Powers of Attorney and Advance Directives

A medical crisis only gets worse, when you learn you don’t have legal authority to make medical decisions for a loved one, or find out after a loved one is incapacitated that you can’t gain access to assets in their trust. You need to have certain estate planning legal documents already in place, according to the article “Tips you should know for Powers of Attorney and Advance Directives” from seacoastonline.com.

Power of Attorney. The power of attorney (POA) allows one person, the “principal” to appoint another person as their “agent” (also known as an “attorney in fact”). The agent has the authority to act on behalf of the principal, depending on the powers described in the document. Each state has its own laws about who can be an agent, if more than one person can be appointed as agent and if there are any limits to what power can be given to an agent. Your estate planning attorney will be able to create a POA to suit your situation.

A POA can be created to give extremely broad powers to an agent. This is sometimes called a “general” POA, where agents can do everything that you would do, from accessing and managing bank accounts, applying for Social Security, to filing tax returns. A POA can also be limited in scope, known as “limited” POA. You could permit an agent to only sign a tax return or conduct a specific transaction.

In most estate planning scenarios, the POA is “durable,” meaning the named agent can continue to have authority to act, even if the principal is incapacitated after the documents have been executed. This makes sense: a durable POA generally avoids having to go to court and have a guardian appointed. The person you have selected will be the POA, not a court-appointed person.

Advance Directive. The advance directive allows a person to appoint another person to make medical decisions on their behalf if incapacitated. In some states, this is called a durable power of attorney for health care, and in others it is referred to as a health care proxy.

In most cases, the advance directive becomes effective when one or more treating physicians determine the person no longer has capacity to make or communicate health care decisions. Having this document in place avoids having to go to court to have a guardian appointed. If time is of the essence, any delay in decision-making could lead to a poor outcome. If there is no advance directive and physicians have decided you are unable to make these decisions, they go by a hierarchy of relatives to make the decisions for you. If you have an estranged adult child, for instance, but they are your next-of-kin, they could be the one making decisions for you.

If you have children who recently became legal adults (usually age 18), these documents will protect them as well, since just being their parent does not provide you with the right to make these decisions.

Contact an experienced estate planning attorney to prepare these documents should a medical crisis arise.

Reference: Seacoastonline.com (June 27, 2021) “Tips you should know for Powers of Attorney and Advance Directives”

 

How to Protect Loved Ones from Elder Abuse

Predators had an open season on the elderly during the pandemic, as isolation necessitated by COVID severely limited family member’s ability to visit in person. In some instances, caregivers themselves were the predators, and manipulation on important legal documents, including durable power of attorney, trusts, wills and ownership of homes has occurred. All this was reported the article “Warning: Isolation Of Your Aging Parent May Be A Red Flag” from Forbes. The enforced isolation has created worrisome situations for all concerned.

If you haven’t seen your parents or grandparents for a year or more, and are all fully vaccinated, one expert strongly encourages visitation, as soon as is possible. Use the visit to review all of their legal matters and talk about how to increase engagement and end the isolation.

Consider the following a checklist of what needs to be done at that first visit:

Look for any signs that anyone who had access to loved ones may have taken advantage of their isolation during the past year. Don’t assume the best behavior of everyone around them. It’s not how we like to think, but caution needs to be exercised in this situation.

Check on their will and trusts. The pandemic has reminded everyone that life is fragile, and it’s important to go over legal documents or, if they don’t exist, create them. Find out if anyone has pressured family members to change legal documents—if they have been changed in the last year and you weren’t told about it, find out what happened.

If aging parents do not have a will or trusts, or these documents were altered in your absence, speak with an estate planning attorney who can create a new estate plan. Make sure all copies of older wills are destroyed. At the same time, this would be a good time to have their powers of attorney, healthcare proxy and living wills updated.

If your parent or grandparent lives on their own, find out if they are now in need of any caregiving. A year is a long time, and elderly people who started out fine during the epidemic may have had changes in their health or ability to live independently. Go see for yourself how they are managing. Is the house clean? Are the stairs too steep to be managed?  Not everyone will be able to return to “normal” without some help. Senior centers, gyms and recreational facilities have been shut down for a long time. They may need some help getting back into a routine of socializing and exercising.  The end of enforced isolation can also mean the end of an easy cover for anyone who was using isolation as a protection for financial elder abuse or any other type of abuse.

Isolation itself is a form of abuse, including not allowing others to visit in person or speak with a parent alone. You can overcome this by being engaged with family members on a regular basis, by phone, video visits or, if you are able to, more frequent in person visits.

Reference: Forbes (April 23, 2021) “Warning: Isolation Of Your Aging Parent May Be A Red Flag”

 

What’s the Difference between Per Stirpes vs. Per Capita in Estate Planning?

When creating an estate plan, one of the basic documents you need is a will. In estate planning, it’s important to distinguish between per stirpes and per capita distributions. These are two terms you are likely to come across when creating your estate plan, says Yahoo Finance’s recent article entitled “Per Stirpes vs. Per Capita in Estate Planning.”

Per stirpes is Latin and means “by branch” or “by class.” When this term is used in estate planning, it refers to the equal distribution of assets among the different branches of a family and their surviving descendants. This lets the descendants of a beneficiary keep inherited assets within that branch of their family, even if the original beneficiary passes away. The assets would be equally divided between the survivors. Per stirpes distributions essentially create a “trickle-down” effect: assets can be passed on to future generations if a primary beneficiary passes away.

In contrast, “per capita” is also a Latin term that means “by head.” When you use a per capita distribution method for estate planning, any assets you have would pass equally to the beneficiaries who are still living when you pass. The share portions would adjust accordingly, if one of your children or grandchildren were to die before you.

Whether it makes sense to use a per stirpes or per capita distribution in your estate plan can depend for the most part, the way in which you want your assets to be distributed after you’re gone.

Per stirpes allows you to keep asset distributions within the same branch of the family and eliminates the need to amend or update wills and trusts when a child is born to one of your beneficiaries or a beneficiary passes away. This method can also help to minimize the potential for infighting among beneficiaries, since asset distribution takes a linear approach. However, an unwanted person could take control of your assets.

With per capita, you can state precisely who you want to name as beneficiaries and receive part of your estate. The assets are distributed equally among beneficiaries, based on the value of your estate at the time you pass away.

Per stirpes and per capita distribution rules can help you determine how your assets are distributed after you die.

Talk with an experienced estate planning attorney to fully understand the implications of each one for your beneficiaries, including how they may be affected from a tax perspective.

Reference: Yahoo Finance (Jan. 7, 2021) “Per Stirpes vs. Per Capita in Estate Planning”

 

How Do You Plan for the Death of a Spouse?

The COVID pandemic has become a painful lesson in how important it is to having estate plans in order, especially when a spouse becomes sick, incapacitated, or dies unexpectedly. With more than 400,000 Americans dead from the coronavirus, not every one of them had an estate plan and a financial plan in place, leaving loved ones to make sense of their estate while grieving. This recent article from Market Watch titled “How to get your affairs in order if your spouse is dying” offers five things to do before the worst occurs.

Start by gathering information. Make all of your accounts known and put together paperwork about each and every account. Look for documents that will become crucial, including a durable power of attorney, an advanced health care directive and a last will. Gather paperwork for life insurance policies, investment portfolios and retirement accounts. Create a list of contact information for your estate planning attorney, accountant, insurance agent, doctors and financial advisors and share it with the people who will be responsible for managing your life. In addition, call these people, so they have as much information as possible—this could make things easier for a surviving spouse. Consider making introductions, via phone or a video call, especially if you have been the key point person for these matters.

Create a hard copy binder for all of this information or a file, so your loved ones do not have to conduct a scavenger hunt.

If there is an estate plan in place, discuss it with your spouse and family members so everyone is clear about what is going to happen. If your estate plan has not been updated in several years, that needs to be done. There have been many big changes to tax law, and you may be missing important opportunities that will benefit those left behind.

If there is no estate plan, something is better than nothing. A trust can be done to transfer assets, as long as the trust is funded properly and promptly.

Confirm beneficiary designations. Check everything for accuracy. If ex-spouses, girlfriends, or boyfriends are named on accounts that have not been reviewed for decades, there will be a problem for the family. Problems also arise when no one is listed as a beneficiary. Beneficiary designations are used in many different accounts, including retirement accounts, life insurance policies, annuities, stock options, restricted stock and deferred compensation plans.

Many Americans die without a will, known as “intestate.” With no will, the court must rely on the state’s estate laws, which does not always result in the people you wanted receiving your property. Any immediate family or next of kin may become heirs, even if they were people you with whom you were not close or from whom you may even have been estranged. Having no will can lead to estate battles or having strangers claim part of your estate.

If there are minor children and no will to declare who their guardian should be, the court will decide that also. If you have minor children, you must have a will to protect them and a plan for their financial support.

Create a master list of digital assets. These assets range from photographs to financial accounts, utility bills and phone bills to URLs for websites. What would happen to your social media accounts, if you died and no one could access them? Some platforms provide for a legacy contact, but many do not. Prepare what information you can to avoid the loss of digital assets that have financial and sentimental value.

Gathering these materials and having these conversations is difficult, but they are a necessity if a family member receives a serious diagnosis. If there is no estate plan in place, have a conversation with an estate planning attorney who can advise what can be done, even in a limited amount of time.

Reference: Market Watch (Jan. 22, 2021) “How to get your affairs in order if your spouse is dying”

 

Do We Need Estate Planning?

Estate planning is not just about making a will, nor is it just for people who live in mansions. Estate planning is best described in the title of this article “Estate planning is an important strategy for arranging financial affairs and protecting heirs—here are five reasons why everyone needs an estate plan” from Business Insider. Estate planning is a plan for the future, for you, your spouse and those you love.

There are a number of reasons for estate planning:

  • Avoiding paying more federal and state taxes than necessary
  • Ensuring that assets are distributed as you want
  • Naming the people you choose for your own care, if you become incapacitated; and/or
  • Naming the people you choose to care for your minor children, if you and your spouse left them orphaned.

If that sounds like a lot to accomplish, it is. However, with the help of a trusted estate planning attorney, an estate plan can provide you with the peace of mind that comes with having all of the above.

If those decisions and designations are not made by you while you are alive and legally competent, the state law and the courts will determine who will get your assets, raise your children and how much your estate will pay in death taxes to state and federal governments. You can avoid that with an estate plan.

Here are the five key things about estate planning:

It’s more than a will. The estate plan includes creating Durable Powers of Attorney to appoint individuals who will make medical and/or financial decisions, if you are not able to do so. The estate plan also contains Medical Directives to communicate your wishes about what kind of care you do or do not want, if you are so sick you cannot do so for yourself. The estate plan is where you can create Trusts to control how property passes from one person or one generation to the next.

Estate planning saves time, money, and angst. If you have a surviving spouse, they are usually the ones who serve as your executor. However, if you do not and if you do not have an estate plan, the court names a public administrator to distribute assets according to state law. While this is happening, no one can access your assets. There’s a lot of paperwork and a lot of legal fees. With a will, you name an executor who will take care of and gain access to most, if not all, of your assets and administer them according to your instructions.

Estate planning includes being sure that investment and retirement accounts with a beneficiary designation have been completed. If you don’t name a beneficiary, the asset goes through the probate court. If you fail to update your beneficiary designations, your ex or a person from your past may end up with your biggest assets.

Estate planning is also tax planning. While federal taxes only impact the very wealthy right now, that is likely to change in the future. States also have estate taxes and inheritance taxes of their own, at considerably lower exemption levels than federal taxes. If you wish your heirs to receive more of your money than the government, tax planning should be part of your estate plan.

The estate plan is also used to protect minor children. No one expects to die prematurely, and no one expects that two spouses with young children will die. However, it does happen, and if there is no will in place, then the court makes all the decisions: who will raise your children, and where, how their upbringing will be financed, or, if there are no available family members, if the children should become wards of the state and enter the foster care system. That’s probably not what you want.

The estate plan includes the identification of the person(s) you want to raise your children, and who will be in charge of the assets left in trust for the children, like proceeds from a life insurance policy. This can be the same person, but often the financial and child-rearing roles are divided between two trustworthy people. Naming an alternate for each position is also a good idea, just in case the primary people cannot serve.

Estate planning, finally, also takes care of you while you are living, with a power of attorney and healthcare proxy. That way someone you know, and trust can step in, if you are unable to take care of your legal and financial affairs.

Once your estate plan is in place, remember that it is like your home: it needs to be updated every three or four years, or when there are big changes to tax law or in your life. Contact an experienced estate planning attorney to assist you.

Reference: Business Insider (Jan. 14, 2021) “Estate planning is an important strategy for arranging financial affairs and protecting heirs—here are five reasons why everyone needs an estate plan”

 

If Not Now, When? It is the Time for Estate Planning

What else could possibly go wrong? You might not want to ask that question, given recent events. A global pandemic, markets in what feels like free fall, schools closed for an extended period of time—these are just a few of the challenges facing our communities, our nation and our world. The time is now to do to be sure that everyone has their estate planning completed, advises Kiplinger in the article “Coronavirus Legal Advice: Get Your Business and Estate in Order Now.”

Business owners from large and small sized companies are contacting estate planning attorney’s offices to get their plans done. People who have delayed having their estate plans done or never finalized their plans are now getting their affairs in order. What would happen if multiple family members got sick, and a family business was left unprotected?

Because the virus is recognized as being especially dangerous for people who are over age 60 or have underlying medical issues, which includes many business owners and CEOs, the question of “What if I get it?” needs to be addressed. Not having a succession plan or an estate plan, could lead to havoc for the company and the family.

Establishing a Power of Attorney is a key part of the estate plan, in case key decision makers are incapacitated, or if the head of the household can’t take care of paying bills, taxes or taking care of family or business matters. For that, you need a Durable Power of Attorney.

Another document needed now, more than ever: is an Advance Health Care Directive. This explains how you want medical decisions to be made if you are too sick to make these decisions on your own behalf. It tells your health care team and family members what kind of care you want, what kind of care you don’t want and who should make these decisions for you.

This is especially important for people who are living together without the legal protection that being married provides. While some states may recognize registered domestic partners, in other states, medical personnel will not permit someone who is not legally married to another person to be involved in their health care decisions.

Personal information that lives only online is also at risk. Most bills today don’t arrive in the mail, but in your email inbox. What happens if the person who pays the bill is in a hospital, on a ventilator? Just as you make sure that your spouse or children know where your estate plan documents are, they also need to know who your estate planning attorney is, where your insurance policies, financial records and legal documents are and your contact list of key friends and family members.

Right now, estate planning attorneys are talking with clients about a “Plan C”—a plan for what would happen if heirs, beneficiaries and contingent beneficiaries are wiped out. They are adding language that states which beneficiaries or charities should receive their assets, if all of the people named in the estate plan have died. This is to maintain control over the distribution of assets, even in a worst-case scenario, rather than having assets pass via the rules of intestate succession. Without a Plan C, an entire estate could go to a distant relative, regardless of whether you wanted that to happen.

Reference: Kiplinger (March 16, 2020) “Coronavirus Legal Advice: Get Your Business and Estate in Order Now.”

 

Why Is a Power of Attorney Important?

A son who is preparing to help his mother with her legal and financial affairs asks what legal documents he needs to obtain in the article “Tips for becoming a power of attorney” in Hometown Life. He is concerned about a sibling who is estranged from the family and could cause problems in the future. Can he protect his mother and himself?

The first thing he needs to do is obtain a medical power of attorney for the mother, and a durable power of attorney. These are two separate powers of attorney that will give the son the legal right to handle both her financial affairs and her medical care.

With the documents, he will be able to speak directly to her healthcare providers, including her doctors, and to make end-of-life decisions on her behalf. An unhappy family member could indeed cause problems, especially when it comes to major decisions.

The durable power of attorney is geared for legal or financial issues, including handling the mother’s day-to-day money tasks and making decisions about her investments and assets, including the family home.

Having both of these documents, gives the son the ability to do what is necessary for his mother, while also protecting him from an uncooperative family member. However, there are more tasks to be done.

First, he needs to find out if she has an estate plan, including a will, a trust or even any other powers of attorney. He should find out if they are current, and if they still reflect her wishes.

If she has an estate plan, he’ll need to find out when it was last updated and see if it needs to be revised. If she does not, she needs to meet with an experienced estate planning attorney to create a plan to distribute assets according to her wishes and create any needed trusts.

He should also collect her medical information, so he knows who her doctors are and what medications she is taking. He also needs to understand her medical insurance coverage and see if she has the protection that she needs from health care costs.

For her financial affairs, the son needs to gather up information about her accounts, including passwords and login information. The mother should add the son as a signatory to her bank accounts and brokerage houses.

He should also get the names and contact information of any financial professionals she works with. That includes financial advisors, insurance agents and CPAs. It would be wise to get the last two years of her tax returns. This could be invaluable in helping to understand her assets.

Reference: Hometown Life (Dec. 6, 2019) “Tips for becoming a power of attorney”

What Do I Need to Know About Powers of Attorney?
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What Do I Need to Know About Powers of Attorney?

People frequently devote their efforts to their wills and trusts. Choosing a person to serve as their power of attorney is often a last-minute decision.

Forbes’ article, “9 Things You Need To Know About Power Of Attorney,” reminds us that it’s an important decision and not one that should be taken lightly. Let’s look at what you need to know to get your POA right.

Understand what it means. With a POA, you select a person as your attorney-in-fact (or agent) to make financial decisions for you. This gives your agent control over any assets held in your name alone.

Look at your options. There are two types of powers of attorney. A durable power of attorney is effective when you sign it. It survives your incapacity. A springing power of attorney goes into effect when you’re incapacitated. A springing power of attorney is more difficult to use. Your agent must prove that you’re incapacitated usually through some written confirmation by one or more physicians. Even though the document states how to do that, banks frequently are hesitant to make that determination. Thus, most attorneys advise you to execute a durable power of attorney and often will hold the original POA until it is needed, as an extra protection.

Make a wise decision. You may wonder if your agent can steal your money, and unfortunately the answer is “yes.” Your agent will have access to your financial accounts and could use your funds for his own benefit. The agent has a fiduciary duty to use the assets only for your benefit or as you direct in the document so you could later sue the agent for theft and misuse of your funds.

Abuse. Depending on the terms of the power of attorney, your agent may have the ability to amend the ownership of your bank accounts or change your beneficiary designations. This is common in second marriages. The transfer often occurs right before the spouse passes away, typically when the husband is dying in the hospital. If the husband’s will leaves his large bank accounts to his children from his first marriage, the second wife with power of attorney can add herself as a joint owner of the account. When the husband dies, she’s the surviving joint owner and liquidates the account. Siblings also do this to direct mom’s assets away from their brothers or sisters.

Designate an alternate. If your agent dies before you or is incapacitated, you should appoint a back-up who can act.

Read through the document. Take a look though the powers listed in the document and make sure you’re comfortable with what it allows.

The POA dies with you. Once you pass away, the POA is no longer valid. Your will then controls what happens to your assets.

Your revocable trust should be funded. If you fund your trust during your lifetime, you may not need to use your power of attorney. However, you should still have one just in case. Ask an experienced estate planning attorney about this.

Reference: Forbes (September 12, 2019) “9 Things You Need To Know About Power Of Attorney”

 

So, You Have to Manage Someone Else’s Money – Now What?

This sounds like a disaster in the making. A durable power of attorney document must follow the statutory requirements, must delegate proper authority, must consider the timing of when the agent may act and a host of other issues that must be addressed, warns My San Antonio in the article “Guide to managing someone else’s money.” A durable power of attorney document can be so far reaching that a form downloaded from the Internet is asking for major trouble.

Start by speaking with an experienced estate planning attorney to provide proper advice and draft a legally valid document that is appropriate for your situation.

Once a proper durable power of attorney has been drafted, talk with the agent you have selected and with the successor agents you want to name, about their roles and responsibilities. For instance:

When will the agent’s power commence? It may start immediately, or it may not become active, until the person becomes incapacitated.

If the power is postponed, how will the agent prove that the person has become incapacitated? Will he or she need to go to court?

What is the extent of the agent’s authority? This is very important. Do you want the agent to be able to talk with the IRS about your taxes?, with your investment advisor? will the agent have the power to make gifts on your behalf, and to what extent? May the agent set up a trust for your benefit?, can the agent change beneficiary designations and what about caring for your pets? Can they talk with your lawyer or accountant?

When does the agent’s authority end? Unless the document sets an earlier date, it ends when you revoke it, when you die, when a court appoints a guardian for you, or if your agent is your spouse, when you divorce.

What does the agent need to report to you? What are your expectations for the agent’s role? Do you want immediate assistance from the agent or will you continue to sign documents for yourself?

Does the agent know how to avoid personal exposure? If the agent signs a contract for you by signing his or her own name that contract may be performed by the agent. Legally, that means that the cost of the services provided could be taken out of the agent’s wallet. Does the agent understand how to sign a contract to avoid liability?

All of these questions need to be addressed long before any durable power of attorney papers are signed. Both you and the agent need to understand the role of a power of attorney. An experienced estate planning attorney will be able to explore all the issues inherent in a durable power of attorney and make sure that it is the correct document.

Reference: My San Antonio Life (Aug. 26, 2019) “Guide to managing someone else’s money”

 

Estate Planning Smooths Life’s Bumpy Road

It’s too bad that this happened to the Franklin family but it happens often. A family member dies unexpectedly or becomes incapacitated at a young age and they never did the right planning.  Sometimes worse, they did the right planning but the documents are decades old and out of step with current laws and the power of attorney is so old  that no financial institution will recognize it.

The problems that these scenarios create for loved ones are stressful and expensive and take a fair amount of everyone’s time. Solutions are offered in the article “Planning for the unexpected–4 Steps to get your affairs in order” from the Post Independent.

These four steps will help make the unexpected events of life a little less challenging.

Have a will and other estate planning documents prepared.

A will is a list of instructions to the court that details how you want your possessions to be distributed after you die. It should be drafted by an estate planning attorney who is licensed to practice law in your home state. The will goes through the probate process, which takes care of your legal and financial matters. In some states, the probate process is a simple process. In others, it can be problematic. Your estate planning attorney will be able to advise you about the probate process in your area.

A revocable living trust is a useful estate planning document that is used to establish more control over your assets, while you are alive. It should also be created by an experienced estate planning attorney. At your death, assets held in your trust then pass to heirs and avoid the probate process.

Make sure you title your assets properly.

Once you have a will and any trusts in place, any assets you wish to have placed in the trust need to be titled correctly. If you own a property with someone else and want to be sure your share of that property goes to the other owner, you’ll need to title it jointly.

Don’t forget to review the beneficiary designations that are usually a part of your bank and investment accounts, retirement accounts and insurance policies. Any beneficiary designation will override the will. If you haven’t reviewed beneficiary designations in a long time, now is the time to do so. There is no way to undo a beneficiary designation, once you have died.

Have power of attorney agreements created.

These documents give another person, the “agent,” the power to act on your business, financial and legal affairs, if you are incapacitated. The laws vary from state to state, which is another reason to work with an estate planning attorney licensed in your state. You’ll need these documents:

  • A Durable Power of Attorney
  • A Health Care Proxy
  • A Living Will
  • Prepare a letter of instruction-This is not a legally binding document, but it can provide loved ones with a great deal of clarity when you have passed.
  • Consider including this information:
  • A list of financial accounts and account numbers and any online usernames and passwords.
  • A list of important documents and where they can be found.
  • The names and contact information for the legal and financial professionals with whom you work.
  • Your final burial and/or funeral wishes.

Once you’re done, review the documents every few years and when there are major events in your life, including births, marriages, divorces, deaths and other “trigger” events. Remember that the laws change, so don’t let too much time go by without a thorough review of your estate plan.

Reference: Post Independent (July 22, 2019) “Planning for the unexpected–4 Steps to get your affairs in order”