Advanced Directives – My Personal Experience When Planning for the Unexpected
My Story
Like many of you reading this article, I never think a major medical disaster could happen to me or, if something did happen, that I would be competent enough to make decisions for myself. Well, as a ‘relatively young’ guy, this was not the case recently when I needed emergency surgery to prevent permanent paralysis. Two years ago, I was practicing my golf swing on a late Thursday afternoon at Sleepy Hollow in Brecksville, Ohio. I’m a terrible golfer and I wanted to ensure I wouldn’t embarrass myself the next day while playing with a client. Near the end of my practice, I decided I wanted to see how hard I could hit the ball. I hit the ball with maximum effort that ended up landing on the fairway outside of the nets. During my swing I felt a ‘pop’ in my back and my leg went numb. I decided to call it quits and go home to rest.
That night, while resting I leaned over to grab the TV remote. Without warning I had excruciating pain suddenly occur in my back and my legs went limp. I was on the floor unable to move or reach my phone. Luckily, my friend was visiting and he called EMS. When EMS arrived, I was crying from the pain, unable to move my legs, laying on the floor. I have never experienced anything more painful in my life. The paramedics gave me a shot of fentanyl for pain – it did nothing. Upon arriving at the hospital, the nurses gave me a shot of morphine – it did nothing. Then the doctor ordered a dilaudid. After an hour of being on a combination of fentanyl, morphine, and dilaudid, I was finally relieved of pain and in addition, also relieved of my mental abilities.
After an MRI was performed, the doctor came to give me the news. She said that I had a severe lateral herniated disc. The disc exploded and was piercing the nerves that control my legs. I would need emergency surgery within the very immediate future, or I would have permanent paralysis in my right leg for life. She explained that because the herniation was lateral, it required a more complicated approach. It was one that she could handle, but she felt her colleague (who was on vacation) was more adept due to his experience. The doctor suggested that I wait three days, in severe pain and on multiple pain meds, to have her collegial surgeon perform the surgery. She needed to know what I wanted to do. However, because of the effect the medications I was taking for pain, I did not have the mental competency to make this decision myself. Instead, those who I named in my advanced directives would need to make these decisions for me.
Simply put, advance directives are legal documents that provide detailed instructions about who should oversee your medical treatment and what your end-of-life or life-sustaining wishes are. In the event you are unable to speak for yourself, like in my case of mental incapacity, the medical professionals can contact someone else who has authority to make those decisions for you. Though there are many advance directive documents out there, the three most common are Healthcare Powers of Attorney, HIPAA Authorization and a Living Will.
Healthcare Power of Attorney – A healthcare power of attorney allows you to appoint a trusted person to make all healthcare decisions in the event that you are unable to make them for yourself.
Living Will – A living will eases the burden on your healthcare POA to ‘pull the plug’ when you are in a permanent vegetative mental state.
HIPAA (Health Insurance Portability and Accountability Act) – Medical records are private and are covered under the HIPAA laws. You Healthcare POA must have the authority to obtain your medical records through a properly executed HIPAA authorization.
My Healthcare POA
By this time, I was admitted in the hospital and the surgeon needed an answer regarding when I wanted the surgery to take place. The doctor asked to contact my healthcare POA. I said, no problem her name is Kathy and I will provide her number. I reached for my phone and it was then I realized that I had forgotten it when EMS brought me in. Like many of us, I did not memorize Kathy’s number so without my phone, I was stuck. Additionally, since this was during the outbreak of COVID my friend who called EMS was not able to come into the hospital either.
The nurse taking care of me looked through my cart and noticed I already had my healthcare POA on file, naming Kathy as my Agent. I wasn’t thinking clearly so I hadn’t thought to ask the nurse to check. It was then that I remembered, in a slight daze, that I practice what I preach. Three years earlier I completed all of my advanced directives and made sure to upload them with all three major hospitals: Cleveland Clinic, University Hospital, and Metro.
The hospital called my Healthcare POA and she came to my rescue. As a nurse herself, she knew exactly what medications I was on and how to interpret the medical situation. Moreover, and critically important, she knew how to handle the insurance barriers that come with getting medical treatment. Had I not completed my Healthcare POA, Living Will and HIPAA several years prior, I may have had a surgery from an inexperienced surgeon or worse yet, may have been paralyzed for life. Additionally, had I not uploaded these precious documents with my local hospitals, I would not have had my healthcare agent’s phone number.
When I preach to clients about maintaining updated advanced directives I am preaching from experience. I didn’t need them, until I needed them! Advanced directives are easy to obtain and require minimal effort to have them uploaded to local hospitals. I implore you to have them drafted by an attorney or at the very least, complete them the next time you’re at your family care physician. For more information or to learn how Baron Law can help you complete your advanced directives, contact us at 216-573-3723.
GST: Generation Skipping Transfer Tax
Staying abreast of current tax changes is critical to getting the most “bang for your buck” when it comes to estate planning. 2018 had significant, albeit likely temporary, increases in the federal estate, gift, and generation-skipping transfer tax exemptions. For example, individuals who previously used their previous lifetime gift tax exemption amounts can now effectively double the amount of assets and money that can be transferred without incurring any federal gift tax consequences. As such, it is a good idea to reevaluate your current estate planning to determine if your estate planning goals are being met and if there are now unexploited taxation opportunities with the recent changes in law. For example, many people, in light of the increased lifetime gift tax exemption amount and generation-skipping transfer tax exemption amount, are making gifts to children, grandchildren, or close family friends with either outright distributions or through new or existing trusts. The first step, however, in manipulating recent changes in federal law to your personal benefit is understanding the underlying tax structures. One significant theory of taxation is the generation-skipping transfer tax. This tax, however, is only one of many which may affect your estate, as such, contact an experienced Ohio estate planning attorney to make sure the most goes to your friends and family.
- What is the GST Tax?
First question is the most common, what is the generation-skipping transfer tax? The generation-skipping transfer tax or, “GST”, is a flat, 40% tax on transfers to specific persons, sometimes called “skip persons,” such as grandchildren, other family members more than one generation from you, nonfamily members more than 37.5 years younger than you, and also certain trusts. Whether or not transfers to a particular trust are subject to GST taxation is primarily focused on who are named as beneficiaries and their generational status to the grantor(s). Avoiding GST taxation and preserving the most amount of your money and assets is one of the primary goals for you and your estate planner.
- How is it triggered?
GST taxation can be triggered either intentionally or unintentionally via transfers of assets or money. Intentional transfers, such as purposefully leaving bequests, trust distributions, or inheritance to “skip persons.” Unintentional transfers, such as children predeceasing grandchildren and an estate plan failing to take this possibility into account when calculating future distribution structures.
When a particular transfer is deemed to trigger the GST tax, the next step is to calculate whether it falls into any exemption categories and if there is any money left in any of those categories to shield the transfer from GST taxation. The two major exemptions are the annual gift tax exclusion, currently $14,000 per recipient; $28,000 for married couples, and the Unified Tax Credit, approximately $11.8 million lifetime exemption and approximately double that amount for married couples.
- How do I use exemptions to avoid GST?
Utilizing tax exemptions to avoid GST essentially boils down to properly documenting and earmarking transfers that may trigger GST taxation and filing any appropriate paperwork with the IRS. Again, regardless of whether these transfers are made during the grantor’s lifetime or at their death, as long as transfers either skip a generation or are made in trust for multiple generations, GST taxation must be considered and addressed.
Estate planners take the transfers you want to make, then plot different tactics for transfer dependent on your overall goals and realities for your particular estate. Many, few, or no options may be available to avoid GST in your circumstances. Sometimes certain gifts are not applied toward the exemption, such as “annual exclusion” gifts and direct payments for medical or education purposes, thus these can be made completely tax-free. Other times decisions have to be made to temporary hold off on a transfer or to shift a transfer to another spouse to use their tax exemption amounts. Furthermore, the estate planner must decide whether to file a gift tax return or plan the transfer so it appears as an incomplete gift. Just because a transfer looks like it falls within the bounds of a taxation exemption doesn’t mean the transfer magically is ignored by the IRS, your estate planning still has a lot of paperwork and legal leg work to do.
- How to Avoid GST with trusts
Trusts provide a multitude of estate planning benefits, one of the most popular uses for them is minimizing or avoiding estate taxation, in this context, GST taxation. A-B trusts, bypass trusts, and dynasty trusts are all examples of trust vehicles that can mitigate or completely avoid any concerns you might have with generation-skipping transfers. Trust use here primarily concerns manipulating trust funding and available exemption amounts in conjunction with the practical needs of you and your family. Each trust type, however, has their own benefits and disadvantages. As such, it is important to talk with an Ohio estate planning attorney to find out the pro’s and con’s of using a trust in your circumstances.
Regardless of whether a trust is right for your estate planning goals, now is the time to review your current estate planning documents to ensure they remain in accordance with your intent and the recent changes in law. Often many estates are planned around and use trusts that are funded according to formulas tied to now changed federal estate exemption amounts. As such, with the recent increased estate tax exemptions, such trusts may be funded with significantly larger amounts than you anticipated when you originally met with your estate planner. Further, a comprehensive review of your trust and estate planning documents will allow you to assess their effectiveness in light of the changes to the law, changes in your personal life, and changes to your estate planning goals.
Disclaimer:
The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.
Daniel Baron reviewed our Trust, Wills and HPOA. He provided good feedback as to what needed updating and any necessary additions to the documents. We didn’t have a FPOA which thanks to him we now have. He was able answer any questions we had and proved to be very flexible to accommodate our schedules when it came time to meet. I would recommend him to anyone looking to do Estate Planning.