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Why Do I Need a Power of Attorney?
Having a Good Power of Attorney in Place is Critical if You Become Incapacitated

Why Do I Need a Power of Attorney?

You might nominate both of your children as attorneys-in-fact, requiring that they agree to act on your behalf under a power of attorney.

Fed Week’s article, “Giving Someone the Power of Attorney,” uses the example that you might suffer a stroke with no prior warning signals and be unable to sign your name. This could mean serious financial consequences. However, executing a power of attorney can protect you in that kind of situation.

It’s important for just about everyone to have a power of attorney. You can name more than one attorney-in-fact, stipulating if they are permitted to act alone or if they must act in concert.

Of course, the individual you designate must be someone you trust. This is typically a close (albeit younger) member of the family or a close friend.

If desired, you can assign different responsibilities to different individuals. For instance, you can name your spouse to make your housing decisions and your son to manage all your financial affairs.

You may not want to give power over your assets to a family member, while you’re still in command of your faculties (or have capacity). To address this, many states recognize springing powers of attorney. These do not become effective, until specified events take place, like incompetency (certified by a doctor) or when you go into a nursing home.

If your state doesn’t recognize springing powers, you often can see the same result with a durable power of attorney that’s accompanied by a letter saying that the power will go into effect, if certain events occur. For example, in Florida, contingent or “springing” powers are not permitted after legislation was passed in 2011. However, the State of Minnesota does recognize them.

Talk to an experienced estate planning attorney. He or she can also keep these signed documents until they’re needed.

Your attorney will also know if the law also provides that powers of attorney properly executed under the laws of another state are recognized in your state of residence.

You can create a power of attorney without giving up control.

Reference: Fed Week (October 3, 2019) “Giving Someone the Power of Attorney”

What’s Better, A Living Trust or a Will?
A Living Trust Usually is Better Than a Will

What’s Better, A Living Trust or a Will?

Everyone knows what a last will and testament is. However, a will is not always the best way to distribute your assets, explains the Times Herald-Record in the article “Living trusts are better choice than wills.” Most people think that by having a will alone, they will make it clear who they want to receive their assets when they die. However, wills are used by the court in a proceeding called “probate,” if the only estate plan you have is a will. The court proceeding is to establish that the will is valid. Depending upon where you live, probate can take a year before assets are distributed to beneficiaries.

Certain family members must receive notifications, when a will is submitted to probate. Some people will receive notices, even if they are not mentioned in the will. This can lead to all kinds of awkward situations, especially from estranged or unknown relatives. The person who is the executor of the will is required to locate these relatives, and until they are found and notified, the probate process comes to a standstill.

There are instances where a judge will allow a legal notice to be published in a local newspaper, after valid attempts to find relatives aren’t successful. If there is a disabled beneficiary, a minor beneficiary, a relative or beneficiary who can’t be located, or a relative who has been incarcerated, the judge often appoints lawyers to represent these parties’ interests and the estate pays for the attorney’s fees.

Depending on the situation, the executor may be required to furnish a family tree, or a friend of the decedent must sign an affidavit attesting that the person never had any children.

Thinking of disinheriting a child? Anyone who is disinherited in a will, receives a notice about that and is legally permitted to contest the will. That can lead to years of expensive litigation, including discovery demands, depositions, motions and possibly a trial. Like most litigation, will contests usually end in a settlement. The disinherited relative often gets a share of the inheritance, even when the decedent didn’t want them to get anything.

For many families, a living trust is a better alternative. They also serve as disability planning, naming people who will manage the assets of the trust, in case of incapacity. They are private documents, so their information does not become public knowledge, like the details of a will.

A qualified estate planning attorney will help you determine what estate planning tools will work best to achieve your goals, while maintaining your privacy and ensuring that assets pass to heirs in a discrete manner.

In many situations a living trust should be part of an estate plan.

Reference: Times Herald-Record (Oct. 26, 2019) “Living trusts are better choice than wills”

Should I Change Beneficiary Designations if I Get a Divorce?
Change Beneficiary Designations Upon a Divorce

Should I Change Beneficiary Designations if I Get a Divorce?

Money problems in a marriage can be a big part of a couple’s decision to divorce. In fact, a recent study found that 13% of divorced student loan borrowers attributed their student loan debt for the dissolution of their marriages. The question then to consider is whether you should change beneficiary designations.

Motley Fool’s recent article entitled “6 Tips for Managing Your Investments Through Divorce” says that the financial fallout from divorce can leave spouses struggling to recover.

While the divorce rate in the U.S. is dropping a little for younger couples, “gray divorce” is on the rise. The divorce rate for couples who are 50 or older has nearly doubled since 1990. The rate has tripled for those ages 65 and older, according to data from the National Center for Health Statistics and U.S. Census Bureau. Divorce in these older couples has the potential to be even more financially problematic, because they’re entering (or already in) retirement.

Here are some tips for managing your investments, while going through the divorce process:

  1. Update beneficiary designations on your investment accounts. If you don’t want your soon-to-be ex-spouse to be the beneficiary to your investment accounts, remove his or her name and designate one or more new beneficiaries.
  2. Obtain access to all accounts. In many families, one spouse handles the family finances. If you are not this person in your relationship, make certain that you have all the information you need to access information about all your assets, including your investment accounts.
  3. Think about tax consequences and other penalties. Before you sell any assets, consider the tax ramifications and other potential negatives, like expenses or penalties. In many taxable accounts, selling securities can mean capital gains taxes. Annuities may have big penalties, if you leave early. There’s also the issue of timing: if your divorce takes place in a market decline, it might not be the best time to sell. You may agree to keep your holdings and divide shares evenly between the spouses, so you don’t have to worry about taxes or penalties if they can be avoided.
  4. Dividing taxable investment accounts. Splitting up these assets will have different processes, based on the type of account. For taxable accounts, like a brokerage account jointly owned with your spouse, you have to provide a letter to the financial institution requesting that the joint account be closed, and that new, separate accounts be opened in each spouse’s name.
  5. Dividing retirement accounts. In most states, retirement account assets generally are considered marital property. That means your spouse may be entitled to some of these assets. Many couples include specific terms about what will happen to retirement account assets in their divorce or settlement agreements. Dividing up retirement assets can be complicated, because different information is needed, and different rules apply depending on the type of account. Note that how you divide an account, might trigger taxes and fees that you’ll want to avoid if you can.
  6. Get legal assistance. Dividing financial assets during divorce can be complicated, so work with an experienced attorney. A lawyer with the right background can help with estate planning and other investment-related issues, as well as the tax issues.

Beneficiary designations are especially important for IRAs.

Reference: Motley Fool (October 24, 2019) “6 Tips for Managing Your Investments Through Divorce”