Estate Planning at All Levels of Wealth: Don't the Wealthy Deserve As Much Attention to Competence Planning As Those Who Seek Medicaid Planning?

One only has to read news stories like those about Doris Duke, Brooke Astor and Lilianne Bettencourt to understand that incompetence planning should be as important to those with financial means as it is to those without.  In fact, as the population ages and medical science advances, "Estate Planning" may need a new name, one that has a direct correlation to protecting oneself and one's estate while still alive.  The questions to ask are not only "Who will you leave your assets to?" and "What will the estate tax consequences be?" but also "How will you protect yourself so that when you are no longer able to make your own medical and financial decisions, your wishes concerning your care and your assets will be implemented the way you intend them to be?"

Estate planning as we know it today evolved generations ago when people lived, became ill and died. What mattered was planning for death.  But now planning for the middle and upper classes, including the very wealthy, also needs to focus on planning for disability and incompetence in the same way that Medicaid planning and planning to preserve assets for the elderly on the lower end of the asset/income spectrum has evolved.

Questions and issues that need more attention from estate planning practitioners:  

In many estate plans, the three documents that affect the client's issues are the living will and/or health care proxy, the durable power of attorney and the living, revocable trust. For the most part, the provisions in these documents are boilerplate. Very few clients have thought through how the documents work together and whether or not conflicts might arise. Therefore, estate planning practitioners should encourage their clients to consider the following questions:

Who is in charge of physical care? Who is in charge of financial assets? Are they different people or institutions? Is there any coordination between them? What is the system that fosters that coordination? How is the person designated to be in charge of the client's physical care guaranteed payment for the choices that are made by either the attorney in fact, under the durable power of attorney or the trustee of the trust?  What if there is conflict? For example, what if the person in charge of care chooses at home care but has no authority over the money or vice versa? What if the person in charge of the money also stands to inherit when the client dies?

How can the client's wishes concerning care of person and care of assets be made binding and coordinated? Should the client prepare a written memorandum which sets forth what s/he would want to see happen and how the care should be coordinated? This type of memorandum could be updated annually as life evolves and could play an important part in where the person lives, on what s/he expends money and what the standard of care is if s/he were to become disabled or incapacitated. Should there be a mechanism by which annual financial and physical care reports must be provided? Should it be mandatory that those who are making the decisions about physical care meet several times a year with those who are making the financial decisions?

Should there be life time "in terrorem clauses"? In other words, if the care that was expected is not received, or if funds were not paid for the care that was requested, is there a forfeiture of inheritance if the person making those decisions also stands to receive assets?  Could there be provisions drafted for trustee surcharge or penalties if the client's intent was not carried out? Should there be a cause of action for tortuous interference with an inheritance?

The accounting provisions should not be standard boilerplate clauses. Care should also be taken as to whom the accounting should be made if the client is no longer able to review the transactions. The accounting clause is a standard clause in many documents. Perhaps it would be interesting to mandate accountings to other family members or friends who could review the actions taken to date and who have standing to object to them.  Should there be a clause in the trust which triggers irrevocability? What if that trigger is not just by a physician, but by a panel of people selected and well known to the client?

To what extent should planning be allowed after a person is clearly disabled or incapacitated? Life is a movie, not a snapshot. A client could live decades past the point of rational thought. To what extent should the evidence of intent and memorandum written by the client be considered as intention and not mandatory? How can the possibility of living decades with incompetence be taken into account? Who should be the judge of the fulfillment of client intent?  People known to the client? The Court?  Should the Court be involved only as a last resort? Should it just be a Judge who makes those decisions? What testimony would be mandatory?

Should there be a tribunal of mental health professionals who first assess the competence? To what extent should substituted judgment be allowed? For example, should guardians of incompetent adults be allowed to begin a divorce proceeding on behalf of the ward? Can the client's intent be changed once incompetent? Can the client's domicile be changed once incompetent? To what extent can the client's estate plan be changed once the client is incompetent?

Should there be different standards for different actions? How competent does a client have to be to execute a health care proxy, a living will, a durable power of attorney, a deed or a contract; to establish or amend a living trust; to sign an irrevocable trust?  Conventionally there has been a difference in the standard depending on whether or not the client has divested himself of a right or asset during his lifetime. If not, then the standard may be the lower one needed to execute a will. If so, then it may be the higher standard of contract. But what should be the standard when executing a revocable, living trust? Should it be the lower standard of competence because the client still has the right to revoke it? Most competent clients do not fully understand the consequences of the revocable trust. Should it be a higher standard than the will competence standard? How can we be sure the client understood the restrictions on subsequent distributions to beneficiaries, the rights and obligations of the Trustee, the circumstances by which a Trustee can be removed or who should be receiving the accountings? It seems to me that the standard for understanding those issues and the consequences of the decisions should be greater than knowing who are the natural objects of your bounty are and approximately what is your net worth. Even though life is a movie, not a snapshot, should there be some provisions that the client mandates must never change? Should the court uphold those provisions unless it is unconscionable to do so?

How much of this should be public? How much should be private? When it is made public, there is public scrutiny and transparency. Is that good or bad?  Does it matter? Is it up to the client to make those decisions?

When sitting down with a client to plan affairs should questions be asked about health issues (mentally and physically) in the family tree? Is it important to know if dementia, Alzheimer's or Parkinson's is present? If any of these illnesses are present, is it important to understand what happened, and how the family chose to deal with it? Do questions like that make the client think about what the personal impact would be if that happened?

Should the documents specify the forum if there is a challenge to competence? Does it have to be a court? Can it be mediation or arbitration? Can it be a panel of persons selected by the client? Should physicians be involved? As the incompetence could go a long time, should there be a mechanism for it to perpetuate? While clients can state what they want and that they don't want to be challenged in the future, how can they protect themselves in the future when it's impossible to know what that future will bring?  

I am sure that there are many more questions than these, but the legal, medical and ethical issues that these questions raise are a beginning point in the new planning paradigm.