Illinois Estate Planning & Elder Law Blog

Just as we create estate plans for our eventual demise, we also need to plan ahead for the possibility that we will become sick and unable to make our own medical decisions. Medical science has created many miracles, among them the technology to keep patients alive longer, sometimes indefinitely. As a result of many well-publicized “right to die” cases, Illinois has made it possible for individuals to give detailed instructions regarding the kind of care they would like to receive should they become terminally ill or are in a permanently unconscious state.

If an individual becomes incapacitated, it is important that someone have the legal authority to communicate that person’s wishes concerning medical treatment. Similar to a power of attorney for property, a power of attorney for health care allows an individual to appoint someone to act as his agent, but for medical, as opposed to financial, decisions. The health care power of attorney is a document executed by a competent person (the principal) giving another person (the agent) the authority to make health care decisions for the principal if he is unable to communicate such decisions. By executing a health care power of attorney, principals ensure that the instructions that they have given their agent will be carried out. A health care proxy is especially important to have if an individual and family members may disagree about treatment.

Accompanying a power of attorney for health care should be a medical directive. Such directives provide the agent with instructions regarding what type of care the principal would like. A medical directive can be included in the health care power of attorney. It may contain directions to refuse or remove life support in the event the principal is in a coma or a vegetative state, or it may provide instructions to use all efforts to keep the principal alive, no matter what the circumstances.

Living wills are documents that give instructions regarding treatment if the individual becomes terminally ill or is in a persistent vegetative state and is unable to communicate his or her own instructions. The living will states under what conditions life-sustaining treatment should be terminated. If an individual would like to avoid life-sustaining treatment when it would be hopeless, he needs to execute a living will. Like a health care power of attorney, a living will takes effect only upon a person’s incapacity. Also, a living will is not set in stone; and individual can always revoke it at a later date if he wishes.

A living will, however, is not a substitute for a power of attorney for health care. A living will simply dictates the withdrawal of life support in instances of terminal illness, coma or a vegetative state.

Do not confuse a living will with a “do not resuscitate” order (DNR). A DNR says that if you are having a medical emergency such as a heart attack or stroke, medical professionals may not try to revive you. This is very different from a living will, which only goes into effect if you are in a vegetative state. Everyone can benefit from a living will while DNRs are only for very elderly or frail patients for whom it wouldn’t make sense to administer CPR.

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Learning what not to do can be just as instructive as learning what to do. That is the premise of The 101 Biggest Estate Planning Mistakes, an entertaining and informative estate planning guide.

Author Herbert Nass, an estate planning attorney for 25 years who has represented several celebrities, uses examples from celebrity estate plans as well as his own practice to illustrate what not to do when conducting estate planning. According to Nass, the biggest mistake is not planning at all. Nass points out the problems caused when Sonny Bono, Tupac Shakur and Bob Marley all died intestate. He also documents, among other things, blunders involving personal property, real estate, executors, minors, prior marriages, taxes, disgruntled friends and family, and funerals and burials. While some mistakes are specific to celebrities or the super wealthy, most of the errors could be made by anyone.

Nass intersperses actual excerpts from celebrity wills and stories about celebrity estate plans throughout the book. For example, he cautions against leaving too much money to a pet, as Leona Hemsley did, or selling valuable property too soon after a death, something Jackie Onassis’ family did. Nass’ 101 mistakes range from the legal (e.g., not confirming how property is held before drafting an estate plan) to the practical (e.g., not draining water pipes in vacant houses) to the personal (e.g., disinheriting your children or grandchildren out of anger). Nass’ writing style is entertaining and his stories are interesting and instructive.

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When choosing a beneficiary for a retirement plan, it is important to understand how your spouse will be treated under the plan. Surviving spouses are treated differently under 401(k)s and individual retirement accounts (IRAs). While a 401(k) provides protections for a surviving spouse, an IRA does not.

Because the 401(k) is an employee based retirement system, it is governed by a federal law, the Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA, a surviving spouse is usually the automatic beneficiary of a retirement plan (There may be some exceptions. For example, the spouse may have to be married to the employee for a certain amount of time). The spouse must consent in writing if the employee wishes to name someone else as the beneficiary.

IRAs, on the other hand, are not governed by ERISA, so they do not include the same protections for spouses. This is true even if a 401(k) is rolled into an IRA. In a recent case, Charles Schwab v. Debickero (U.S. Ct. App. 9th Cir., No. 07-15261, Jan. 22, 2010), a husband rolled his 401(k) into an IRA with Charles Schwab & Company after he retired. He named his children as the IRA’s beneficiaries. After he died, his wife claimed that she was entitled to the account funds as his surviving spouse. She argued that because her husband rolled his 401(k) into the IRA, she should receive the same protections that the 401(k) gave her. The court disagreed, finding that the IRAs are excluded from ERISA coverage even if the funds originated in a 401(k).

If you have an IRA and want your spouse to be its beneficiary, you have to specifically name the spouse as a beneficiary. If you have a 401(k) and want your spouse to be the beneficiary, you should still fill out a beneficiary designation form, naming your spouse. And if you roll it over into an IRA, make sure you fill out a new beneficiary designation form. If you want someone other than your spouse to be the 401(k)’s beneficiary, you will need the spouse’s consent in writing, as noted above.

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