Why You Need a Power of Attorney in Your Estate Plan
A Good Estate Plan Includes a Power of Attorney

Why You Need a Power of Attorney in Your Estate Plan

A power of attorney is an important legal document in your estate plan that allows a person, known as the principal, to designate a person of their choice to become their agent, acting on their behalf. This is usually done when the principal is unable to manage their financial affairs due to disability, illness or incapacity. It must be done while the principal is still competent, notes Delco Times in the article “What’s the difference between guardianship and power of attorney?” There are also instances when power of attorney is used when the principal is unable to conduct their own affairs, because they are traveling or are deployed overseas. A good estate plan includes more than just a will. A power of attorney is an important part.

Related documents are the health care power of attorney and the durable power of attorney. A durable financial power of attorney is a document where the principal designates the powers that the agent may exercise over their finances. The powers granted by this document can be used by the agent, regardless of the principal’s capacity or disability.

The principal has the option to grant very broad authority to their agent. For instance, the principal could give their agent the authority to gift all their assets, while they are still living. That’s why it is very important for the specific provisions in the power of attorney to be carefully reviewed and tailored to the principal’s wishes. There are risks in naming an agent, since they are able to exercise complete control over the principal’s assets. The agent must be 100% trustworthy.

A health care power of attorney allows an agent to make decisions about the principal’s health. Note that this document is operative only when a copy is provided to the attending physician, and the physician determines that the principal is incompetent.

Both health care power of attorney and financial power of attorney may be revoked by the principal at any time and for any reason.

If the principal has not had these documents prepared in advance and then becomes incompetent by reason of injury, illness, or mental health issues, they may not have the legal right to sign the power of attorney. When this happens, it is necessary for a guardianship proceeding to occur, so that other people may be named to take charge of the person’s financial and health affairs. Advance planning is always preferred.

If an individual is born with a disability that impacts their capacity and upon attaining legal age, does not have the capacity to sign a power of attorney, then a guardianship proceeding will be necessary. The court must determine if the person is truly incapacitated and if there might be an alternative to appointing a guardian. Once the guardian is appointed, the principal no longer has the legal right to make decisions on their own behalf.

A guardianship is a much more restrictive tool than a power of attorney. For one thing, the power of attorney generally does not need the involvement of the court. There is always the possibility that a guardian is appointed who does not know the family or the individual. A durable power of attorney allows a person to appoint someone they know and trust to help them and their family, if and when they become incapacitated.

Speak with your estate planning attorney about how power of attorney works, and when guardianship issues might arise. Being prepared in advance by having the right documents in place, is always better than having the family going to court and hoping that the right decisions are made.

See how a durable power of attorney is a critical piece of a good estate plan.

Reference: Delco Times (May 8, 2019) “What’s the difference between guardianship and power of attorney?”

How Much Money Should I Put into a Special Needs Trust for my Child?
Special Needs Trust Planning

How Much Money Should I Put into a Special Needs Trust for my Child?

One of the toughest things about planning for a child with special needs is trying to calculate the amount of money it’s going to take to provide both while the parents are alive and after the parents pass away. A special needs trust is a great way to set aside money for a special needs loved one to provide for them while at the same time preserving their ability to receive government benefits.

Kiplinger’s recent article asks “How Much Should Go into Your Special Needs Trust?” The article explains that it’s not uncommon for folks to have done some estate planning but not necessarily special needs estate planning. And they haven’t thought about how much money they should earmark to fund that trust someday and which assets would be the best to use.

Special needs estate planning involves creating a special needs trust that allows a person with a disability continue to receive certain public benefits. Typically, ownership of assets more than $2,000 would make the individual ineligible for certain public benefits. Assets held in a special needs trust don’t count toward this amount.

A child with special needs can generate multiple expenses. The precise amount will be based on the needs and lifestyle of the family and the child’s capabilities.

When the parents die, this budget must be increased because the things the parents did must be monetized.

A special needs trust usually isn’t funded until the parents’ death. Then, the trust would need to file a tax return each year and pay taxes.

There are also legal and trust administration expenses to think about. Public program benefits can in many cases offset many of the above-mentioned costs.

It’s vital to conduct a complete analysis of the future costs to provide for a child with special needs so that parents can start saving and making adjustments in their planning.

Speak with an elder law or estate planning attorney about special needs trusts.

Learn more about special needs trusts.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”

Special Needs Planning Uses ABLE Accounts
Special needs planning with ABLE Accounts

Special Needs Planning Uses ABLE Accounts

People with special needs and their families face large financial hurdles. For many years, they were not permitted to accumulate any assets, or even work part-time, without losing Supplemental Security Income (SSI) or any means-tested government benefits. Special needs trusts have been a staple planning tool. However, with the introduction of the “Achieving a Better Life Experience” or ABLE account in 2016, children or adults with disabilities may save as much as $100,000, without putting their benefits at risk. And, according to Consumer Reports, in the article “ABLE Accounts Can Help People with Disabilities Save Tax-Free,” the accounts are now available nationwide. ABLE accounts now offer another tool in the special needs planning toolkit.

Anyone, including the beneficiary, can contribute to these accounts, up to the $100,000 limit. However, there are some people who may be able to put even more money into ABLE plans, as a result of the 2017 tax law change. Eligible individuals who are employed may earn up to $12,140 without endangering their benefits, as long as the funds are put into their ABLE account. And those who also have a 529 college savings plan, can roll that money into an ABLE account.

These are improvements, says experts in the disability world. However, making more eligible people aware of these accounts is a challenge. Without access to an ABLE account, a person with special needs who has more than $2,000 in a savings account might lose out on essential services, including SSI and Medicaid.

Special needs trusts have long been available to help disabled individuals or their families put aside money, but the cost to set them up is higher than simply opening an ABLE account.

Research shows that there are about 8 million special needs individuals who are eligible for ABLE accounts, but at the end of 2018, there were only 35,000 ABLE accounts, with more than $170 million in assets.

There are some limitations to ABLE accounts. The disability must have occurred before the person turned 26. Since 2016, bills have been introduced into Congress, including some new legislation that is before both the House and the Senate, that would raise the qualifying age to 46. However, it’s not yet clear whether this amendment is going to get enough support to pass.

There is good news for those who have had a diagnosis prior to turning 26 and are already receiving SSDI (Social Security Disability Insurance) or SSI. They automatically qualify. If you aren’t receiving those benefits but your disability fits with Social Security’s criteria, most plans actually let you certify yourself. You just need a doctor’s note and a date of diagnosis. Be prepared to have to prove that in the future.

Like college 529s, you don’t have to live in the state where you open an account. Any plan that is nationally available can be used. There are now more than 40 state plans, and only a few are limited to state residents. The account can be opened by a parent, guardian, or person who has power of attorney for a disabled person or a minor.

Unlike 529 plans, there can only be one account for one person.

The most you can save every year is $15,000.

The total able account balance can grow to $100,000, without triggering an SSI benefit loss. However, if that limit is exceeded, the SSI payments will be suspended until the account falls below the limits.

If you are not receiving SSI benefits, you can save up to the 529 limit for the state, which is usually $350,000 or more.

The money is intended to be spent on qualifying expenses, which are things that enhance a person’s health, well-being and independence. Typical qualifying expenses include basic living expenses, education, career training and assistive technology

An estate planning attorney, who works with Special Needs families to create estate plans that incorporate Special Needs Trusts (SNT), will be able to provide guidance, so that the ABLE account aligns with the overall estate plan for the family.

Reference: Consumer Reports (April 11, 2019) “ABLE Accounts Can Help People with Disabilities Save Tax-Free”