ESTATE PLANNING

WHAT IS ESTATE PLANNING? Estate Planning involves planning for management and disposition of your property while you are alive and after your death.It also concerns planning your personal and health care needs in the eventthat you no longer become able to provide for such care yourself. Dependingon your situation it may very well also involve financial, tax, medical and business planning. The form of your Estate Planning will depend on your particular situation. In forming your Estate Plan, you should consider your family and its needs the nature and extent of your property, who should Administer your Estate after your death, who shall have legal authority over your children if you die while they are minors, how Federal Estate (death) and other taxes can be minimized or eliminated, how any death taxes will be paid following your death, who should receive your Life Insurance and Retirement benefits upon your death, who should manage your Estate upon your death, or in the event you become incapacitated, and who should take care of you in the event that you are incapacitated. WHAT IS INCLUDED IN YOUR ESTATE. Your Estate consists of the fair market value of each asset that you own. These assets include Life Insurance benefits and any Retirement Plans you might have. WHO NEEDS ESTATE PLANNING? Almost everyone can benefit from Estate Planning. But certainly anyone that owns Real Estate, or has personal property in excess of $100,000.00 should seriously consider obtaining Estate Planning advice. Even if you do not have these assets, you will want to designatewho, in the event of your incapacity, is to manage your affairs or care for you or make health care decisions for you. In this respect, you will want to consider whether or not you will want to create a Durable Power of Attorney for health care and property document which can be preparedby your Attorney. In the event of your death, you will want to designate who your Heirs will be, and particulars with regard to funeral arrangements and the like. THE ATTORNEY'S ROLE IN ESTATE PLANNING. The Attorney should assist you in preparing a Will, a Living Trust, a Durable Power of Attorney, Deed Transfer, and the like. However, many other professionals might also be consulted with regard to your Estate Planning Deeds. Typical professionals who might work with your Attorney in planning your Estate are Certified Public Accountants, personal managers, Pension consultants, Life Insurance Agents, and Bank officers. ESTATE PLANING INVOLVES TAX PLANNING. Estate Planning generally focuses on Federal Estate (death) taxes but also it may encompass income,gift, Real property, or other qualified Retirement plan taxes. Federal Estate taxes are imposed on an Estate upon death which has a certain value (described hearafter).   Often times significant Federal Estate taxes can be saved by proper planning before death. CAN THE WAY IN WHICH I HOLD TITLE MAKE A DIFFERENCE? The manner in which you hold Title to your assets can have a significant impact on your Estate Planing. For instance if Husband and Wife hold title on their house on their Deed as Joint Tenants, this can have serious negative consequence to the Estate and may not be the best way of holding title. WHAT IF I BECOME UNABLE TO CARE FOR MYSELF? If you through old age, accident, or illness you should become unable to care for your Estate or yourself, you can plan for these circumstances now while you are mentally capable to do so. You can select the person or persons who will care for your Estate, or for your minor children through various Estate Planning documentation that your Attorney will prepare for you. If you do nothing,often the only alternative is for your relatives or Spouse to set up a legal conservatorship in Court in order to have them handle these matters for you. Not only can this process be very expensive, but the Judge (whom you do not know and does not know you) may make decisions which you might not have wanted to be made concerning these matters. For example, you may have wished that one of your relatives (or more than one) take responsibility for your Estate or for you personally, but the Court might appoint another relative of yours who requests to be appointed, which is a person that you would not have wanted to assume that responsibility. SHOULD YOU HAVE A WILL OR A LIVING TRUST? A Revocable Inter VivosTrust is also commonly referred to as a "Living Trust". This is a written agreement between the person creating the Trust (Trustor) and the personor institution who is to manage the assets held in the Trust (Trustee).The Trustee may either be an individual or a Bank or Trust Company. You create a Trust by executing the agreement and by transferring your assets into the Trust. With respect to Real Estate, this will include the preparation of a Deed in which you deed the property over to the Trust. Generally speaking,the Revocable Trust allows you to amend or totally Revoke or cancel itat anytime during your life time as long as you remain mentally competentto do so. Often the major purpose of a Revocable Inter Vivos Trust is toavoid Probate. Probate is a Court supervised process where the Court seeks to ensure that all of the Decedents Creditors are paid prior to transferof the assets to the heirs, and in which the Court ensures that the proper legal heirs receive the distribution of assets from the Estate. Many people wish to avoid Probate because it is time consuming and costly. The Probate process can extend from a minimum of approximately eight (8) months to several years depending on the circumstances. Attorneys generally chargea fee based upon the value of the Probate Estate which is typically severalthousands of dollars and which generally exceeds $10,000.00 in a $500,000.00Estate and $20,000.00 in a one million dollar Estate. The Estate value consists of the fair market value of the assets of the Estate and disregardsany mortgages or secured loans on the property. For example, if you own a home of $200,000.00 with a mortgage of $180,000.00 against it, the asset value for determining Attorneys fees as set forth in the California ProbateCode is the $200,000.00 figure. Typically the cost of a Living Trust ismuch less expensive than Attorneys fees in a Probate proceeding. The California Probate Code also provides that the Administrator/Executor in a Probate proceeding is entitled to the same statutory compensation as the Attorneys Probate fee. The Court always appoints a person (Executor/Administrator)to manage the Probate proceedings in addition to the Attorney which personis usually a family member who is designated in the Decedents Will or otherwise appointed by the Court. COSTS OF PROBATE. The California Probate Code, as discussed above,sets fees for the Attorney and Executor/Administrator based upon the valueof the Probate Estate. The combined Executor/Administrator fee is as set forth below. ESTATE VALUE   $ 100,000.00   $ 200,000.00   $ 500,000.00   $1,000,000.00   $2,000,000.00   $5,000,000.00  ATTORNEY/EXECUTOR FEE   $ 8,000.00   $ 14,000.00   $ 26,000.00   $ 46,000.00   $ 66,000.00   $126,000.00    WHAT BENEFITS ARE THERE TO A LIVING TRUST OVER A WILL OTHER THAN AVOIDING PROBATE? There are many benefits to a Living Trust other than avoiding the costand time consuming process of Probate. These benefits are as follows: (1.) Federal Estate taxes can be reduced or totally eliminated with a Living Trust; (2.) You can select the person to care for you or your Estate if youbecome incapacitated; (3.) You can select the person that will handle the financial affairsof your Estate or your minor children upon your death; (4.) You can keep your financial affairs private upon your death or incapacity. Conservatorship proceedings in the event of incapacity, or Probate proceeding in the case of death are public proceedings in which anyone can obtain information about your personal and Estate affairs. However a Living Trust is private document because it generally does not involve any Court proceedings whatsoever, so that generally the public will not have access to any information concerning your private affairs; (5.) If you wish to place strings on your inheritance following your death, that is, not desire to distribute the property outright upon death to your Heirs, you can provide for this in a Living Trust. That is, yourTrust can indicate that the Trustee of the Trust will distribute out monies to your various Heirs according to instructions given by you, or in the discretion of the Trustee. You do not have this Estate Planning optionif you simply have a Will. WHY DOES A LIVING TRUST AVOID PROBATE? When you transfer your assets into the Trust, you technically no longer own anything since your Trust becomes the Owner. So there is nothing to Probate when you die. DO YOU LOSE CONTROL OF THE PROPERTY THAT YOU PUT INTO YOUR TRUST? No. Since the Trust that is prepared for Estate Planning purposes is typicallya "Revocable" Trust, you remain in total control so long as you are mentally capable of doing so. You can revoke the Trust or amend it in anyway thatyou see fit. Further, in a typical Estate Planning arrangement, you will be selected as Trustee (or Manager) of your Trust while you are able and willing to act as Trustee. A Successor Trustee is typically named to replaceyou if you are no longer able to perform your duties. HOW DOES A LIVING TRUST REDUCE/ELIMINATE ESTATE TAXES? If the value of your Estate when you die is greater than the amounts shown below for the year of death, Federal Estate taxes will be owed in your Estate (some exceptions), starting at a rate of 37% and going up from that point depending on the total valueof your Estate. Note that an Estate Tax is different from an Income Tax.Even if your Estate now is under those exemption amounts shown below,and if you anticipate that itmay increase beyond this amount, you may wish to consider obtaining a Trust now since there are other advantages to having a Living Trust which may apply to you now. If you die without a trust, you can leave an unlimited amount to your Spouse tax free, and you may be able to escape Federal Estate tax on the first death that way. This is called the Marital Deduction. Upon your Spouse death, the Estate will be entitled to an Estate Exemption (in an amount described hearafter), so the exemption amount will go to your Beneficiarie tax free and the rest will be taxed. But with a Living Trust, it is possible that your Spouse could have had an Estate up to twice the exemption amount whic the Spouse could have passed to your Beneficiaries tax free. This is done by setting up a Trust so that upon the death of the first spouse, two or more Sub-Trusts (called an A-B Trust or an A-B-C Trust) are created automatically pursuant to your Trust documentation. On June 7, 2001, President Bush signed the Economic Growth and Tax Relief Reconciliation Act which changed the law with regard to the payment of estate taxes. The Act is complicated because the Act will expire at the end of the year 2010, and it is not now known whether or not the Act will be extended beyond that period. If the Act is not extended, then the current estate tax law will be reinstated. The following is a general outline of the high points of the new legislation, but it must be emphasized that persons with significant estates should receive independent tax advice as to all the ramifications of the new tax law, including matters not set forth in this new law summary. For a person who dies this year, there will be no estate tax on the first $675,000 of decedent's estate. The tax-free amount (amount excluded from estate taxation) changes as follows under the new law up through the year 2009: Year of Death       Amount 2002 - 2003 $1,000,000 2004 - 2005 $1,500,000 2006 - 2008 $2,000,000 2009 $3,500,000 In the absence of further legislation, no estate tax will be imposed for estates of persons dying in 2010 (i.e. the tax is repealed for the year 2010 only) and the applicable exclusion amount will revert to $1,000,00 in 2011 (in accordance with the prior law) unless the new legislation is extended. With a bypass trust, couples can leave double the amount of the applicable exclusion amount to their children tax-free. For example, if the surviving spouse of a bypass trust dies in 2009, $7,000,000 can be left to the children tax-free. However, if the new legislation is not extended, and if the surviving spouse dies in the year 2011, only $2,000,000 can be left to the children tax-free. In the year 2010 under the new law, even though there would be no estate tax for that year if the surviving spouse were to die in that year, the heirs may be taxed on the capital gains they inherit. Therefore, because of the complexity of this new law, and the uncertainty of how the law will change over the next several years, it is important that estate tax advice be sought out up through year 2011 by persons interested in ensuring that their estate planning is in sync with the estate tax law in current and future years up through 2011. Under the new legislation, the gift tax law remains in place permanently, but will no longer be computed using the same applicable exclusion table as the estate tax. Instead, the applicable exclusions amount will increase to $1,000,000 in 2002 and stay at that level until Congress decides to change it. What kind of estate tax planning can be made based upon the uncertainties of the new tax law? Given the modest increase of the applicable exclusion amount to $1,000,000 in 2002, $1,500,000 in 2004 and $2,000,000 in 2006, it seems reasonable to plan for up to the next five years. This allows for a reasonable projection of the probable economic consequences of planning strategies and is at least a good possibility for achieving desired economic results. Moving farther into the future becomes extremely problematic. In my opinion, one should not build his estate plan on the assumption that the estate tax will indeed be permanently repealed in 2010. SHOULD AN ATTORNEY CREATE YOUR LIVING TRUST? Estate Planningin most instances is very complicated and so many Attorneys who do not have extensive experience or training in Estate Planning do not perform such work because of its complexity. By attempting to form your own EstatePlanning with self-help books and literature or software, you are taking the risk of making mistakes which could have disastrous consequences. Itis like treating yourself for a serious medical problem instead of going to see a Doctor. WILL VERSUS LIVING TRUST COMPARISON CHART WITH NO WILL WITH A WILL WITH A LIVING TRUST Physical or Mental Capacity Conservatorship proceeding might occur.The Court might decide who cares for you and your estate. Probate.   Same as "no will" No probate. Your successor trustee manages your financial affairs according to your instructions. At Death Probate proceedings which  are expensive and time consuming. Delays distribution of estate to heirs. Time consuming Probate proceedings. No Probate. Your debts are paid by your Succesor Trustee and your possessions are distributed according to your wishes as set forth in your trust. Flexibility and Control California law decides who your property goes to. Your will can be contested. You can't put strings on your distribution to your heirs. Your children receive entire inheritance at age 18. You can change your Trust at any time, or discontinue it. Your property remains under your total control even if you are incapacitated. Privacy None. Probate proceedings are a public record. None. Privacy preserved. No probate. Living Trusts are not a public record. Minor Child Probate Court appoints a Guardian to care for your child, and/or yourchild's financial assets. Your child receives entire inheritance at age18. Ongoing Guardianship until your child reaches 18 are expensive. See above. Your appointed Trustee manages the inheritance and provides funds for the expenses of your child or Heirs according to your instructions. A Courtapproves a Guardian to take care of your child, but cannot overrule the selection of your Trustee and has no control of the inheritance. Estate Taxes Potential Estate Taxes will have to be paid. Same as with no will. Potential Estate Taxes may be reduced or totally eliminated.   DURABLE POWERS OF ATTORNEY A Durable Power of Attorney (DPA) for health care and/or asset managementis a document that can be of benefit to you. You may wish to obtain this Estate Planning document whether or not you have a Living Trust. We tendto think of estate planning as something we do now to take care of what happens when we die. While this definition has the advantage of being neatand tidy, it's a bit too simple. As we grow older, many of us face the stern reality that before we die we may not be mentally or physically competentfor some period of time, sometimes an extended period. I believe that athorough estate plan must consider this possibility. If your health deterioratesand you become incompetent to make financial or medical decisions, theremust be another adult with legal authority to make decisions for you. Thereare two ways to deal with this possibility: l. Do nothing, and, if you ever become incapacitated, let a judge appoint someone, called a conservator or guardian to make decisions for you. Court proceedings for incapacitated persons are almost always undesirable, unless you have no choice. These are costly, time-consuming, and expose to public concern what most people prefer to keep private. Sometimes, people simply ignore the requirement of court proceedings; a niece signs her ill aunt's name to the aunt's retirement check, for example. Unfortunately, there's an unpleasant legal term for this act -forgery. So ignoring the law isn't wise, and often not practical either. Over an extended period of time,it's hard to adequately manage another's affairs by continually signing his name to financial documents, especially if he owns different typesof property. 2. Use a document called a "durable power of attorney" to make your own binding choice of who will have authority to act for you in the eventof your incapacity. Creation of a durable power of attorney in advanceis a sensible, inexpensive alternative to the risk of court proceedings.You can also create what is called a "Directive to Physicians" to specify what you want done regarding use of life support equipment and procedures. AN OVERVIEW OF DURABLE POWERS OF ATTORNEY A Power of Attorney is a legal document in which one person gives another person legal authority to act for him or her. A "durable" power of attorney remains legally effective until the death of the person who created it,even if that person becomes incapacitated. You can use a durable power of attorney (DPA) to authorize someone to make medical (Health Care DPA)and financial (Asset DPA) decisions for you if you are incapacitated and can't make them yourself. The essence of a durable power of attorney is self-control. You, not some judge, determine who will have legal authority to act for you if youbecome incapacitated. You can retain all control over your affairs unlessand until incapacity occurs. If it does, you have determined what restrictions and directions are imposed on the person you've named to act for you. Other advantages of a durable power of attorney include: It's a reasonably short document and is normally not difficult to prepare. The person who creates it doesn't need to transfer title of her assets. It can always be revoked by the principal, unless the principal becomes incapacitated. No court review or approval is needed. Normally, it doesn't have to be filed or recorded with any governmental agency. HOW DURABLE POWERS OF ATTORNEY WORK. The person creating a durable power of attorney is called the "principal." The person he appoints to act for him is called the "attorney-in-fact." You can also appoint someone to act for you in case your first choice can't,an "alternate attorney-in-fact." The attorney-in-fact can be any person the principal chooses, and most definitely doesn't have to be a lawyer. It's typical for one spouse to appoint the other, or a parent to appoint one or more trusted children, to fulfill this function. A durable powerof attorney can be prepared so that it goes into effect only if you become incapacitated. This is called a "springing" durable power of attorney.It is the kind most people want; they're healthy now, but they want to provide for what should be done if they later become incapacitated. EXAMPLE: Mary is 80 and healthy, but worried about what might happen to he in future years. She prepares a springing durable power of attorney, authorizing her daughter Ellen to make medical and financial decisions for her if (and only if) Mary becomes incapacitated and can't make those decisions for herself. She requires that her doctor determine that she's become incapacitated before the durable power of attorney can "spring" into effectiveness. Another type of durable power of attorney becomes effective on signing.With this type, the attorney-in-fact immediately has authority to make decisions for the principal. This type of durable power of attorney mightbe advisable for someone with a life-threatening illness, or who is facing major surgery, or who knows he's declining into advanced stages of Alzheimer's disease. Durable powers of attorney are used for two vital areas: finances and health care. In either, or both, areas, with a few limits, you can putin whatever specifications, qualifications and limitations you want on the powers you grant your attorney-in-fact to manage your financial affairsand make medical decisions. EXAMPLE: Alice, who is elderly and frail, prepares a springing durable power of attorney authorizing her niece, Patricia, to be her attorney-in-factfor medical and financial decisions in the event Alice becomes incapacitated.Alice trusts Patricia. However, Alice is nevertheless fearful that, somehow,her home might be sold, even though Patricia has promised she would neverdo this. So Alice writes into her durable power of attorney a provision that "In no event shall my attorney-in-fact have the authority or power to sell, transfer or otherwise encumber my home at 222 Fern Street, MorroBay, California." Sara is seriously ill, faces major surgery, and knows that for sometime she will be unable to make all her own medical and health care decisions.She prepares a durable power of attorney, delegating to her sister, Susan,the authority to make health care decisions for her. To make sure thather own wishes are complied with, she inserts several restrictions regarding Susan's power. Specifically, Sara wants to be operated on by Dr. June Leeat Sierra Vista Hospital. So, in defining the attorney-in-fact's authority,she includes the following clause: "My attorney-in-fact shall comply withmy stated desire that all surgery performed on me be done at Sierra Vista Hospital (address), by Dr. June Lee, unless Dr. Lee is unable to perform such surgery." Theodore, who is ill, decides to appoint his son, Jason, as his attorney-in-fact to handle his financial affairs. Theodore has two other children, Nancy and Ed, who don't live in California. Nancy and Ed aren't on the best of terms with Jason. To try to prevent suspicion or conflict between his children over Jason's handling of Theodore's finances, Theodore decides to require Jason to prepare quarterly reports of all financial transactions he engages in as attorney-in-fact and send them to Nancy and Ed. To accomplish this,Theodore inserts the following clause in his durable power of attorney:"The attorney-in-fact shall prepare quarterly reports of all financialtransactions he engages in for or with any asset of the Principal. A copyof each such report shall be mailed to Nancy Byrne and Edward Post within l4 days of preparation." LIVING TRUSTS AND POWERS OF ATTORNEYA living trust provides that your successor trustee will manage the trus property for you if you become incapacitated. Even if you use a durable power of attorney to appoint someone (your attorney-in-fact) to handleyour property if you become incapacitated, property in your living trust still remains subject to your success or trustee, not the attorney-in-fact. But this division is typically only one of terminology, not substance,as most people appoint the same person to handle both jobs. Some peoplewho plan to transfer all of their property under a living trust ask why they need to bother with a durable power of attorney at all. There are two reasons. First, only by using a durable power of attorney can you appoin a person who you want to make health care decisions for you if you become incapacitated. Second, you are likely to receive income after you become incapacitated, from pensions, social security and other sources, and you will need an attorney-in-fact to deal with this money, and maintain your personal bank account, pay bills, etc. ASSET DURABLE POWER OF ATTORNEY Advantages of DPA for Asset Management. An assets durable power of attorney (DPA) can eliminate the need for a conservatorship because it provides a means to manage the principal'sassets. A DPA is easily executed and no special rules need be complied with for execution to be valid. It is also economical to prepare and put into place. Attorneys' fees for the preparation and execution of a DPA should be substantially less than those involved in setting up an intervivos trust or establishing and administering a conservatorship. A DPA is of unlimited duration during the life of the client, unles a time limit is specified in the writing creating the DPA. It may be revoke by the principal, or by a conservator of the estate, or by the court. Itis not revoked by the incapacity of the principal or the mere passage oftime. When the principal dies, the DPA terminates only when the attorney-in-fact as actual knowledge of death. The powers granted to the attorney-in-fac may be as wide or as narrow as the principal wishes. The power of attorney may be immediately effective or may spring into operation on the incapacity of the principal. It can be used to complete an incapacitated principal's estate plan, e.g., to fund gifts, make tax decisions, transfer assets to a revocable inter vivos trust, or execute disclaimers. It can also be used to open the principal's safety deposit box. The attorney-in-fact undera DPA can be given the authority to operate or reorganize a business. One or more contingent attorneys-in-fact may be nominated in the event the primary attorney-in-fact becomes unable or unwilling to serve. Provisions for resignation of an attorney-in-fact, removal in the case of incapacity,and for succession of the contingent attorney-in-fact should be included. Disadvantages of DPA for Asset Management There are several disadvantages to DPAs. In the absence of court supervision,there are few safeguards to ensure that the attorney in fact is serving the principal's wishes or best interests. The attorney-in-fact may encounter reluctance from third parties to recognize DPAs. Certain California title companies have questioned the validity of the Uniform Act and are reluctant to recognize DPAs even where they clearly meet the requirements of thestatute. Banks and other financial institutions may be willing to recognizeDPAs only if they are drafted on the institution's own forms. If the DPA is revoked, or terminated by the principal's death, it continues in operation until the attorney-in-fact learns of the revocation or termination. An attorney-in-fact could face adverse income, gift, and estate tax consequences if he or she holds certain powers under a DPA. For example,if the attorney-in-fact can exercise the power to make gifts in his orher own favor, or can exercise control over an insurance policy, the value of the property subject to gift tax or the value of the life insurance policy could arguably be included in the estate of the attorney-in-fact if he or she predeceases the principal. These tax consequences have no yet been clarified, but the risk to the attorney-in-fact must be considered.Scope of Asset DPA Powers An attorney-in-fact may be authorized to perform any acts that the principal might perform, except those to which the principal must givehis or her personal attention, e.g., executing a will, entering a marriage.The DPA can grant broad general powers to the attorney-in-fact, or can limit the power to specific matters, e.g., handling tax matters, funding a revocable trust, and managing real estate. Those powers that can seriously affect the principal's estate plan(e.g., the power to make gifts, fund trusts, change beneficiaries, make disclaimers) should be included in a DPA only after careful review and consideration. Any authority of the attorney-in-fact to engage in self-dealing should be stated in the DPA instrument. Lack of such authority could unnecessarily hamper an attorney-in-fact who is a close relative of the principal. Springing Powers A DPA can be effective immediately on execution or it can be a "springing"power, coming into effect on the principal's incapacity. The format that is chosen will vary with the client's wishes and needs. A DPA that is immediately effective may avoid the problem of determining when the principal becomes incapacitated. It may also be more acceptable to third parties. By contrast,if a springing DPA is used, a third party may want proof of the principal's incapacity. A springing DPA should be used if the principal wants to ensur that the attorney in fact does not act prematurely, while the principal is still able to manage his or her own affairs. The DPA should clearly define criteria for determining the principal's incapacity, e.g., the written opinion of one or more physicians. A finding of incompetency by a courtshould generally not be used as the standard of incapacity because that would defeat the purpose of creating the DPA to avoid court involvement. The attorney-in-fact under a springing power should be notified immediately of the principal's incapacity, and he or she may need properly authenticated written proof of incapacity in order to proceed. DURABLE POWER OF ATTORNEY FOR HEALTH CARE Introduction. A Durable Power of Attorney for Health Care (DPAHC)is a power of attorney that allows an individual, the principal, to designate a person as the attorney-in-fact to make health care decisions for him or her. A "health care decision" is defined as the consent, refusal of consent, or withdrawal of consent to health care. A DPAHC is establishedby private agreement, and none of the acts of the attorney-in-fact are subject to court approval or confirmation. Advantages of DPAHC. A DPAHC designates the person who will make health care decisions,and gives the health care provider one decision maker on whom to rely.It states the intentions of the principal regarding health care and avoids the need for court action on health care decisions. The statute provides protections for the principal. The DPAHC is revocableat any time if the principal has capacity to revoke. If the spouse of the principal is designated as the attorney-in-fact, the designation is automaticallyrevoked on annulment or dissolution of the marriage, unless the DPAHC otherwiseprovides. If the parties remarry, the designation provision is automatically revived. The objections of the principal always override decisions of the attorney-in-fact and no one can condition medical care on the execution of a DPAHC. In addition, statutory restrictions are placed on the powers of the attorney-in-fact. He or she cannot make decisions that would resultin the principal's being placed in a mental health facility, or undergoing convulsive treatment, psychosurgery, sterilization, or abortion. The statute limits the criminal and civil liability of a health careprovider who relies on a DPAHC and acts in accord with a decision of the attorney-in-fact. Even though a DPAHC has been revoked by the principalor statutorily revoked as a result of divorce, a person acting in goodfaith reliance on the DPAHC is not subject to criminal prosecution or civilliability unless he or she has actual knowledge of the revocation. Disadvantages of DPAHC. One disadvantage of a DPAHC is that the attorney-in-fact may make decisions that he or she believes are in the best interests of the principal evenif those decisions are not consistent with the principal's wishes. Another disadvantage is that health care providers may refuse to honor a DPAHC,even though the statute provides protection for good faith reliance. Drafting Considerations. The DPAHC should designate one or more alternate attorneys-in-fact,the order in which they are to serve, and under what conditions. The DPAHC should clearly state the wishes of the principal with respect to healthcare decisions, including whether he or she wants certain measures to betaken to keep him or her alive. This statement is likely to be the only guidance available to the attorney-in-fact. The factors to be consideredby the attorney-in-fact in making a decision should be clearly stated inthe DPAHC. Unless the principal directs otherwise, the attorney-in-fact has statutory authority to make decisions regarding anatomical gifts and autopsies, and can direct the disposition of remains. The DPAHC should clearly state the circumstances in which the principal will be considered unable to make his or her own health care decisions.For example, the DPAHC may state that the principal is considered not to be capable of making decisions if a determination to that effect is made by a stated number of physicians, if a conservatorship is established,or if the principal does not blink his or her eyes or show some other response to a question. A DPAHC will remain effective indefinitely unless a shorter period is provided in the document. Terminal Illness We all understand that modern medical technology often has the ability to keep an incurably ill person alive for an extended period of time. We also understand that the odds that this might happen to each of us are higher than we would like. One good indication that this is a serious possibility is that, currently, over 80% of all deaths in the United States occur in institutions (hospitals, old age homes), whereas only a generation ago it was less than 50%. To many, the possibility of being institutionalized and hooked up to a tangle of wire and tubes, helplessly dependent with no hope of recovering normal life, is a nightmare. Increasingly, many people feel this kind of "living" isn't life, and isn't worth it. If they havean irreversible disease, they choose to die a "natural" death, rather than to prolong life artificially. Fortunately, by using a health care durable power of attorney you can specify, in advance, what you want done regarding life support systems in the event you become incapacitated and unable to express your own desires. Basically, you have three options in your durable power of attorney for health care: Require the use of life support systems. Prohibit the use of life support systems to artificially prolong life when you have been diagnosed as "incurably ill" or having a "terminal condition." Delegate the decision regarding use of life support equipment to your attorney-in-fact. You can also create a separate document called "Directive to Physicians" to specify what you want done regarding the use of life support equipment and procedures. We hope that the above explanation has been of help to you in understanding durable powers of attorney.