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Prevent Estate Administration Problems Before They Occur

Prevent Estate Administration Problems Before They Occur

Estate administration, that is, when the executor gets busy with paying debts, taxes and distributing assets, is often the time when any missing steps in an estate plan are revealed. The best legal problems are the ones that don’t happen, advises the article “Practical tips for estate administration, pre-planning advice, and a Coronavirus update” from the Winston-Salem Journal. Here are tips to avoid problems:

Do you need a trust to avoid probate fees and simplify estate administration?

Think of a trust as a secret box or bank account. If you own property in another state, want adult heirs to receive their inheritance over a period of time, have a beneficiary with special needs, or simply don’t want the public to learn about your assets, then a stand-alone trust that works in conjunction with your will is something to consider. However, you may be able to achieve some of these goals through beneficiary designations. A big advantage of a trust is that it is not subject to probate; assets in a probate estate become public record. If privacy is an issue, you’ll want a trust.

Is your estate plan out of date?

If your estate plan has not been updated in the last three or four years, it is likely that you have extra expenses that are no longer necessary. It’s also likely that you are missing out on tax savings opportunities. There have recently been a huge number of changes to estate and tax laws. If your will was signed before 2013, it is time to simplify your will.

Did you inherit real estate with your siblings?

If the sale of the property is still pending, get it wrapped up as soon as possible. If one of your siblings dies, or moves away, managing the disposition of real estate can become complicated and expensive.

When was the last time you reviewed Power of Attorney documents?

If you are not competent and critical steps need to be taken for your care, your agents may find themselves unable to act on your behalf, if your POA and related documents are “outdated.” They may need court intervention to make even simple decisions.

How has coronavirus impacted choices in long-term planning documents?

If your will, POA, medical power of attorney and HIPAA release forms have not been updated recently, decisions may be made without any discussion with the people you trust most.

Speak with an estate planning attorney now to get your legal and financial affairs in order. Many states have granted attorneys the ability to have documents executed and witnessed remotely, so there is no reason not to go forward now.

Reference: Winston-Salem Journal (May 3, 2020) “Practical tips for estate administration, pre-planning advice, and a Coronavirus update”

Read more related articles at:

The biggest mistakes executors make

Guidelines for Individual Executors & Trustees

Also, read one of our previous Blogs at:

Fixing an Estate Plan Mistake

 

 

Financial Elder abuse

Elder Abuse Continues as a Billion-dollar Problem

Elder Abuse Continues as a Billion-dollar Problem

Elder abuse continues as a Billion-dollar problem for some. Aging baby boomers are a giant target for scammers. A report issued last year from a federal agency, the Consumer Financial Protection Bureau highlighted the growth in banks and brokerage firms that reported suspicious activity in elderly clients’ accounts. The monthly filing of suspicious activity reports tied to elder financial exploitation increased four times from 2013 through 2017, according to a recent article from the Rome-News Tribune titled “Financial abuse steals billions from seniors each year.”

When the victim knew the other person, a family member or an acquaintance, the average loss was around $50,000. When the victim did not have a personal relationship with their scammer, the average loss was around $17,000.

What can you do to protect yourself, now and in the future, from becoming a victim? There are many ways to build a defense that will make it less likely that you or a loved one will become a victim of these scams.

First, don’t put off taking steps to protect yourself, while you are relatively young. Putting safeguards into place now can make you less vulnerable in the future. If you are diagnosed with Alzheimer’s or another form of dementia five or ten years from now, it may be too late.

Create a durable power of attorney as part of your estate plan. This is a trusted person you name as your legal representative or agent, who can manage your financial affairs if need be. While it is true that family members are often the ones who commit financial elder abuse, you’ll need to put your trust in someone. Usually this is an adult child or a relative. Make sure that the POA suits your needs and is properly notarized and witnessed. Don’t count on standard templates covering your unique needs.

Consider the guaranteed income approach to retirement planning. Figuring out how to generate a steady stream of income as you face the cognitive declines that occur in later years might be a challenge. Planning for this in advance will be better.

Social Security is one of the most valuable sources of guaranteed income. If you will receive a pension, try not to do a lump sum payout with the intent to invest the money on your own. That lump sum makes you a rich target for scammers.

Consider rolling over 401(k) accounts into Roth accounts, or simply into one account. If you have one or more workplace retirement plans, consolidating them will make it easier for you or your representative to manage investments and required minimum distributions.

Make sure that you have an estate plan in place, or that your estate plan is current. Over time, families grow and change, financial situations change and the intentions you had ten, twenty or even thirty years ago, may not be the same as they are today. An experienced estate planning attorney can ensure that your wishes today are followed, through the use of a will, trust and other estate planning strategies. This is why Elder Abuse Continues as a Billion-dollar Problem

Resource: Rome News-Tribune (April 27, 2020) “Financial abuse steals billions from seniors each year.”

Read more related articles at:

Elder financial abuse is a multibillion-dollar problem

How Criminals Steal $37 Billion a Year from America’s Elderly

Also, read one of our previous Blogs at : 

How Do I Protect My Elderly Parent from Scams and Elder Abuse?

 

power of attorney

Preparing for an Emergency Includes Power of Attorney

Unexpected events can happen at any time. Without a backup plan, finances are vulnerable. The importance of having an estate plan and organized legal and financial documents on a scale of one to ten is fifteen, advises the article “Are you prepared to hand over your finances to someone in an emergency?” from USA Today. Maybe it doesn’t matter so much if your phone bill is a month late but miss a life insurance premium payment and your policy may lapse. If you’re over 70, chances are slim to none that you’ll be able to purchase a new one.

When estate plans and finances are organized to the point that you can easily hand them over to a trusted spouse, adult child or other responsible person, you gain the peace of mind of knowing you and your family are prepared for anything. Someone can take care of you and your family, in case the unexpected happens.

A financial power of attorney (POA) gives another person the legal authority to take financial actions on your behalf. The person you give this responsibility to, should be someone you trust and who will put your best interests ahead of their own. An estate planning attorney will be able to create a power of attorney that can be very specific about the powers that are granted.

You may want your POA to be able to pay bills, and manage your investment accounts, for instance, but you may not want them to make changes to trusts. A personalized power of attorney document can give you that level of control.

Consider your routine for taking care of household finances. Most of us do these tasks on autopilot. We don’t think about how it would be if someone else had to take over, but we should. Take a pad of paper and make notes about every task you complete in a given month: what bills do you pay monthly, which are paid quarterly and what comes due only once or twice a year? By making a detailed record of the tasks, you’ll save your spouse or family member a great deal of time and angst.

Is your paperwork organized so that someone else will be able to find things? Most people create their own systems, but they are not always understandable to anyone else. Create a folder or a file that holds all of your important documents, like insurance policies and investment accounts, legal documents and deeds.

If you pay bills online, naming someone else on the account so they have access is ideal. If not, then try consolidating the bills you can. Many banks allow users to set up bill payment through one account.

Keep legal documents and records up to date. If you haven’t reviewed your estate planning documents in more than three years, now is the time to speak with your estate planning attorney to ensure that your estate plan still reflects your wishes. Call your estate planning attorney to discuss your next steps.

Reference: USA Today (March 20, 2020) “Are you prepared to hand over your finances to someone in an emergency?”

Read more about this at :

Getting Your Affairs in Order

Are you prepared to hand over your finances to someone in an emergency?

And read some of our previous Blogs at:

The Second Most Powerful Estate Planning Document: Power of Attorney

C19 UPDATE: If You Have Not Yet Named Someone with Medical Power of Attorney, Do It Now

 

 

Power of Attorney

The Second Most Powerful Estate Planning Document: Power of Attorney

The Second Most Powerful Estate Planning Document: Power of Attorney.  All too often, people wait until it’s too late to execute a power of attorney. It’s uncomfortable to think about giving someone full access to our finances, while we are still competent. However, a power of attorney can be created that is fully exercisable only when needed, according to a useful article “Power of attorney can be tailored to circumstances” from The News-Enterprise. Some estate planning attorneys believe that the power of attorney, or POA, is actually the second most important estate planning document after a will. Here’s what a POA can do for you.

The term POA is a reference to the document, but it also is used to refer to the person named as the agent in the document.

Generally speaking, any POA creates a fiduciary relationship, for either legal or financial purposes. A Medical or Healthcare POA creates a relationship for healthcare decisions. Sometimes these are for a specific purpose or for a specific period of time. However, a Durable POA is created to last until death or until it is revoked. It can be created to cover a wide array of needs.

Here’s the critical fact: a POA of any kind needs to be executed, that is, agreed to and signed by a person who is competent to make legal decisions. The problem occurs when family members or spouse do not realize they need a POA, until their loved one is not legally competent and does not understand what they are signing.

Incompetent or incapacitated individuals may not sign legal documents. Further, the law protects people from improperly signing, by requiring two witnesses to observe the individual signing.

The law does allow those with limited competency to sign estate planning documents, so long as they are in a moment of lucidity at the time of the signing. However, this is tricky and can be dangerous, as legal issues may be raised for all involved, if capacity is challenged later on.

If someone has become incompetent and has not executed a valid power of attorney, a loved one will need to apply for guardianship. This is a court process that is expensive, takes several months and leads to the court being involved in many aspects of the person’s life. The basics of this process: three professionals are needed to personally assess the “respondent,” the person who is said to be incompetent. The respondent loses all rights to make decisions of any kind for themselves. They also lose the right to vote.

A power of attorney can be executed quickly and does not require the person to lose any rights.

The biggest concern to executing a power of attorney, is that the person is giving an agent the control of their money and property. This is true, but the POA can be created so that it does not hand over this control immediately.

This is where the “springing” power of attorney comes in. Springing POA means that the document, while executed immediately, does not become effective for use by the agent, until a certain condition is met. The document can be written that the POA becomes in effect, if the person is deemed mentally incompetent by a doctor. The springing clause gives the agent the power to act if and when it is necessary for someone else to take over the individual’s affairs.

Having an estate planning attorney create the power of attorney that is best suited for each individual’s situation is the most sensible way to provide the protection of a POA, without worrying about giving up control while one is competent.

Reference: The News-Enterprise (Feb. 24, 2020) “Power of attorney can be tailored to circumstances”

Read More About this subject at:

9 Things You Need To Know About Power Of Attorney/Forbes

Power of Attorney/AmericanBarAssociation

Also read our previous Blogs at:

Why Do I Need a Power of Attorney?

C19 UPDATE: If You Have Not Yet Named Someone with Medical Power of Attorney, Do It Now

Business Succession Planning

Business Succession Planning For Business Owners

A business owner without a business succession estate plan, is a business owner whose business and personal estate are both in jeopardy, says the Augusta Free Press in an article that asks “Own a business? 5 reasons you need an estate plan.”

You need more than a will to plan for incapacity. If you become ill or incapacitated, a will isn’t the business succession estate planning tool that will help you and your family. What you need is a power of attorney (POA). This document names another individual or individuals to manage your finances and your business dealings, while you are unable to do so. Your estate planning attorney can create a power of attorney that limits what the named person, known as an “agent” may do on your behalf, or make it a broad POA so they can do anything they deem necessary.

Your state’s estate plan may not align with your wishes. Every state has its own laws about property distribution in the event a person does not have a business succession estate plan. A popular joke among estate planning attorneys is that if you don’t have an estate plan, your state has one for you—but you may not like it. This is particularly important for business owners. If you have a sibling who you haven’t spoken to in decades, depending upon the laws of your state, that sibling may be first in line for your assets and your business. If that makes you worried, it should.

Caring for a disabled family member. A family that includes individuals with special needs who receive government benefits requires a specific type of estate planning, known as Special Needs Planning. This includes the use of trusts, so a trust owns assets the assets for the benefit of such a family member without putting government benefits at risk.

Help yourself and heirs with tax liability. If your future plan includes leaving your business to your children or another family member, there will be taxes due. What if they don’t have the resources to pay taxes on the business and have to sell it in a fire sale just to satisfy the tax bill? A business succession estate plan, worked out with an experienced estate planning attorney who regularly works with family-owned businesses, will include a comprehensive tax plan. Make sure your heirs understand this plan—you may want to bring them with you to a family meeting with the attorney, so everyone is on the same page.

Avoid fracturing your own family. An unhappy truth is that when there is no estate plan, it impacts not just the family business. If some children or family members are involved in the business and others are not, the ones who work in the business may resent having to share any of the business. How to divide your business is up to the business owner. However, making a good plan in advance with the guidance of an experienced advisor and communicating the plan to family members will prevent the family from falling apart.

There’s no way to know how family members will respond when a parent dies. Sometimes death brings out the best in people, and sometimes it brings out the worst. However, by having an estate plan and business plan for the future, you can preclude some of the stresses and strains on the family.

Learn what business succession planning is all about.

Reference: Augusta Free Press (August 13, 2019) “Own a business? 5 reasons you need an estate plan.”

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”

Make Sure Your Power of Attorney Works When Needed

If you present a POA (Power of Attorney) to a bank and the agents are described as Bill and Samantha, for instance, instead of Samantha or Bill, the bank clerk may bristle. John as agent under power of attorney with Mary as successor agent is more likely to be acceptable. The use of the word “and” in a POA often presents a problem to banks. Did the document get drafted with the intent that Bill and Samantha both be present for any transactions? Having the right power of attorney is critical.

In Pennsylvania, major changes were made to the POA law in 2014 that addressed wording, witnessing and other requirements and protections for the party accepting the POA. The “Vine fix” law describes what a bank, financial institution or other party who is presented with a POA can and cannot do. The “Vine fix” provides immunity to anyone who accepts a POA in good faith, without actual knowledge that the POA is invalid, says The Mercury in the article “Planning Ahead: Will your bank honor your power of attorney?”

This law came about as a result of a case, Vine v. Commonwealth of PA State Employees’ Retirement Board. A Pennsylvania State employee, who was incapacitated following a car accident and a stroke, was given a POA to sign by the man who was then her husband. He changed her retirement options and later filed for divorce. At issue was the question of whether Mrs. Vine could invalidate his option and file for disability benefits. She did not have legal capacity, when she signed the document.

This was a case of hard facts making bad law. The State Supreme Court found that a third party (the Pennsylvania State Employees Retirement Board) could not rely on a void power of attorney, even where it did not know it was void when it was accepted. Banks saw the decision and were concerned that they could be sued for damages in similar cases.

The new law offers some immunity and additional protections for banks. However, as a result, there’s a little more push back with banks recognizing agents under power of attorney. The bank can request an agent’s certification or affidavit or opinion of counsel, as to whether the agent is acting within the scope of his legal authority. There is still a civil liability for refusing to accept a power of attorney that meets all the requirements.

Some estate planning attorneys have their clients obtain Power of Attorney forms directly from the institutions. This decreases the chances of any problems, when POAs are presented. It’s also a good idea to update the POA when you update your estate plan, which should be every three or four years. Regardless of your state of residence, a POA dated 10 or 15 years ago is likely to meet with some scrutiny. Talk with your estate planning attorney about the best way to address this in advance.

Learn what a good power of attorney can do for you.

Reference: The Mercury (April 2, 2019) “Planning Ahead: Will your bank honor your power of attorney?”

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