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Generation skipping

How Does the Generation-Skipping Transfer Tax Work in Estate Planning?

How Does the Generation-Skipping Transfer Tax Work in Estate Planning?

The generation-skipping transfer tax, also called the generation-skipping tax, can apply when a grandparent leaves assets to a grandchild—skipping over their parents in the line of inheritance. It can also be triggered, when leaving assets to someone who’s at least 37½ years younger than you. If you are thinking about “skipping” any of your heirs when passing on assets, it is important to know what that may mean tax-wise and how to fill out the requisite form. An experienced estate planning attorney can help you and counsel you on the best way to pass along your estate to your beneficiaries.

KAKE.com’s recent article entitled “What Is the Generation-Skipping Transfer Tax?” says the tax code imposes both gift and estate taxes on transfers of assets above certain limits. For 2020, you can exclude gifts of up to $15,000 per person from the gift tax, with the limit twice as much for married couples who file a joint return. Estate tax applies to estates larger than $11,580,000 for 2020, increased to $11,700,000 in 2021.

The gift tax rate can be as high as 40%, and the estate tax is also 40% at the top end. The IRS uses the generation-skipping transfer tax to collect its portion of any wealth that is transferred across families, when not passed directly from parent to child. Assets subject to the generation-skipping tax are taxed at a flat 40% rate.

Note that the GSTT can apply to both direct transfers of assets to your beneficiaries and to assets passing through a trust. A trust can be subject to the GSTT, if all trust beneficiaries are considered to be skip persons who have a direct interest in the trust.

The generation-skipping tax is a separate tax from the estate tax, but it applies alongside it. Similar to the estate tax, this tax begins when an estate’s value exceeds the annual exemption limits. The 40% GSTT would be applied to any transfers of assets above the exempt amount, in addition to the regular 40% estate tax.

That is the way the IRS gets its money on wealth, as it moves from one person to another. If you passed your estate to your child, who then passes it to their child then no GSTT would apply. The IRS would just collect estate taxes from each successive generation. However, if you skip your child and leave assets to your grandchild, it eliminates a link from the taxation chain, and the GSTT lets the IRS replace that link.

You can use your lifetime estate and gift tax exemption limits, which can help to offset how much is owed for the generation-skipping tax. However, any unused portion of the exemption counted toward the generation-skipping tax is lost when you pass away.

If you’d like to minimize estate and gift taxes as much as possible, there are several options. Your experienced estate planning attorney might suggest giving assets to your grandchildren or another generation-skipping person annually, rather than at the end of your life. That’s because you can give up to $15,000 per person each year without incurring gift tax, or up to $30,000 per person if you’re married and file a joint return. Just keep the lifetime exemption limits in mind when planning gifts.

You could also make payments on behalf of a beneficiary to avoid tax. For instance, to help your granddaughter with college costs, any direct payments you make to the school to cover tuition would generally be tax-free. The same is true for direct payments made to healthcare providers, if you’re paying medical expenses on behalf of another.

Another option may be a generation-skipping trust that lets you transfer assets to the trust and pay estate taxes at the time of the transfer. The assets you put into the trust must stay there during the skipped generation’s lifetime. Once they die, the trust assets can be passed on tax-free to the next generation.

There’s also a dynasty trust. This trust can let you pass assets to future generations without triggering estate, gift, or generation-skipping taxes. However, they are meant to be long-term trusts. You can name your children, grandchildren, great-grandchildren and subsequent generations as beneficiaries and the transfer of assets to the trust is irrevocable. Therefore, when you place the assets in the trust, you will not be able to take them back out again. You can see why it’s so important to understand the implications, before creating this type of trust.

The generation-skipping tax can make a big impact on the assets you’re able to leave to heirs. If you’re considering using this type of trust to pass on assets or you’re interested in exploring other ways to transfer assets while minimizing taxes, speak to an experienced estate planning attorney.

Reference: KAKE.com (Feb. 6, 2021) “What Is the Generation-Skipping Transfer Tax?”

Read more related articles at :

How the Generation-Skipping Transfer Tax Exemption Works

The Generation-Skipping Transfer Tax: A Quick Guide

Also, read on of our previous blogs at:

Do We Need Estate Planning?

Click here to check out our On Demand Video about Estate Planning.

Estate Battle with Millions at Stake in New Orleans

Estate Battle with Millions at Stake in New Orleans

Jessica Fussell Brandt filed an eviction petition against her daughter, Julie Hartline, her son-in-law Darryl Hartline and two grandchildren, Alexis and Zachary Hartline. She is pitted against them in a legal fight over an estate valued at more than $300 million, reports nola.com in the article “In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound.”

Before auto magnate Ray Brandt died at age 72 from pancreatic cancer, the entire family shared a compound that includes two mansions located next to the Metairie Country Club. Brandt has been trying to sell the property which belongs to the estate, as its executrix. The family members living there don’t want to move, even taking down “For Sale” signs from the lawn.

Her attempt to evict them comes after she won a case in her attempt to maintain control of her late husband’s estate, which includes a large number of auto dealerships and collision centers across Louisiana and Mississippi.

On January 25, a Jefferson Parish judge invalidated the last will and testament that Ray Brandt signed just weeks before his death and another last will drafted in 2015. The district judge ruled that both last wills contained a flaw in how they were notarized: neither notarization specified that Ray Brandt, the witnesses, and the notary were together when it was signed.

The decision is being appealed, but it appears to leave the fate of Brandt’s empire to a last will he made in 2010. Unlike the others, this last will places Jessica Brandt in full control of his estate and trust, including the auto dealerships, until her death.

Ultimately, Ray Brandt directed that her grandchildren, who he legally adopted as adults before he died, would split the estate’s assets.

Despite issuing a statement saying that Jessica was “pleased with the prospect beginning the healing process,” after the Jefferson Parish decision, the eviction filing revealed that Jessica’s attorneys sent an email urging family members to leave the property by January 31, 2021.

Jessica made a statement that her wish to evict family members was a result of the multiple citations issued by Jefferson Parish for continuing violations at the compound. The latest one was for a trailer and mud buggy parked in a driveway on a vacant lot. She also said that the family members own two other homes, one in Metairie and one in Fort Beauregard.

The compound where the family settled seven years ago is estimated to be worth more than $8 million.

The heart of the dispute pits Jessica Brandt against Archbishop Rummel High School principal Marc Milano, who Ray Brandt named as a trustee to oversee the auto group and the rest of the estate until Jessica Brandt dies. Milano has accused Jessica of taking money from the estate and trying to claim an ownership interest in the dealership. She sued him for defamation.

Now the grandchildren have filed their own legal action, challenging a petition to put Ray Brandt’s last will into effect. Their argument is the trust that Ray Brandt set up in 2015 makes it clear that he meant for Milano to oversee the assets.

This estate battle will no doubt keep the Jefferson Parish courts and newspapers busy for some time. It’s a lesson to keep your family’s business private, by ensuring that your estate plan is properly prepared and up to date.

Reference: nola.com (Feb. 3, 2021) “In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound”

Read more related articles at:

Fate of Ray Brandt’s auto empire in doubt amid roiling family squabble over estate

‘Stop all of this!’ Ray Brandt’s widow bemoans the family battle over his massive estate

In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound

Also, read one of our previous Blogs at:

Celebrity Estates: Battle Over Inheritances

Click here to check out our On Demand Video about Estate Planning.

Blended Families

Planning Future for Nontraditional Families

Planning Future for Nontraditional Families

Today’s non-traditional family are not just LGBTQ couples, but families undergoing gray divorces, blended families, stepchildren, multinational families and children born through assisted reproductive technologies, referred to as ART, in a recent article titled “How to Plan for LGBTQ, Blended Families, Cohabitation, Other Nontraditional Families” from Financial Advisor.

The key is having an estate plan prepared that is flexible so that last wills, trusts, and all documents reflect the non-traditional family very clearly and do not leave room for courts to make decisions. Here are a few new elements to consider:

Gendered pronouns and definitions. Ideally, your estate documents should use specific names of individuals, not pronouns. We live in a fluid society and using pronouns could lead to unnecessary complications.

Recognize ART and its implications. If there are children conceived by ART, they need to be explicitly included as children of the family. DNA testing can result in a child inheriting assets from a parent they never knew. It may be wise to exclude biological children, parents or siblings who do not have a relationship with the family.

Trust Protector/Trust Decanting. By including provisions that permit trusts to be decanted, that is, transferred from one trust to another, your estate planning attorney will create flexibility to allow a trust protector (a non-fiduciary appointment of a third party) to make changes. The selection of the trust protector is particularly important, as they could have a large impact on the overall plan.

Marriage, non-marital relationships, divorce, remarriage. An estate plan needs to prepare for future changes with precision and flexibility. Protecting the family, its privacy and dignity can be done by limiting the information in the last will, which becomes a public document. While we can’t know what the future holds, we can plan for change.

Prenuptial agreements. State laws vary on what is acceptable and procedurally necessary for a prenup to be enforceable. Typically, the agreement must be voluntary and include full disclosure of both parties’ financial situation. In some states, post-nuptials can be prepared, if the parties can’t agree on the document before they are legally wed.

Divorce creates special estate planning issues. Beneficiary designations need to be changed for life insurance, IRAs and other non-probate assets. Take affirmative steps to ensure that ex-spouses, or soon-to-be exes are removed as beneficiaries on all accounts, including pensions and insurance plans subject to ERISA.

Cohabitating couples. Marital gifts are tax free, but that is not the case for people living together. Estate planning and tax planning needs to be done, so the surviving partner is taken care of. This may include the creation of a cohabitation agreement, similar to a prenuptial agreement.

Planning for sickness and death. Explicitly stating wishes for end-of-life medical treatments, including feeding tubes, respirators, heart machines, etc., is step one in having an Advance Medical Directive created. Step two is deciding who is empowered to make those decisions. Someone who is unmarried but has a partner or a second spouse needs to be authorized. Note that when an individual is hospitalized, stepparents may attempt to deny access to spouses’ children, or children may block access to a stepparent. There should also be a Do Not Resuscitate (DNR) or Physicians Orders for Life-Sustaining Treatment (POLST) in place with the person’s wishes.

Non-traditional families of all types need to protect the family with estate planning and documentation. Issues about protecting children, making health care decisions for a critically ill partner and control of assets must be addressed in a way that respects the individuals and their families while working within the law.

Reference: Financial Advisor (Feb. 2, 2021) “How to Plan for LGBTQ, Blended Families, Cohabitation, Other Nontraditional Families”

Read more related articles at:

Planning for a Non-Traditional Family (Which Is Probably Yours)

Estate Planning For The Modern Family: What To Do When You’re Not The Cleavers

Also, read one of our previous Blogs at:

How Can Blended Families Use Estate Planning to Protect All of the Siblings?

Click here to check out our On Demand Video about Estate Planning.

REAL HOUSEWIVES EX CONSERVATORSHIP

‘Real Housewives’ Ex under Temporary Conservatorship

‘Real Housewives’ Ex under Temporary Conservatorship

Tom Girardi’s brother, Robert, has been named to take care of his daily and personal activities. The news comes a month after Robert filed a petition to be in control of Tom’s estate and ongoing legal battles.

A conservatorship is when a judge appoints someone to manage an incapacitated person’s financial and personal affairs. The conservator’s duties include overseeing finances, establishing and monitoring the physical care of the ward and managing living arrangements.

Screen Rant’s article entitled “RHOBH: Erika’s Ex Tom Girardi Now Under Temporary Conservatorship Due to Illness” reports that Tom and Erika have been entangled in some legal drama since she filed for divorce in November of last year.

Despite the May-December romance (more than 30 years’ difference), they always appeared to be happy together. However, as they battle in divorce, their relationship has turned ugly. Tom refused to pay spousal support, but he has her involved in another legal issue: the couple is being sued by Tom’s former clients for embezzling over $2 million. The plaintiffs say that Tom and Erika stole the money to maintain their lavish lifestyle.

According to Us Weekly, the 81-year-old’s attorney Rudy Cosio said that Tom wouldn’t be able to attend the hearing because he suffered a medical emergency over the weekend. His brother filed a petition in January to control Tom’s estate and legal battle because he’s not currently well enough to handle this on his own. The petition was approved by the judge. Robert was given temporary conservatorship of his brother’s estate, as well as his daily activities and personal matters until the end of March. Another hearing is set for mid-March when the judge will decide whether to grant Robert’s other requests. These include granting him approval to place Tom in facility that treats patients with neurocognitive disorders like dementia.

Robert’s attorney released a statement to Us Weekly on the conservatorship and its urgent nature.

“There was an urgent need for Bob Girardi to have the power to engage counsel in the bankruptcy proceeding on his brother’s behalf, and Tom’s court-appointed counsel clearly agreed, as did the court today,” the statement read.

According to court filings, Robert admitted Tom’s health has been declining since Erika filed for divorce and the embezzlement lawsuit last year. Tom is currently unable to understand the ramifications of the bankruptcy filings pending against him and needs Robert to help him.

In December, it was reported that Tom was secretly hospitalized due to a serious illness. While Tom’s illness is not yet known, many are worried about his mental capabilities.

Reference: Screen Rant (Feb. 2, 2021) “RHOBH: Erika’s Ex Tom Girardi Now Under Temporary Conservatorship Due To Illness”

Read more related articles at:

Erika Jayne’s Husband Tom Girardi Placed Under Temporary Conservatorship Amid Divorce

RHOBH star Erika Jayne’s ex Tom’s brother granted conservatorship over 81-year-old lawyer after ‘medical emergency’

Also, read one of our previous Blogs at:

What Is a Conservatorship?

Click here to check out our On Demand Video about Estate Planning.

 

Covid kids

Now that Seniors are vaccinated will Covid be more prevalent in Youth?

Now that Seniors are vaccinated will Covid be more prevalent in Youth?

This is a question to be given some thought. Initially the COVID vaccine is available to first responder’s and people in the healthcare fields and then it goes by age ranging from highest to lowest. It is also available for those who are considered high risk. But where does that leave the rest of the population? Covid knows know age limit and has been pretty indiscriminate about who it affects. Although the prior categories are more susceptible, there is concern that those left unvaccinated will continue to carry or obtain the virus, thus not completely ending the pandemic. While vaccinating who we are able to brings hope and promise to a possible end to the pandemic, there is still concern about how long the pandemic will endure until vaccinations are available to everyone. Some pose arguments that the young should be vaccinated first, vaccinate the young to protect the old. They reference past flu viruses and how they were handled as a valid point. Some say healthy young people might not be able to get the coronavirus vaccine until 2022. Other’s stick to the original theories of vaccinating the most susceptible and working our way down to the youth. They argue we must take care of the immediate danger and then begin the prevention cycle.

Read more related articles at:

COVID-19 vaccine: vaccinate the young to protect the old?

Healthy young people might not be able to get the coronavirus vaccine until 2022, WHO says

Tipsters, tech-savvy kids, pharmacy hopping: How Americans are landing coronavirus vaccines

Also, Read one of our Previous blogs at:

What are the Issues with COVID Vaccinations Sign-ups for Seniors?

Click here to check out our On Demand Video about Estate Planning.

Corona 3

Did the Pandemic Put a Premium on Estate Planning?

Did the Pandemic Put a Premium on Estate Planning?

The number of life insurance applications from people under age 44 increased by more than 7% in 2020, according to the MIB Group, a data sharing service for insurance companies, which tracks life insurance applications.

NBC News’ recent article entitled “Americans flocked to buy life insurance, prepare wills and trusts last year” says that life insurance applications for the age group had been mostly down over the last several years. So, that’s a big increase.

There are a number of factors that contributed to the spike, but experts point to the pandemic and the insurance awareness it brought on.

People are looking at mortality like they’ve never looked at it before, especially younger adults. Those who felt invincible have been shaken by COVID-19. They now realize we are all mortal.

With millions of jobs lost during the early stages of the pandemic, many workers had to leave behind their employer-paid life insurance through their employee health benefits packages. Roughly 54% of Americans had life insurance earlier this year, most of them through their employers.

Overall, insurance applications are up by 4% this year. Northwestern Mutual, the nation’s largest seller of life insurance last year, sold 15% more life insurance policies from April to September, compared to the same time last year, CNBC reported in October.

Other companies also saw their applications grow.

In estate planning, the number of people drafting wills and trusts is also on the upswing because of the pandemic. A recent LegalZoom survey found that 32% of people ages 18 to 34 drafted wills because of COVID-19, and about 21% of that group did so because they knew someone who had contracted the virus.

Estate planning attorneys know that preparing for death can be cumbersome. However, as the pandemic has shown us, our demise can come at any time. We should all be prepared.

Reference: NBC News (Jan. 1, 2021) “Americans flocked to buy life insurance, prepare wills and trusts last year”

Read more related articles at:

Pandemic highlights importance of estate planning

Estate Planning In The Pandemic Age: It’s Time To Prepare For The Unexpected

Also, read one of our previous Blogs at:

How Can Estate Planning Protect Me from COVID-19?

Click here to check out our On Demand Video about Estate Planning.

Estate Plan- Biden

Does an Estate Plan Need to Change because of the New Administration?

Does an Estate Plan Need to Change because of the New Administration?

Changes in the White House and the Senate have many people wondering how federal estate and gift tax laws may change and when those changes will occur, as reported in an article “Estate planning in light of a new presidential administration: What should you do now?” from the St. Louis Business Journal.

While campaigning, Joe Biden pledged to undo many of the prior administration’s tax policies, promising a progressive approach to taxation focusing on shifting the burden of taxes to high-income individuals and businesses.

The Tax Cuts and Jobs Act (TCJA) temporarily doubled the federal estate and gift tax exemption to $10 million (adjusted annually for inflation) until 2025. For 2021, the exemption stands at $11.7 million for individuals and $23.4 million for married couples. These amounts were set to expire after 2025 to $5 million for individuals and $10 million for married couples, but changes are expected to arrive sooner.

Biden also said he would end the “step-up” in basis that spares beneficiaries from having to pay income taxes for capital gains on inherited assets that appreciated in value, typically stocks, mutual funds and real estate. If a beneficiary sells an inherited asset now, the capital gains generated is the difference between the asset’s fair market value at the time of the sale minus the stepped-up basis, i.e., the fair market value of the asset at the date of the deceased’s death, rather than the basis at the date of the original purchase.

Without the step-up in basis, the capital gains generated upon the sale of the inherited assets would be far higher, increasing capital gains taxes paid by heirs.

Does it make sense to prepare or review your estate plan now, in light of the potential changes ahead? Having an outdated estate plan might be a bigger risk. When it comes to big changes in future tax laws, there are two things to keep in mind:

Making changes out of fear of tax law changes that have not occurred yet, could have lasting effects, and not always good ones. It is prudent to remain informed and prepared, but not to anticipate changes that have not become law yet.

What is more important is to be prepared for change, by understanding your current estate plan and being sure that it still works to minimize taxes and accomplish goals.

A few questions to consider:

  • Do you fully understand your current estate plan?
  • Do you know the total value of your assets and liabilities?
  • Do you know if federal and state estate taxes will be an issue for your heirs?
  • Have you reviewed your beneficiary designations recently?
  • When was your estate plan last updated? That includes your last will, revocable living trust, power of attorney and health care directives.

Changes are coming to estate law, but what they are and when they will occur are still unknown. Having an experienced estate planning attorney create or review your estate plan right now is more important than waiting to see what the future will bring.

Reference: St. Louis Business Journal (Jan. 27, 2021) “Estate planning in light of a new presidential administration: What should you do now?”

Read more related articles at: 

Estate Planning under the Biden Administration: What should you do for 2021?

What does a new administration mean for your estate plan?

Also, read one of our previous Blogs at:

What Do I Need to Know about Gift-Giving with the Biden Administration?

Click here to check out our On Demand Video about Estate Planning.

 

millennial and parent

Millennials, It’s Time to Talk Estate Planning With Your Parents

Millennials, It’s Time to Talk Estate Planning With Your Parents

Every generation gets it. some stigma as to how they act as a generation. Some say millennials are selfish and uncaring about the future. They have have gotten a bad rap from a lot of generalized society. As with everything, this theory doesn’t hold water. Millennials continue to get older and can no longer be looked at as children anymore. Lots of millennials are responsible adults now. Some are even moving into their forties. This means that Boomers, also known as their parent’s generation. are also continuing to get older, which means, Millennials may need to begin speaking to their parents, whom are Boomers, about estate planning.

Boomers are at the age when it becomes necessary to have the difficult conversations with them, and the estate planning conversation is one of the most important. This discussion goes further than just conversations about wills and inheritance. It is important to discuss power of attorney, living wills, and even death event planning.

You should discuss wills, trusts, inheritance and any documents needed in regard to those matters. Documents for power of attorney or health care proxy will likely need to be discussed. Also, a living will is very important in the case of your parents being unable to do tasks like pay the bills and other things.

These conversations are not easy and are often uncomfortable and difficult to bring up. One way to help this is to approach estate planning as a way to alleviate anxiety and stress and present the idea to your parents as such.

See Erin Lowry, Millennials, It’s Time to Talk Estate Planning With Your Parents, Bloomberg, December 30, 2020.

Read more related articles at:

Millennials, It’s Time To Talk Estate Planning With Your Parents from Financial Advisors Mag

Are You A Millennial? Talk to Your Parents About Estate Planning

Also, Read one of our previous Blogs at:

The Estate Planning Conversation To Have with Your Parents

Click here to check out our On Demand Video about Estate Planning.

Tony Bennett

How Is Tony Bennett Doing with Alzheimer’s?

How Is Tony Bennett Doing with Alzheimer’s?

Ninety-four-year-old Tony Bennett recently made the announcement in AARP Magazine that he has had Alzheimer’s for last four years. The article details how the condition has impacted the singer’s memory and ability to recognize everyday objects.

BBC’s recent article entitled “Tony Bennett reveals he has Alzheimer’s” says that his wife Susan told the magazine that the singer is “not always sure where he is or what is happening around him.”

However, the iconic crooner has thus far been spared many of the worst characteristics of the disease – including the disorientation that can cause patients to wander from home and episodes of terror, rage, or depression.

Bennett has been a star since 1951, but some of his biggest successes have come in the last few years, including the chart-topping duet albums with Lady Gaga, which won a Grammy. The two stars recently completed a follow-up, which is due for release this year. The LP was recorded over two years, despite the fact that Bennett sometimes was “lost and bewildered” during the sessions.

However, singing frequently helps to subdue the symptoms of Alzheimer’s, and Bennett still rehearses twice a week with his longtime pianist Lee Musiker.

The singer’s neurologist Gayatra Devi told AARP that, prior to the pandemic, Bennett’s touring schedule “kept him on his toes and also stimulated his brain in a significant way”.

“Singing is everything to him. Everything,” added his wife. “It has saved his life many times.”

However, the decline of the live music industry has “been a real blow from a cognitive perspective,” said Devi.

“[Bennett’s] memory, prior to the pandemic, was so much better. And he is not alone. So many of my patients are negatively affected by the isolation, the inability to do the things that matter to them,” he said. “For someone like Tony Bennett, the big high he gets from performing was very important.”

Devi emphasized that Bennett was still “doing so many things, at 94, that many people without dementia can’t do.

“He really is the symbol of hope for someone with a cognitive disorder,” he added.

Alzheimer’s is a condition which affects the brain and is by far the most common cause of dementia. Memory loss is the most common feature of dementia, but other symptoms can include changes to behavior, mood and personality, as well as becoming lost in familiar places or being unable to find the right word in a conversation.

Reference: BBC (Feb. 1, 2021) “Tony Bennett reveals he has Alzheimer’s”

Read more related articles at:

Tony Bennett’s Battle With Alzheimer’s

Tony Bennett’s Family Reveals Singer’s Alzheimer’s Diagnosis

Also, read one of our previous Blogs at:

How Can Celebrities’ Estate Planning Be Impacted by Alzheimer’s?

Click here to check out our On Demand Video about Estate Planning.

POA

Can You Amend a Power of Attorney?

Can You Amend a Power of Attorney?

The situation facing one family is all too common. An aunt is now incapacitated with severe Alzheimer’s disease. Her brother has been her agent with a durable power of attorney in place for many years. In the course of preparing his own estate plan, he decided it’s time for one of his own children to take on the responsibility for his sister, in addition to naming his son as executor of his estate. The aunt has no spouse or children of her own.

The answers, as explained in a recent article “Changing the agent under a durable power of attorney” from My San Antonio Life, all hinge on the language used in the aunt’s current durable power of attorney. If she used a form from the internet, the document is probably not going to make the transfer of agency easy. If she worked with an experienced estate planning attorney, chances are better the document includes language that addresses this common situation.

If the durable power of attorney included naming successor agents, then an attorney can prepare a resignation document that is attached to the durable power of attorney. The power of attorney document might read like this: “I appoint my brother Charles as agent. If Charles dies or is incapacitated or resigns, I hereby appoint my nephew, Phillip, to serve as a successor agent.”

If the aunt would make her wishes clear in the actual signed durable power of attorney, the nephew could relatively easily assume authority, when the father resigns the responsibility because the aunt pre-selected him for the role.

If there is a clause that appointed a successor agent, but the successor agent was not the nephew, the nephew does not become the agent and the aunt’s brother can’t transfer the POA. If there is no clause at all, the nephew and the father can’t make any changes.

In September 2017, there was a change to the law that required durable power of attorney documents to specifically grant such power to delegate the role to someone else. The law varies from state to state, so a local estate planning attorney needs to be asked about this issue.

If there is no provision allowing an agent to name a successor agent, the nephew and father cannot make the change.

Another avenue to consider: did the aunt’s estate planning attorney include a provision that allows the durable power of attorney to establish a living trust to benefit the aunt and to transfer assets into the trust? Part of creating a trust is determining who will serve as a trustee, or manager, of the trust. If such a clause exists in the durable power of attorney and the father uses it to establish and fund a trust, he can then name his son, the nephew, as the trustee.

Taking this step would place all of the aunt’s assets under the nephew’s control. He would still not be the aunt’s agent under her power of attorney. Responsibility for certain tasks, like filing the aunt’s income taxes, will still be the responsibility of the durable power of attorney.

If her durable power of attorney does not include establishing a living trust, the most likely course is the father will need to resign as agent and the nephew will need to file in court to become the aunt’s guardian. This is a time-consuming and slow-paced process, where the court will become heavily involved with supervision and regular reporting. It is the worst possible option, but it may also be the only option.

If your family is facing this type of situation, begin by speaking with an experienced estate planning attorney to find out what options exist in your state, and it might be resolved.

Reference: My San Antonio Life (Jan. 25, 2021) “Changing the agent under a durable power of attorney”

Read more related articles at:

Consumer Pamphlet: Florida Power of Attorney

Things You Can and Can’t Do With Power of Attorney

Also, read one of our previous Blogs here:

Can I Create a Power of Attorney without Giving Up Control?

Click here to check out our On Demand Video about Estate Planning.

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