Is It Important to Have a Power of Attorney?

If you have a will, you have a document to tell others what you want to happen with your property after you die. However, if you are incapacitated and cannot make decisions about your finances or health, you need a Power of Attorney, says Ohio News Time in the article “Do I Really Need a Power of Attorney?”

A Power of Attorney (POA) names another person, referred to as an “agent,” to make decisions on another person’s behalf, known as the “principal.” The agent may need to manage the person’s finances, including paying a mortgage, utility bills and handling other money matters.

If there is no POA, the family faces a series of challenges. They will need to go to court and apply to become their loved one’s guardian. This process becomes expensive and time consuming. Anyone applying to become a guardian needs to be vetted by the court and any large decisions made for the ward must be approved by the court. The court is not required to make a family member a guardian, so it is possible for a person the family doesn’t even know to suddenly be empowered to handle their loved one’s finances.

It’s far easier to have a POA created when you have your estate created. When you update your estate plan, you’ll also want to review and update your POA.

A POA should never be a standard form, since few people’s lives fit into a standard format. For instance, you may want a POA to permit your agent to conduct all of your financial matters, but not to sell your home. You may want to name a specific person just to handle the sale of your home, if you are not able to return to living at home but will need to permanently stay in a long-term care facility. The POA is tailored to reflect your wishes and can be as broad or as narrow as you want.

It is also important to name “successor” agents. If the first person you name cannot or does not want to serve in this capacity, naming a successor agent will make the transition easier. In the event the successor does not want to serve, it may not be a bad idea to have a back-up to the back-up.

Speak with the people you are naming to serve as POA to ensure that they know what their responsibilities will be and confirm their willingness to serve. It is also important to be realistic: if they are the same age as you, will they be able to serve? It may be better to name an adult child to take on this role.

In addition to the POA, everyone should have a Health Care Power of Attorney. This permits a named person, also known as an agent, to discuss your health with doctors and other providers and make decisions about your care. You’ll also want a HIPAA Release, so a person you wish has access to medical records.

The POA is often considered a simple add-on to an estate plan. However, it is actually a very important document to protect you while you are living. Without it, your spouse or adult children will have many more barriers to be involved in your care and make decisions on your behalf.

Reference: Ohio News Time (Oct. 15, 2021) “Do I Really Need a Power of Attorney?”

How Does Cryptocurrency Work in an Estate Plan?

Crypto-assets, including cryptocurrencies and non-currency blockchain tokens, hold significant family wealth today and present challenges to securing, transferring, protecting and gifting, as explained in the article “What Holding Crypto Means for Your Estate Plan” from U.S. News & World Report.

Traditional estate planning is evolving to include this new asset class, as digital asset investors embrace a market worth more than $1 trillion. Experienced investors who use digital assets to expand their asset diversification are more likely to understand the importance of protecting their investment through estate planning. However, first time investors who own a small amount of cryptocurrency or the early adapters who bought Bitcoins at the very start and now are worth millions, may not be as aware of the importance of digital asset estate planning.

Unlike traditional bank accounts, controlled through a centralized banking system and a legacy system of reporting, digital assets are by their very nature decentralized. An owner has access through a private key, usually a series of numbers and letters known only to the asset’s owner and stored in a digital wallet. Unless an executor knows about digital wallets and what a private key is and how to use them, the assets can and often do evaporate.

It can be challenging for executors to obtain access to traditional accounts, like 401(k)s or brokerage accounts. Mistakes are made and documents go astray, even in straightforward estates. In a new asset class, with new words like private keys, seed phrases, hardware wallets and more, the likelihood of a catastrophic loss increases.

A last will and testament is necessary for every estate. It’s needed to name an executor, a guardian for minor children and to set forth wishes for wealth distribution. However, a will becomes part of the public record during court proceedings after death, so it should never include detailed information, like bank account numbers. The same goes for information about cryptocurrency. Specific information in a will can be used to steal digital assets.

Loved ones need to know the crypto-assets exist, where to find them and what to do with them. Depending on the amount of the assets and what kind of assets are held, such information needs to be included and addressed in the estate plan.

If the assets are relatively small and owned through an exchange (Coinbase, Binance, or Kraken are a few examples), it is possible to list the crypto asset on a schedule of trust assets and ensure that the trustee has all the login information and knows how to access them.

For complex cases with significant wealth in digital assets, establishing a custodian and trustee may be necessary. A plan must be created that establishes both a custodian and trustee of digital assets. Steps include sharing private keys with a family member or trusted friend or splintering the private keys among multiple trusted individuals, so no one person has complete control.

This new asset class is here for the foreseeable future, and as more investors get involved with cryptocurrency, their estate plan needs to address and protect it.

Reference: U.S. News & World Report (Oct. 5, 2021) “What Holding Crypto Means for Your Estate Plan”

When Should an Estate Plan Be Reviewed?

If your parents don’t remember when they last reviewed their estate plan, then chances are it’s time for a review. Over the years, wishes, relationships and circumstances change, advises the recent article, “5 Reasons To Have Your Parents’ Estate Plan Reviewed,” from Forbes. An out-of-date estate plan may not achieve your parent’s wishes, or be declared invalid by the court. Having an estate planning attorney review the estate plan may save you money in the long run, not to mention the stress and worry created by an estate disaster. If you need reasons, here are five to consider.

Financial institutions are wary of dated documents. Banks and other financial institutions look twice at documents that are not recent. Trying to use a Power of Attorney that was created twenty years ago is bound to create problems. One person tried to use a document, but the bank insisted on getting an affidavit from the attorney who prepared it to be certain it was valid. While the son was trying to solve this, his mother died, and the account had to be probated. A “fresh” power of attorney would have solved the problem.

State laws change. Things that seem small become burdensome in a hurry. For example, if someone wants to leave a variety of personal effects to many different people, each and every one of the people listed would need to be located and notified. Many states now allow a separate writing to dispose of personal items, making the process far easier. However, if the will is out of date, you may be stuck with a house-sized task.

Legal document language changes. The SECURE Act changed many aspects of estate planning, particularly with regard to retirement accounts. If your parents have retirement accounts that are payable to a trust, the trust language must be changed to comply with the law. Not having these updates in the estate plan could result in an increase in income taxes or costly fees to fix the situation.

Estate tax laws change. In recent years, there have been many changes to federal tax laws. If your parents have not updated their estate plan within the last five years, they have missed many changes and many opportunities. It is likely that your parents’ assets have also changed over the years, and the documents need to reflect how the estate taxes will be paid. Are their assets titled so that there are enough funds in the estate or trust to cover the cost of any liability? Here’s another one—if all of the assets pass directly to beneficiaries via beneficiary designations, who is going to pay for the tax bills –and with what funds?

Older estate plans may contain wishes from decades ago. For one family, an old will led to a situation where a son did not inherit his father’s entire estate. His late sister’s children, who had been estranged from him for decades, received their mother’s share. If the father and son had reviewed the will earlier, a new will could have been created and signed that would have given the son what the father intended.

These types of problems are seen daily in your estate planning attorney’s office. Take the time to get a proper review of your parent’s estate plan, to prevent stress and unnecessary costs in the future.

Reference: Forbes (May 25, 2021) “5 Reasons To Have Your Parents’ Estate Plan Reviewed”

 

What Happens when Homeowner Dies without Will?

When parents die suddenly, in this case due to COVID-19, and there is no will and no discussions have taken place, siblings are placed in an awkward, expensive and emotionally fraught situation. The article titled “My parents died of COVID-19 and left no will. My brother lives rent-free in their home and borrowed $35,000. What now?” from MarketWatch sums up the situation, but the answer is complicated.

When there is no will, or “intestacy,” there aren’t a lot of choices.

These parents had a few bank accounts, owned their home outright and left no debts. They had six adult children, including one that died and is survived by two living sons. None of the siblings agrees upon anything, so nothing has been done.  One of the siblings lives in the house rent free. Another brother was loaned $35,000 for a down payment on a mobile home. He now claims that the loan was a gift and does not have to pay it back. There are receipts, but the money was paid directly to the escrow company from the mother’s bank account.

How do you determine if this brother received a loan or a gift? What do you do about the brother who lives rent-free in the family home? How does the family now move the estate into probate without losing the house and the bank accounts, while maintaining a sense of family?

For starters, an administrator needs to be appointed to begin the probate process and act as a mediator among the siblings. In some states, the administrator also requires a family tree, so they can know who the descendants are. Barring some huge change of heart among the siblings, this is the only option.  If the parents failed to name a personal representative and the siblings cannot agree on who should serve, an estate administration lawyer is the sensible choice. The court may name someone, if there is concern about possible conflicts of interests or the rights of creditors or other beneficiaries.

A warning to all concerned about how the appointment of an administrator works, or sometimes, does not work. Working with an estate planning attorney that the siblings can agree upon is better, as the attorney has a fiduciary and ethical obligation to the estate. While state laws usually hold the administrator responsible to the standard of care of a “reasonable, prudent” individual, not all will agree what is reasonable and prudent.

One note about the loan/gift: if the mother helped a brother to qualify for a mortgage, it is possible that a “Gift Letter” was created to satisfy the bank or the resident’s association. Assuming this was not a notarized loan agreement, the administrator may rule that the $35,000 was a gift. Personal loans should always be recorded in a notarized agreement.

This family’s disaster serves as a good lesson for anyone who does not have an estate plan. Siblings rarely agree, and a properly prepared estate plan protects more than your assets. It also protects your children from losing each other in a fight over your property.

Reference: MarketWatch (April 4, 2021) “My parents died of COVID-19 and left no will. My brother lives rent-free in their home and borrowed $35,000. What now?”

 

Make Sure Your Estate Plan Protects Digital Assets

Today’s estate plan needs to expressly declare an “agent” or a “fiduciary” to gain access and control of “digital assets” in case of incapacity or death. If your estate plan has not been updated in the last four or five years, it’s likely that your digital assets are unprotected, advises the article “Properly addressing digital assets on your estate plan” from Southern Nevada Business Weekly.

Digital assets have value not only to owners, but to family members, beneficiaries and heirs. Some assets have sentimental value, like videos and photos, while others, like business records, URLs and gaming accounts, have financial value. Failing to address these issues in an estate plan could result in your executor and heirs being denied access and control of digital assets during incapacity or death.

Here are some examples of digital assets:

  • Email accounts–contain communications and history, including information about other digital assets.
  • Social media accounts/apps: Facebook, Twitter, Pinterest, YouTube, TikTok, etc.
  • Photo Sharing Accounts: Instagram, Shutterfly, Snapfish, Flickr, etc.
  • Gaming and Gambling Accounts/Apps: DraftKings, Esports Entertainment
  • E-Commerce Accounts/Apps: Amazon, PayPal, Etsy, PayPal, Venmo, etc.
  • Financial Accounts/Apps: Banks, Scottrade, E*Trade
  • Retail Accounts: Any store, online shopping that has a username and a password
  • Security Information: Two factor authentication, mobile phone PIN/PW, facial recognition, etc.

Here’s a little-known fact: without the proper legal authority to access these assets, the “agent” or “fiduciary” could be committing a crime. The Consumer Fraud and Abuse Act provides that it is a federal crime to access a computer and obtain information without authorization or when exceeding authorized access.

Most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA 2017). The Act contains specific language to be used in wills, trusts or power of attorney to name a “designated recipient” or “fiduciary” to access, control, transfer, or close digital assets upon incapacity or after death. RUFADDA also provides specific procedures for companies to disclose digital assets to a designated recipient or fiduciary.

If your estate planning assets do not address the issue of digital assets or do not use the specific language of RUFADDA, or generally if your estate planning documents were created before 2017, it’s time for a review that includes digital assets.

Even if all you have is a personal email account, you have digital assets to protect. It’s not a big problem to address them in your estate plan but can become a bigger program if they are neglected.

Reference: Southern Nevada Business Weekly (Sep. 17, 2020)“Properly addressing digital assets on your estate plan”

 

Avoid These Mistakes with Your Estate Plan

Estate planning means putting together a plan on paper following the letter of the law when it comes to what should happen to assets when you die. It also includes your decision regarding who will care for your children, who will make decisions on your behalf if you are unable and what kind of care you do or don’t want when you are seriously ill or injured. It doesn’t have to be difficult, but according to the article “10 Mistakes Often Made When Estate Planning” from SavingAdvice.com, there are ten classic mistakes to avoid.

1—Thinking you don’t have an estate and not having an estate plan. Your estate is whatever you own: a house, regardless of its size, a car, personal items, financial accounts, pets and any items that have monetary or sentimental value. You might think your family will just figure things out when you die. In most cases, they won’t, or not easily. That creates a burden for them.

2—Thinking only about after death. Most of what is done in estate planning does concern what happens after you die, but it also includes protection for you and loved ones while you are living. Certain documents are created to protect you, if you become incapacitated. It also includes life insurance, disability insurance and long-term care insurance.

3—Not making sure all of your estate planning documents work together. Let’s say you have a life insurance policy and the beneficiary is your first husband. If you remarry, you need to update that form. What if you named someone to be your beneficiary on retirement accounts, but you have learned since you named them that the person won’t be able to manage the money? An estate planning attorney can help you put all of the pieces together to work correctly.

4—Not planning for minor children. If you have children who are under age 18, your estate plan is the document that tells the court two very important things: who you want to raise them (to be their guardian) and who you want to be in charge of the money left for their care.

5—Not taking advantage of trusts. A revocable trust gives you control over assets while you are alive, but passes control to a beneficiary when you die. It, therefore, avoids probate for the assets in the trust. However, if you don’t do this correctly, you’ll create more problems than you solve.

6—Forgetting about taxes. An estate plan helps minimize taxes for your estate and for your heirs. Otherwise, your heirs could receive far less, and Uncle Sam will receive far more than you wanted.

7—Failing to set aside adequate liquid assets. When you die, your loved ones will need to pay for a funeral, which are very expensive. Or you may own a business that you left to heirs—they may need a certain amount of cash to continue operating, while things are being settled. Make arrangements, so you don’t leave loved ones or business partners high and dry.

8—Avoiding the tough conversations while you’re alive. Maybe you want to leave your children the family home, but they don’t want it. You may also want to be sure they take your ancient Pekinese dog, who they never warmed up to. Talk with your heirs about your wishes and understand if your wishes are not the same as theirs. Adjust your estate plan accordingly.

9—Overlook the concept of secondary beneficiaries and executors. If you have three children and name only one as a beneficiary, what happens if that one dies? The same goes for naming an executor. You’ll want to name a primary and a secondary executor, and multiple beneficiaries.

10—Thinking estate planning is done once and finished forever. Estate planning is never really done, until you die. Life changes, your relationships change and assets change. Just as you do your taxes once a year, you should review your estate plan every time there is a big change in your life or every three or four years. You should also contact your estate planning attorney to schedule an appointment to do this.

Reference: SavingAdvice.com (July 24, 2020) “10 Mistakes Often Made When Estate Planning”

 

Your Estate Plan Needs to Be Customized

The only thing worse than having no estate plan, is an estate plan created from a ‘fill-in-the-blank’ form, according to the recent article “Don’t settle for a generic estate plan” from The News-Enterprise. Your estate plan needs to be customized. Compare having an estate plan created to buying a home. Before you start packing, you think about the kind of house you want and how much you can spend. You also talk with real estate agents and mortgage brokers to get ready.

Even when you find a house you love, you don’t write a check right away. You hire an engineer to inspect the property. You might even bring in contractors for repair estimates. At some point, you contact an insurance agent to learn how much it will cost to protect the house. You rely on professionals, because buying a home is an expensive proposition and you want to be sure it will suit your needs and be a sound investment.

The same process goes for your estate plan. You need the advice of a skilled professional–the estate planning lawyer. Sometimes you want input from trusted family members or friends. There other times when you need the estate planning lawyer to help you get past the emotions that can tangle up an estate plan and anticipate any family dynamics that could become a problem in the future.

An estate planning attorney will also help you to avoid problems you may not anticipate. If the family includes a special needs individual, leaving money to that person could result in their losing government benefits. Giving property to an adult child to try to avoid nursing home costs could backfire, making you ineligible for Medicaid coverage and cause your offspring to have an unexpected tax bill.

Your estate planning lawyer should work with your team of professional advisors, including your financial advisor, accountant and, if you own a business, your business advisor. Think of it this way—you wouldn’t ask your real estate agent to do a termite inspection or repair a faulty chimney. Your estate plan needs to be created and updated by a skilled professional: the estate planning lawyer.

Once your estate plan is completed, it’s not done yet. Make sure that the people who need to have original documents—like a power of attorney—have original documents or tell them where they can be found when needed. Keep in mind that many financial institutions will only accept their own power of attorney forms, so you may need to include those in your estate plan.

Medical documents, like advance directives and healthcare powers of attorney, should be given to the people you selected to make decisions on your behalf. Make a list of the documents in your estate plan and where they can be found.

Preparing an estate plan is not just signing a series of fill-in-the-blank forms. It is a means of protecting and passing down the estate that you have devoted a lifetime to creating, no matter its size.

Reference: The News-Enterprise (June 23, 2020) “Don’t settle for a generic estate plan”

 

What Happens when Mom Refuses to Create an Estate Plan?

This is a tough scenario. It happens more often than you’d think. Someone owns a home, investment accounts and an inheritance but doesn’t want to have an estate plan. They know they need to do something but keep putting it off—until they die, and the family is left with an expensive and stressful mess. A recent article titled “How to Get a Loved One to Visit an Estate Planning Attorney Before It’s Too Late” from Kiplinger, explains how to help make things right.

Most people put off seeing an estate planning attorney because they are afraid of death. They may also be overwhelmed by the thought of how much work is involved. They are also worried about what it all might cost. however, if there is no estate plan, the costs will be far higher for the family.

How do you get the person to understand that they need to move forward?

Talk with the financial professionals the person already uses and trusts, like a CPA or financial advisor. Ask them for a referral to an estate planning attorney they think would be a good fit with the person who doesn’t have an estate plan. It may be easier to hear this message from a CPA, than from an adult child.  Work with that professional to promote the person, usually an older family member, to get comfortable with the idea to talk about their wishes and values with the estate planning attorney. Offer to attend the meeting or to facilitate the video conference, to make the person feel more comfortable.

An experienced estate planning attorney will have worked with reluctant people before. They’ll know how to put the older person at ease and explore their concerns. When the conversation is pleasant and productive, the person may understand that the process will not be as challenging and that there will be a lot of help along the way.

If there is no trusted team of professionals, then offer to be a part of any conversations with the estate planning attorney to make the introductory discussion easier. Share your own experience in estate planning, and tread lightly.

Trying to force a person to engage in estate planning with a heavy hand, almost always ends up in a stubborn refusal. A gentle approach will always be more successful. Explain how part of the estate plan includes planning for medical decisions while the person is living and is not just about distributing their assets. You should be firm, consistent and kind.

Explaining what their family members will need to go through if there is no will, may or may not have an impact. Some people don’t care, and may simply shrug and say, “It’ll be their problem, not mine.” Consider what or who matters to the person. What if they could leave assets for a favorite grandchild to go to college? That might be more motivating.

One other thing to consider: if the person has an estate plan and it is out of date, that may be just as bad as not having an estate plan at all, especially when the person has been divorced and remarried. Just as many people refuse to have an estate plan, many people fail to update important documents, when they remarry. More than a few spouses come to estate planning attorney’s offices, when a loved one’s life insurance policy is going to their prior spouse. It’s too late to make any changes. A health care directive could also name a former brother-in-law to make important medical decisions. During a time of great duress, it is a bad time to learn that the formerly close in-law, who is now a sworn enemy, is the only one who can speak with doctors. Don’t procrastinate if any of these issues are present.

Reference: Kiplinger (May 11, 2020) “How to Get a Loved One to Visit an Estate Planning Attorney Before It’s Too Late”

 

Estate Planning Basics for Difficult Times

Most people who contract COVID-19 experience mild symptoms but it does not hurt to be prepared just in case you need to be hospitalized, explains the article “A Guide to Estate Planning During the Coronavirus Pandemic” from HuffPost.com. It is scary to think about being so sick that you aren’t able to make decisions for yourself. However, that’s the point of an estate plan to ease your fears. You’ll feel better knowing you’ve made health and financial decisions in advance and your loved ones won’t have to guess about your wishes. These are the estate planning basics for difficult times.

Even without a global pandemic, everyone should have an estate plan. If you don’t have one, now is the time to get it done, even if you are single and have limited wealth. An estate plan includes documents like a revocable trust, financial powers of attorney (FPOA), health care powers of attorney (HCPOA) and more.

Right now, the medical and financial powers of attorney are on everyone’s mind. These two documents allow a person you name to do your banking, pay your bills and make medical decisions, if you are quarantined at home, admitted to the hospital, or become incapacitated. If you don’t have a financial power of attorney, a family member will need to request the probate court to appoint a guardian. This will be expensive and time-consuming. The same goes for the health care power of attorney. If a decision needs to be made in an emergency situation, the family will not have the ability to enforce your wishes.

A living will, known in some states as an advance health care directive, lets you be specific about what end-of-life treatment you do or do not want to receive, if you become terminally ill or permanently unconscious. Without a living will, the decision to remove life support must be made by loved ones, without knowing what you want.

A HIPAA waiver permits your loved ones to access medical information. Even when there is a health care power of attorney, there are some institutions that will refuse access to medical information without a standalone HIPAA waiver.

The last will and testament is the legal document that is used to direct distribution of property at the time of death, appoint an executor who will oversee the distribution of assets, and, if you have minor children, name a guardian for them. Without a last will, the court will rely on state laws to determine who inherits your property and who will raise your children.

A living trust is a legal contract that creates an entity to hold your assets. If it is a revocable trust, you control it and you can make changes to it anytime you wish. If you become incapacitated or unable to manage your estate, the living trust avoids the need for a court-appointed conservatorship. When you create the living trust, you appoint a successor trustee who will step in when you are unable to manage your affairs. The living trust creates privacy, since the assets in the trust do not go through probate, which is a public process.

Once you have an estate plan, make sure that the documents are safe and the right people can access them. Some estate planning attorneys store documents for their clients. Copies of relevant documents should be given to your treating physician, financial advisor, family members and any trustees or agents. Keep high quality scanned copies on your computer, and label them, so that they can be identified. Don’t name them “Scan1” and “Scan2.” Label them accurately and include the date the documents were signed.

Speak with your estate planning attorney to ensure that you have all of the necessary documents to protect yourself, your loved ones and your property.

Reference: HuffPost.com (April 7, 2020) “A Guide to Estate Planning During the Coronavirus Pandemic”