Darol Tuttle here. This episode answers the question, do I need legal documents? And if so, what they are, what are they? And well first, let's ask, do you really need legal documents? And there are circumstances in which you know you do not need legal documents.
You like a Last Will and Testament, its purpose is to pass wealth after you pass away without loss to taxation or other creditors so that your assets get to the right person. Now not to be facetious, but you know, estate planning really like a Last Will and Testament really benefits your loved ones. And so if there's no one in your life that you love, then you do not need a Will.
You can just pass away in the government will take your assets under the escheatment statute, meaning when a person dies without an identifiable heir a judge makes a ruling as to where the assets go. And if there's no ascertainable lineage ancestors or blood relatives at all, then it goes to the government.
Now, if you want a different result, then you need some kind of legal document to transfer wealth at your death. The other circumstances are you do not need a Last Will and Testament or any kind of transfer on death legal document if you don't die. If your intention is to live forever, then you can skip this video and you do not even need to watch this video if a good chunk of it, if you know with 100% certainty that you're never going to age and you're never gonna get sick if that, your plan, then skip this.
But for the rest of us we want to make sure we can do the best we can to protect our wealth and look after our family and ourselves while we, when we are at our most vulnerable.
And by that I mean, incapacity from dementia, from stroke, from illness, from advanced old age. And then when we pass away to, in the most stress-free way. That's really one of the gifts of legal documents and a legal plan is to make sure everything goes smoothly. Now, I'm gonna lay out in six minutes what I think that your what your arsenal of legal documents should have.
Once again, it's necessary if you know, you will one day die if you think you might get sick. And there is people in your life that you love. So I got my little timer here. Go.
So, the first grouping of legal documents that you need, I would call medical planning documents. And the best place to put your healthcare plan is in your healthcare power of attorney.
A power of attorney is just a delegation of a legal decision making authority to another person. All states, all 50 states have statute that allow a power of attorney, in fact, encourage it and, you just appoint sometimes they're called the healthcare representative. I've seen them called proxies. I use the term agent.
So you appoint a family member, no doubt or usually as your decision maker, you can pick the primary one and then the secondary one. If that primary agent is unable or unwilling.
On the screen, you will see a paragraph of provision. Make sure that your power of attorney has this provision. It's very important. That provision is a Medicaid rule. If there is a manifestation of your intent to return home, even if you are in a long-term care facility, and even if there is really no feasible way for you to return home, if there is a manifestation of your intent to return home, then if a Medicaid lien had attached to your primary residence, it cannot be foreclosed during your lifetime, and so that is a Medicaid asset protection rule.
The best place to put it is in your power of attorney. Number two make sure that you have a HIPAA medical release form, and that is just to meet the hospital's requirements. It's necessary and you list all the people in your life that you have no problem discussing with nurses nurses and doctors and getting medical records if need be, cuz otherwise the only person that can learn about your broken hip.
Did mom recover from the open heart surgery or the hip replacement? The agent under the power of attorney can have that information, but the hospitals will not communicate at family members without that release. And then the third medical planning document is the pull the plug document.
That's what my older clients call it when they, they kind of have a funny attitude about life neural mortality, and so they crack jokes and it's an advanced directive, directive to physician or a living will. Those are all the terms that you will hear, but pull the plug document. My clients call that just to spark that mental image, and so it lays out your wishes and desires in the event that you're in a permanent unconscious state.
Financial decision making is covered by a financial power of attorney. It's required, the financial institutions will require it in the event that you are unwilling or unable to make financial decisions, pay your taxes, pay your bills and whatnot. You'll see on the screen a provision that I can almost guarantee your power of attorney does not have, but it should have.
This provision allows the agent, even if that agent is a family member, 'cause an agent probably will be a son or a daughter to transfer assets to to establish and to transfer assets to a Medicaid asset protection trust. If we need to do some Medicaid planning without it after incapacity, it just cannot happen.
Now, the next category of documents, I wanna call estate transfer. And in America there are limited just a few ways, you can transfer assets successfully after you pass away. One is the Last Will and Testament, a second is a living trust. Third is beneficiary designations at your custodian. And the fourth is transfer on death deed.
Not every state allows that, but the states on the screen are the states that allow a transfer on death deed so you can just record it while you're alive and then after you pass away, title automatically vests in the name of the grantee that you designated and deed, it's a much less expensive way to transfer real estate.
Now let's talk about the last category. The category that I believe is the most important has the highest value proposition and that it's asset protection. Estate transfer is important, but really doesn't benefit you during your lifetime. You can probably go out and get a a living trust or a Will from a lawyer for 5 to 10,000 bucks, and that will work just fine.
However, it will not protect your assets during your lifetime and will not help your surviving spouse against high unreimbursed medical expenses. What you need is a 42 USC trust inside of your Last Will and Testament.
Let me explain that. In the hierarchy of the law, there is the word of God that is expressed in the Holy Book of your choice. Then, there is the Constitution and then there's the federal code. Now, the federal code allows you to transfer your estate to your surviving spouse, but in trust. And if the requirements of 42 USC are met, 1396 are met, then Medicaid lean five-year look back period transfer penalties will not apply to that trust ever.
It's the single best Asset Protection Trust in American Jurisprudence. It's important because you will probably pass away in advanced age, and your surviving spouse will be older too. Now it's 5:18. I've got a few more minutes. Another thing that you might want to think about, so if you're married, asset protection trust inside of a will has to be created by a Will.
If you, if your estate's are taxable, look at the screen. You'll see those states that have their own individual estate tax. Credit shelter trust is an important trust that I would throw inside of the Will as well. If you're single, you can use a Living Trust or transfer-on-death deed. No problem.
It's 5:46. I've got a, that list in as Fast and Furious. Those are the legal documents that you need. Boom, crowd goes wild.
