In the large majority of cases when a client contacts our office for assistance with an estate plan, the client is healthy and not anticipating an early death. Occasionally, however, we will be contacted by a terminally ill client who must put his or her affairs in order very quickly. When this happens, we start by reviewing the client’s current estate plan, if there is one, to see if it just needs to be "tweaked" or if it needs to be completely replaced. This includes reviewing the client’s Will and/or trust, life insurance policies, advance directive for healthcare ("living will"), powers of attorney, and qualified retirement plans and IRAs.

When reviewing life insurance policies, we look at several different factors. First, does the client have sufficient coverage to meet any immediate needs? Also, does the client have the "guaranteed" right to purchase additional life insurance coverage without proof of insurability? If so, this should be an immediate priority.

We will also check to see if the current ownership and beneficiary designations are proper under the circumstances. If not, these need to be corrected right away. For example, we might want to make the surviving spouse the owner of the life insurance instead of the terminally ill client. We might also see if the policy allows for policy loans and if so, determine if this is necessary. Finally, we want to know if there are any Accelerated Death Benefit Right benefits and if a viatical settlement sale might be worth considering.

Next, we’ll look at the client’s income tax returns and evaluate his or her financial assets, especially if the client’s condition will create a financial hardship for the family or the client is in need of funds now. We might also consider transferring property from joint ownership to the healthy spouse only.

From an estate tax planning viewpoint, we might recommend gifting assets to family members or charity. We also want to look at the possibility of qualifying the estate for discounts of transfers of fractional interests, such as interests in limited liability companies or family limited partnerships.

If the client only has a simple Will and still has the testamentary capacity required to execute a new Will or trust, we might recommend a more sophisticated document to take advantage of the "unified credit" or applicable exclusion amount (current $1 million) and the marital deduction available to a surviving spouse.

Many times, the current instrument is quite old and doesn’t address such issues as naming a guardian for minor children or a personal representative. Other times the Will or trust is out-dated and the persons named to act on the client’s behalf are deceased, no longer able to do so, or located many states away where it would not be convenient for them to fulfill their duties.

If there are minor children, the Will or trust, at a minimum, should establish a trust to hold any assets passed to the children until they reach legal age.

If the client has been storing these estate planning documents in a safe deposit box, they should be removed and provided to the attorney or the person who will be acting as personal representative and/or trustee of the estate.

If the client owns real estate, especially if it is located in another state, if might make sense to create a revocable trust and have the client sign deeds transferring these properties into the trust during his or her lifetime. This will eliminate the time and expense involved in probating the estate.

Even though death maybe imminent, the client may become disabled before he or she dies. Someone needs to be able to act on the client’s behalf and this is best handled through a collection of documents. They include a durable power of attorney over the client’s property, which normally includes the right to handle financial affairs and file income tax returns; a health care durable power of attorney which authorizes the named agent to make medical decisions and authorize treatment on the client’s behalf; and a living will which designates a health care proxy and authorizes the discontinuance of medical treatment under certain circumstances.

An area often overlooked is a review of the client’s qualified retirement plans and IRAs. New final distribution rules took effect in 2002 which specify how benefits are to be paid. If the client hasn’t revised his or her beneficiary designations to take advantage of the new rules, the full benefit of the plan may not be realized and this facet of the client’s estate plan may be thwarted.

These are just a few factors which need to be examined with a terminally ill client. There are many others, such as ensuring the adequacy of medical coverage, determining whether anatomical gifting is desired or appropriate, and even making sure that the arrangements for the memorial service and funeral are in place.

Because the time available is so short, the attorney assisting a terminally ill client should have and follow a detailed checklist to ensure all the necessary issues are addressed and resolved expeditiously. If you should find yourself in such a situation, be sure you consult with a qualified estate planning professional who can assist you in making sure that everything gets done in the time available.

© Jerry E. Shiles 2003

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