive the type of care that you need.
Without the Power of Attorney, no one will be able to act on your behalf without getting a court to enter an order finding you incompetent through a Guardianship proceeding. A successful Guardianship proceeding will not only render you a ward of the state, it also takes precious time and is inefficient.
A good example to demonstrate the importance of a Power of Attorney is that of the office of the President of the United States. In the US, we elect a president. However, if something happens to that president, then someone—like the Vice President—automatically steps in and fulfills that role. If something happens to the VP, then the Speaker of the House becomes president and on down the line until we run out of politicians.
Imagine if we didn’t have that fail safe. Imagine if we had to do another election every time something happened to a president. No one would be able to make the important day to day decisions to run the country the whole time we’re picking a new president. That seems absurd, doesn’t it? It is likewise absurd to not have a Power of Attorney in place if something happened to you.
In terms of flexibility, trusts are basically Stretch Armstrong—extremely flexible. A lot of people don’t understand trusts but they are conceptually pretty basic and let you plan for pretty much anything that could happen.
How Trusts Work
Trusts are a pot where you place your assets. Those assets are held in trust for you and your beneficiaries. The terms of the trust are dictated by the person who creates it. . . you. The terms of the trust can be just about as creative as you are. Thus, you can easily structure a trust to anticipate future risks.=
To understand trusts, it’s best to know the history of how they developed. Trusts began in the medieval times. When knights would go off to battle, they knew that they had a substantial chance of dying and they wanted to ensure that they’re assets went to the correct person i.e. their family, if they did in fact die on campaign. So, they would place their assets in the hands of a trusted individual who would make sure the correct people got the Knight’s assets if he died and give the assets back if he lived. This trust person or “trustee” would be given instructions depending on what happened at home. For example, if the wife of the Knight remarried, the bulk of the assets may be given to the eldest son to continue the Knight’s legacy.
An important function of this “trustee” role is that the trustee didn’t have to go through some type of court process to get the assets to the correct person. They just distributed them immediately upon learning of the death of the Knight.
Trusts nowadays operate in the same way, except you don’t need to go to battle to benefit from one. You can create a trust, place your assets in trust, and structure that trust in such a way that it protects your assets no matter what happens. And, on top of that, when your day comes, all your assets pass to your beneficiaries outside the court process, saving you from wasting time, wasting money, grief, and significant risk.
If you want to protect assets, make sure you have the right tools to do so. If you have questions about protection of assets give McIntyre Elder Law a call at (704) 259-7040 or visit our website at www.mcelderlaw.com.
Brenton S. Begley
Elder Law Attorney
McIntyre Elder Law
“We help seniors maintain their lifestyle and preserve their legacies.”