A Basic Estate Plan: An Easy Way To Fireproof Your Assets

Firefighters and other first responders risk their lives every day to protect the lives of others. However, some first responders may avoid engaging in estate planning because they would rather not focus on the risks they face in the line of duty that could result in their own incapacity or death. Others may avoid engaging in estate planning because they are simply too preoccupied with current personal or financial issues (paying the mortgage, tending to work obligations, planning for a new baby, etc.). Others may assume that they do not have enough money to warrant an estate plan. As a result, each year many first responders (and many Americans in general) become incapacitated or die without basic estate planning documents. In fact, according to a 2012 survey by FindLaw.com, only 35 percent of adult Americans have a will.

A common misconception among many first responders without basic estate planning documents is that their family and friends “know what they want” in the event of their incapacity or death. However, the reality is that their loved ones probably do not know what to do and may be unable to act without incurring substantial (and unnecessary) expense. Basic estate planning documents can prevent confusion, family strife and waste. Every first responder should consider having a basic estate plan, including a durable power of attorney, health care proxy and will (the first two documents may have different names in different states) to create a roadmap for their family and friends in the event of their incapacity or death.

Durable Power of Attorney

A power of attorney is a document in which a person, called a “principal,” appoints an “agent” to make financial decisions and engage in financial transactions on the principal’s behalf. The financial powers granted to an agent under a power of attorney are typically very broad. As a result, it is important for the principal to appoint an agent whom he or she trusts. A typical power of attorney for estate planning purposes permits an agent to sell property, pay bills, manage investments, etc., on behalf of the principal. Most Powers of Attorney in the estate planning context are “durable,” which means that they remain effective should the principal become incapacitated. In most cases, a durable power of attorney is effective immediately, in which case the agent can immediately act for the principal as needed (even if the principal is not incapacitated). However, less frequently, a durable power of attorney is “springing,” in which case the agent can only act for the principal after the principal is incapacitated. A durable power of attorney is valid only during the life of the principal and, thus, is ineffective after the principal dies.

If a person is unable to make financial decisions and engage in financial transactions on his or her own behalf, and he or she does not have a durable power of attorney, a court must appoint a “guardian” or “conservator” to make such decisions and engage in such transactions on the person’s behalf. A court-supervised guardianship or conservatorship often will result in expense and delays that the person could easily have avoided with a properly drafted durable power of attorney.

Health Care Proxy

A health care proxy is a document in which a person, called a “principal,” appoints a “health care agent” to make medical decisions on the principal’s behalf only during those times when the principal is unable to make their own medical decisions. A person can also express his or her preferences regarding end-of-life care in a health care proxy or a living will, which often accompanies a health care proxy. Many people use a living will to declare that they only want medical intervention to increase their comfort, rather than to prolong their life, if they are terminally ill or in a persistent vegetative state.

If a person is unable to make medical decisions on his or her own behalf, and he or she does not have a health care proxy, the laws of his or her state of residence, or a court, will determine who will make such decisions on the person’s behalf.

Will

A will directs the distribution of the probate property of a person, called a “testator,” after his or her death. Probate property includes property that is titled exclusively in a person’s own name, including personal effects (jewelry, clothing, car, etc.) and non-joint property owned by the person, including real estate and checking and/or brokerage accounts that are not “transfer on death” or “payable on death” accounts. A will does not apply to non-probate property, including certain joint property, life insurance, retirement plans (401(k)s, IRAs, etc., and other assets that pass by governing state law, contract or beneficiary designation to a recipient other than the testator’s estate.

If a person dies without a will, he or she dies “intestate,” which means that his or her probate property will pass in accordance with the intestacy laws of his or her state of residence. Intestacy laws typically provide that a person’s probate property passes to members of his or her immediate family, or, in the absence of immediate family members, to the state. More remote family members, friends and charitable organizations are generally excluded under state intestacy laws.

Many people believe that the spouse of a person who dies intestate will receive all of that person’s probate property upon his or her death. However, the intestacy laws in many states provide for a division of probate property between the decedent’s spouse and the decedent’s children or, if the decedent had no children, between the decedent’s spouse and the decedent’s surviving parents. For a widow or widower who has lost the family’s primary wage earner, receiving only a portion of the decedent’s probate property could result in financial hardship.

A will also enables a testator to appoint an “executor” to administer his or her estate. If a person dies intestate, the laws of his or her state of residence, or a court, will determine who will administer the person’s estate, and such person may be required to post bond in order to serve.

Finally, a will enables a testator to nominate a “guardian” to care for the testator’s minor children. A “guardian of the person” makes personal decisions for the minor (i.e., where the minor lives, what school the minor attends, what medical care the minor receives, etc.). A “guardian of the estate” or “conservator” manages and administers the funds set aside for the benefit of the minor, e.g., inherited funds. Although such a provision in a testator’s will is subject to court review, the reviewing court will almost always defer to the testator’s wishes and appoint the guardian or guardians named in the testator’s will. If a person dies without nominating a guardian, a court must determine who will serve as the guardian of the person’s minor children

Even if a person currently has a durable power of attorney, health care proxy and will, he or she should periodically review these documents to make sure they continue to express his or her wishes. Typically, a person should review his or her estate planning documents following:

  • Marriage, death, divorce or separation affecting the person or any person named in his or her estate planning documents;
  • Birth or adoption of a child or grandchild;
  • Significant changes in asset values;
  • Change in the person’s state of residence; or
  • Significant changes in tax law.

Every first responder should consider having a durable power of attorney, health care proxy and will to give the first responder (and, perhaps more importantly, his or her family and friends) peace of mind in the event of the first responder’s incapacity or death. Now, first responders and their spouses who reside in New York State can receive a FREE basic estate plan due to Working to Instill Life-Long Security (“W.I.L.L.S.”) events offered twice a year by MetLife’s Legal Affairs G.I.V.E.S., in collaboration with the law firm K&L Gates LLP and FASNY.

The next W.I.L.L.S. event is Saturday, June 14, from 10:00 a.m. – 3:00 p.m., at the Halesite Fire Department, 1 North New York Ave., Halesite, NY 11743. Each participant will walk away with a FREE power of attorney, health care proxy and will. Please contact Pat Curran at pcurran@metlife.com or (212) 251-1599 to reserve a 60-minute appointment or to request additional information about this event or future W.I.L.L.S. events.