Recent Events Spur Call to Action
Harford Business Ledger: October 2005
The World Trade Center attacks, the Terry Schiavo debacle and Hurricane Katrina cause us to be aware of issues in our personal and business lives that we may have never considered before. If there is anything to be gained by these tragedies, the awareness that such events really can happen motivate us to be prepared. Since these events occurred, there are a number of legal and business issues that I look at differently. Hopefully these thoughts will be of assistance to you.
In estate planning matters, most people include their spouses and their children. Wills, trusts and powers of attorney rarely contemplate what happens in the event of a common disaster. It may be helpful to revisit your Will and provide for unexpected contingencies. Who are your heirs if your spouse and all of your children meet a common fate? If your Will doesn't provide what happens, your estate is distributed in accordance with the laws of intestacy. Those laws generally require distribution down the family tree to children and grandchildren. If no one down the family tree survives you, the laws of intestacy climb up the family tree to parents. If the parents are deceased, the laws of intestate succession travel back down from parents to their children, which are the brothers and sisters of the decedent. This process can be further complicated by the determination of the order of death. Did the wife predecease the husband or vice-versa? All of this leaves great fodder for confusion, interpretation and, ultimately, litigation. These tragedies have taught us that the unexpected can happen and it is foolish not to have a Will. These tragedies have also taught us that it may be a good idea to provide for rare but possible circumstances where many intended heirs predecease you. If your current Will does not contemplate those possibilities, you may wish to consider revisions, additions, modifications and codicils.
American property law protects land owners' rights to use their property in accordance with applicable zoning (aside from eminent domain condemnation as expanded by a recent Supreme Court decision). In most cases, this means that a property owner's right to develop that land (or sell it to someone else to develop) cannot be obstructed. If there is demand for real estate -- commercial or residential -- people will be aggressive and creative to provide supply.
Perhaps worse than dying without a Will and being subjected to the laws of intestacy is becoming disabled without a power of attorney. In the case of those rendered disabled by an unexpected tragedy, the issue of managing their legal and medical affairs can have even more devastating consequences to them and their family members. All financial and medical decisions are suspended while the battle is waged. There is no worse example than the issue of Terry Schiavo as it relates to medical issues. Similar unfortunate consequences can occur respecting financial issues in the event of disability. Without a power of attorney, the only choice of your loved ones is to bring a court action to have you declared incompetent and to have a court appointed guardian handle your financial affairs. Whatever malady occurred to render you incompetent is sad enough without the added injury of legal proceedings, the appointment of a guardian and judicial supervision of your financial affairs. Your business assets could be substantially compromised while a war is waged over control of your assets.
Another disturbing trend I have encountered in my practice is attempts by financial institutions, brokerage houses and those in the real estate industry to limit the use of powers of attorney based upon the age of the document. Legally, powers of attorney do not expire unless expressly so provided. Nevertheless, many banks, brokerage houses and other institutions have adopted policies which prohibit employees from honoring powers of attorney that are not "current." "Current" can be defined as short as sixty days old. While it is ridiculous to renew a power of attorney every sixty days, be prepared for a fight if the financial institution with which you are dealing has an unreasonably restrictive policy for honoring powers of attorney.
Perhaps the biggest issue to be revisited in light of recent tragedies is that of insurance. Skyrocketing real estate values and construction costs may have significantly outpaced the insured value of your property and its improvements. Recent storm victims were shocked to learn of policy exclusions of which they were previously unaware. Now is the time to revisit insurance issues. Be sure that your limits of coverage are reasonable in light of current market conditions. Be sure that you clearly understand what is covered -- and what is excluded. In addition to your existing coverage, should you consider other products such as disability insurance or long-term care insurance?
We in Harford County are lucky to have avoided the widespread disaster of recent tragedies. We should, however, learn from those events and prepare ourselves and our families for the worst -- while hoping for the best.