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Avoiding a Family Feud When Choosing a Power of Attorney
Having Power of Attorney in Place Gives Peace of Mind

Avoiding a Family Feud When Choosing a Power of Attorney

The challenge in tasking a family member or trusted friend is not just making sure they have the necessary skills, but to navigate family dynamics so that no fights occur says Considerable.com in the article “How to assign power of attorney without sparking a family feud.” Every family situation is different, but in almost all cases, a power of attorney helps a lot.

Start by understanding exactly what is meant by power of attorney, how it functions within the estate plan, and how siblings can all be involved to some degree with the family’s decision-making process.

Power of attorney is a term that gives an individual, or sometimes, individuals, the legal authority to act on behalf of someone else. It is usually used when a person, usually a parent or a spouse, is unable to make decisions for themselves because of illness or injury. It must be noted that power of attorney relates to financial and legal decisions. There are methods to address making decisions for another person for their health care or end-of-life decisions, but they are not accomplished by the power of attorney (POA).

It should be noted that there is a distinct difference between power of attorney and executor of the estate. Power of attorney is in effect while the person who has granted the authority is alive, but unable to act on their own behalf. The executor of the estate assumes responsibility for managing the estate through the probate process. While they are two different roles, they are often held by the same person, usually an adult child who is responsible and has good decision-making skills.

There are different types of power of attorney roles. The most common is the general power of attorney, followed by the health care or medical power of attorney. The general power of attorney refers to the person who has the authority to handle financial, business or private affairs. If a parent grants power of attorney to one of their children, that child then has the authority to act on behalf of the parent.

Trouble starts if the relationship between siblings is rocky, or if major decisions are made without discussions with siblings.

It’s not easy for siblings when one of them has been granted the power of attorney. That means they must accept the inherent authority of the chosen sibling to make all decisions for their parent. The sibling with the power of authority will have a smoother path if they can be sensitive to how this makes the others feel.

“Mom always liked you best,” is not a sentence that should come from a 50 year old, but often childhood dynamics can reappear during these times.

Remember that the power of attorney is also a fiduciary obligation, meaning that the person who holds it is required to act in the best interest of the parent and not their own. If the relationship between siblings is not good, or there’s no transparency when decisions are made, things can get bumpy.

Here are some tips for parents to bear in mind when deciding who should be their power of attorney:

  • Understand the great power that is being given to another person.
  • Make sure the person who is to be named POA understands the entire range of responsibilities they will have.
  • The siblings who have not been named will need to understand and respect the arrangement. They should also be aware of the potential for problems, keeping their eyes open and being watchful without being suspicious.

Some families appoint two siblings as a means of creating a “checks and balances” solution. This can be set up so the agents need to act jointly, where both agree on an action, or independently, where each has the full authority to act alone. In some cases, this will lesson the chances for jealousy and mistrust, but it can also prolong the decision-making process. It also creates the potential for situations where the family is engaged in a deadlock and important decisions don’t get made.

Parents should discuss these appointments with their estate planning attorney. Their years of experience in navigating family issues and dynamics give the attorneys insights that will be helpful with assigning these important tasks.

Learn how a good power of attorney can give you peace of mind.

Reference: Considerable.com (July 10, 2019) “How to assign power of attorney without sparking a family feud”

How to Design an Estate Plan with a Blended Family?
Second Marriage Blended Family Estate Planning.

How to Design an Estate Plan with a Blended Family?

There are several things that blended families need to consider when updating their estate plans, says The University Herald in the article “The Challenges and Complexities of Estate Planning for Blended Families.”

Estate plans should be reviewed and updated, whenever there’s a major life event, like a divorce, marriage or the birth or adoption of a child. If you don’t do this, it can lead to disastrous consequences after your death, like giving all your assets to an ex-spouse.

If you have children from previous marriages, make sure they inherit the assets you desire after your death. When new spouses are named as sole beneficiaries on retirement accounts, life insurance policies, and other accounts, they aren’t legally required to share any assets with the children.

Take time to review and update your estate plan. It will save you and your family a lot of stress in the future.

Your estate planning attorney can help you with this process.

You may need more than a simple will to protect your biological children’s ability to inherit. If you draft a will that leaves everything to your new spouse, he or she can cut out the children from your previous marriage altogether. Ask your attorney about a trust for those children. There are many options.

You can create a trust that will leave assets to your new spouse during his or her lifetime, and then pass those assets to your children, upon your spouse’s death. This is known as an AB trust. There is also a trust known as an ABC trust. Various assets are allocated to each trust, and while this type of trust can be a little complicated, the trusts will ensure that wishes are met, and everyone inherits as you want.

Be sure you that select your trustee wisely. It’s not uncommon to have tension between your spouse and your children. The trustee may need to serve as a referee between them, so name a person who will carry out your wishes as intended and who respects both your children and your spouse.

Another option is to simply leave assets to your biological children upon your death. The only problem here, is if your spouse is depending upon you to provide a means of support after you have passed.

An experienced estate planning attorney will be able to help you map out a plan so that no one is left behind. The earlier in your second (or subsequent) married life you start this process, the better.

Learn about second marriage estate planning.

Reference: University Herald (June 29, 2019) “The Challenges and Complexities of Estate Planning for Blended Families”

Do I Need a Spendthrift Trust for a Relative?
Spendthrift trusts can protect children from their wasteful spending habits.

Do I Need a Spendthrift Trust for a Relative?

Newsday’s recent article, “What to consider when creating a ‘spendthrift’ trust,” explains that a spendthrift trust protects people from themselves. A trust can be a great protection for those with an issue with drugs, alcohol, gambling or even a person who’s married to a wild spender.

A spendthrift trust—also called an “asset protection trust”—gives an independent trustee the power to make decisions as on how to spend the funds in the trust.

The beneficiary might get trust benefits as regular payments or need to ask permission from the trustee to access funds at certain times.

A spendthrift trust is a kind of property control trust that restricts the beneficiary’s access to trust principal (the money) and maybe even the interest.

This restriction protects trust property from a beneficiary who might waste the money, and also the beneficiary’s creditors.

Remember these other items about asset protection trusts:

  • Be sure that you understand the tax ramifications of a spendthrift trust.
  • If the trust is the beneficiary of retirement accounts, the trust must be designed to have the RMDs (required minimum distributions), at a minimum, flow through the trust down to the beneficiary.
  • If the trust accumulates the income, it could be taxable. In that case, the trust would have to pay the tax at a trust tax rate. That’s substantially higher than an individual rate.

It’s critical that you choose your trustee carefully. You may even think about going with a professional corporate trustee.

If the wrong trustee is selected, he or she could keep the money from the beneficiary, even when the beneficiary legitimately needs it.

Learn how a spendthrift trust can be the best gift you can ever give to a loved one.

Reference: Newsday (June 23, 2019) “What to consider when creating a ‘spendthrift’ trust”