A Closer Look at Living Wills: Kennedy Estates
Reprinted from The Estate Analyst, September, 2009
By Robert L. Moshman, Esq.
When I die, Lord, bury me deep
Way down on old Chestnut Street
So I can hear old Number Nine
As she comes rolling by.1
iving wills are back in the news so it is a good opportunity to review the practical planning implications of such documents as they relate to the appointment of fiduciaries, the execution of important documents and estate planning in general. And there are new developments to consider.
However, the subject matter is emotionally charged, has religious significance, and now has been deep fried in politics. It is hard enough to write about everyone's least favorite subject, their own mortality. So a disclaimer: We're not here for the religion or politics. We're just here for the living wills.
Before and After Terri Schiavo
"When darkness gathers over all,
And the last tottering pillars fall,
Take the poor dust Thy mercy warms,
And mould it into heavenly forms.
— Oliver Wendell Holmes, Sr.
The concept of living wills was introduced in 1967 but really started catching on after the Quinlan and Cruzan cases received widespread coverage in the mid-1980s and early 1990s. A body of legal precedent took shape. Social positions were staked out.2
Then along came the case of Terri Schiavo, a young woman on life support who left no written living will. It was another heart wrenching tragedy playing out over a period of years that summoned the nation's attention and galvanized huge numbers of people to take action and obtain living wills. By 2004, living wills may have peaked in public awareness.3
By 2005, a Gallup poll found that 50% of Americans had wills and 40% of Americans had living wills. But there are other polls that have concluded that the percentage of Americans with wills may be between 40% and 44%. That number may also be inflated. A study by Pew Research Center found that from 1990 through 2005, the percentage of Americans with living wills rose from 12% to 29%.
A Harsh Reality
Death, be not proud, though some have called
Mighty and dreadful, for thou are not so;
For those whom thou think'st thou dost overthrow
Die not, poor Death, nor yet canst thou kill me.
— John Donne
Five years later, the national debate on health care reform came careening into the living will debate with a provision in one version of the plan involving physicians advising patients on living wills.
There are financial costs associated with intervention and, by one estimate, more widespread use of living wills would reduce medical procedures costing $90 billion over ten years. Politicians raised the stakes with a discussion of "death panels" and the living will provision was soon eliminated. But not without a big enough flare up of emotional reaction to remind everyone how explosive this issue can be.
While the health care fracas may have rumbled off in another direction for the time being, here in the quietude of low tide, one can now observe where living wills now stand, five years later.
The Terri Shiavo case focused attention but then the matter faded from consciousness. An effort to continue to raise awareness led to a National HealthCare Decisions Day.4
The U.S. Will Registry, founded in 1996 hit its stride in 2005. Now it competes with America Living Will Registry, other private registries, as well as state administered registries in Washington, Nevada, and Vermont. Free forms for every state are available online on many websites.5
DNR (More or Less)
Do not go gentle into that good night,
Old age should burn and rave at close of day;
Rage, rage against the dying of the light.
— Dylan Thomas
When must there be an intervention on behalf of someone who is helpless and when must that person's wishes be followed?
Despite the rise in living wills, there are uncertainties about how what rules may be applied in any given case.
Few people have living wills, the living wills they have are often vague and don't apply to many circumstances. Several studies from many countries reveal that physicians are frequently not made aware that a living will exists, and analysis of consultations on medical futility cases (i.e., whether to "pull the plug" and not provide life-sustaining treatment) reveal there are still grey areas.
In a survey of Texas hospitals in 2007, there were 974 ethics committee consultations on medical futility cases. The committee ruled with the physician and against the family in 65 cases and treatment was withdrawn in only 27 of those cases.
Practicalities Still Apply
Secure registries are an answer for many people but leave others cold. An automated Internet archive with personal information makes a lot of people apprehensive.
Access to documents doesn't necessarily translate into better living will effectiveness. Many living wills have flawed content that leaves a physician with very general instructions that say little. Another growing concern is with the demonstration of a bona fide execution. Because forms are now so accessible, anyone can print out a form and scribble a few signatures.
Drafting living wills with professional counsel in the context of estate planning makes sense for many reasons.
Professionals who draft wills and standard powers of attorney for families are familiar with the family dynamics when selecting fiduciaries for an elderly parent.
Since there could be a dispute of whether a living will was executed under duress or with full mental competence, it makes sense to execute the living will with the same formalities as a will, with witnesses, a publication of the document and acknowledgment before a notary.
This underscores a glaring weakness of a living will. Just signing a living will doesn't guarantee a course of medical treatment free of controversy and litigation. There are challenges to a living will just as there are challenges to a will.
Was there mental capacity to execute the document? Was the patient coerced or unduly influenced? Did the patient have a change of heart after executing the document?
And how shall a living will be interpreted? A well-drafted will should leave little room for interpretation. It should be precise in how assets are distributed, who shall serve as a fiduciary, what parameters apply to the discretion of that fiduciary.
By comparison, even a well-drafted living will may end up being evaluated in several different ways depending on the medical prognosis involved. Different physicians and hospital review panel members often do not agree about when a specific living will should be effectuated. This remains more subjective and less reliable than with wills.
Since the living will is comparable to and is often combined with a power of attorney for health care, the modern trend is to have the power holder accept the responsibility by signing the document as the agent. This establishes that the person chosen is aware of the responsibility. It also provides a signature sample.
A Draftsman's Considerations
A professional designing a living will document must comply with state law and can utilize a variety of standard forms for this purpose.6 Yet personalizing a living will needs to be accomplished with the same interactive client skills and draftsmanship as a will.
A draftsman must ask the right questions to elicit a person's true intent. This may require explaining terms such as "medical directive." During this process, it is also important to keep an open mind. It should not be assumed that every individual wants a living will.
And of the people who do want a living will, it should not be assumed that everyone wants his or her life to the governed in exactly the same manner. A person may want medical treatment to be withheld, but only in circumstances where an agent can evaluate the withholding of treatment in light of the precepts of a particular religion.
TECHNICAL REFERENCES
1 Freight Train lyrics by Elizabeth Cotten, 1957. Other versions have been performed by Peter Paul and Mary, Taj Mahal, Jerry Garcia and others.
2 In re Quinlan, 355 A.2d NJ 647 (1976). After Ms. Quinlan was removed from a mechanical breathing apparatus, she continued to breath on her own for 10 years. She died in 1985. Cruzan v. Director, MDH, 497 U.S. 261 (1990).
3 Moshman, A Timely Look at Living Wills, The Estate Analyst (May, 2005). Interest had jumped as a result of the Schiavo case. California's Medical Association reported, at the time, that downloads of its advance-directive kit jumped from 350 per week to nearly 10,000 per week.
4 In recent years there has been an effort to generate interest in an annual day for living wills. It is not clear how well National HealthCare Decisions Day (April 16) is catching on. One problem, having the event on an anti-climactic day like April 16, right after the income tax deadline. Another problem-not a lot of repeat business. Biggest problem, it's not as much fun as Christmas. See, www.healthcaredecisionsday.org for state-specific resources on living wills.
5 See, http://liv-will1.uslivingwillregistry.com/forms.html, and https://www.legaldocs.com/htmdocs/livin_st.html. Comparable material for the 50 states had been on the Choice in Dying website. That website was purchased by an unrelated organization and Choice in Dying is now known as Partnership for Caring, Box 97290, Washington, DC 20077-7205, (800) 989-9455, http://www.healthfinder.gov.
6 Five Wishes is supposed to be valid in Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Pennsylvania, Rhode Island, South Dakota, Tennessee, Virginia, Washington, West Virginia, and Wyoming. The other states require a specific pre-approved form.
Kennedy Estates
The passing of Ted Kennedy is the end of a political generation but is also a reminder of the astute financial concepts that helped build and sustain the Kennedy clan as a financial dynasty. Yes, tax laws are different and times have changed, but those planning concepts that assisted the Kennedys remain viable lessons in dynastic planning even today.
The Art of Anticipation
Joseph P. Kennedy was a success early and throughout his career. He rose to be president of a bank by the age of 25. He was a successful investor during the Roaring Twenties. In fact, he was able to manipulate the market with techniques that were then legal but which would later be regulated under a new agency that he was appointed to be the head of, the Securities Exchange Commission.
Unlike almost everyone else during the 1920's, Kennedy foresaw the end of the bull run and the inevitable collapse of that bubble and pulled his wealth out of the stock market during the summer of 1929, just a few months before the October crash.
Kennedy made another fortune in Hollywood and formed a major movie studio in anticipation of the popularity of motion pictures with sound.
Another fortune was made in real estate. Kennedy had $4 million from his stock market success. His motion picture successes may have netted $5 million. Moving his assets into real estate may have increased his net worth to $180 million by 1935. This was the equivalent of $2.8 billion today.
Building a Dynasty
Joseph Kennedy is rumored to have also made money as a bootlegger during prohibition. This appears to be false. However, anticipating the end of prohibition, Kennedy successfully obtained valuable distribution rights for Dewar's Scotch and Gordon's Gin. There appeared to be no area that he could not analyze and exploit for a profit.
A major acquisition was the largest office building in Chicago, Merchandise Mart. Joseph Kennedy acquired the building in 1945 for $12.5 million and the Kennedy family sold the building in 1998 for an amount estimated to be $550 million to $625 million.
The rise in the Kennedy fortune involves political networking and the diversification of assets. These connections later set the stage for the political aspirations of his sons, John F. Kennedy, Robert F. Kennedy and Edward Kennedy.
Beating The Transfer Tax
Joseph P. Kennedy foresaw a transfer tax roadblock in his future. Left alone, his fortune would be diminished by more than half at his death and then diminished at each successive generation.
Changing this outcome was possible by establishing generation skipping trusts. (This was prior to the imposition of the generation skipping transfer tax.) Kennedy set up trusts that would pay a portion of income to his children each year but which would not be taxed in the estates of his children.
The trusts were paying President John F. Kennedy $500,000 annually at a time when he was being paid $100,000 as President. His widow, Jacqueline Kennedy, was remarried to Aristotle Onassis, a billionaire. Caroline Kennedy, having inherited from her parents and brother John F. Kennedy, Jr., may be worth in excess of $400 million.
Edward Kennedy, who served 46 years in the U.S. Senate recently passed away with an estimated fortune of perhaps $164 million. However, because trusts from his father remain private, the numbers discussed in the press are only estimates.
Modern Dynasties
Today, there are many techniques available to create secure, long-term trusts that can span many generations without fear of confiscatory transfer taxation. Many jurisdictions provide relief from the rule against perpetuities. There may be generation skipping transfer taxes, but there are more techniques for long-term asset protection than were available to Joseph P. Kennedy. It just takes foresight and planning to take advantage of these opportunities.
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