Co-authored by Joanna C. Feldman
This question was recently asked at an event we hosted during which we discussed strategies to leave a legacy after death. A Medicaid Trust is an irrevocable trust used to protect assets should one need nursing home care and seek Medicaid to help cover the cost. Because assets in a Medicaid Trust aren’t accessible by the creator of the trust, most people don’t create a Medicaid Trust until their mid-60s (and later).
Regardless of whether a Medicaid Trust is or is not appropriate at the time, everyone – at a minimum – should have three documents: Power of Attorney with Statutory Gifts Rider, Health Care Proxy, and a Last Will and Testament (“Will”).
A Power of Attorney with Statutory Gifts Rider authorizes your appointed agent to manage your financial and property affairs. Say, for example, you lose your capacity and someone needs to transfer your assets, create a Trust on your behalf, fund the Trust, change beneficiary designations, etc. Without a properly drafted, comprehensive Power of Attorney with Statutory Gifts Rider, no one will have the authority to take such actions. A guardianship proceeding will then need to be commenced in Court, which takes time, can cost thousands of dollars in legal fees, and can create ongoing legal obligations for the life of incapacitated person.
A Health Care Proxy authorizes your appointed agent to make health care decisions for you should you become mentally incapacitated and unable to make those decisions. You can choose someone you trust to carry out your health care wishes, which is a way to control your health care when you’re unable to do so yourself. If you don’t have a Health Care Proxy, New York State law provides a framework in certain situations. In a nursing home or hospital setting, the law provides a specific order of priority in terms of person who are allowed to make decisions for you. But you may not have communicated your wishes to the person with the highest priority. Or perhaps they’re not the person you’d want to make your health care decisions. More importantly, this statutory framework does not apply outside of a hospital or nursing home setting.
Finally, everyone should have a Will. If one has a Will, assets owned individually (including as tenants-in-common), without beneficiary designations, and not in a Trust, for example, pass upon death to beneficiaries as specified in the Will. If one does not have a Will, assets pass upon death pursuant to New York State laws. The order of priority specified in those laws may not match up with your wishes. Say, for example, you’re married with children. Without a Will, the law provides that your estate will be distributed to your spouse and children, not just your spouse. Or, for example, say you’re not married and you want to leave your estate to your nephew. Without a Will, the law provides that your estate will be distributed first to your parents (if at least one is alive), or to your siblings (if your parents died before you). A good Will also provides for contingencies should a beneficiary be below a certain age or a person with special needs, and one can appoint guardians and alternate guardians over minor children. This list isn’t exhaustive, but it gives a good sense that without a Will, your assets upon death can pass outside of your wishes, and things can get very complicated.
