Health Care Proxy

When Do I Need a Power of Attorney?

Without a valid durable power of attorney, the answer to the question of “When do I need a Power of Attorney”, really depends on what documents need to be signed.

when do I need a Power of Attorney
One of the most common misconceptions in estate planning is that a power of attorney remains in effect after the principal passes away.

A power of attorney is a legal document signed by the “Principal,” granting the authority to another individual to make decisions on the Principal’s behalf. This document is only in effect during the lifetime of the Principal.

nj.com’s recent article on this topic asks “Who can sign for an incapacitated person if there’s no power of attorney?” The article noted that to have the authority to conduct financial transactions concerning the assets solely owned by the incapacitated person who failed to execute a power of attorney, a guardian will have to be appointed by the court.

A guardianship is a legal relationship established by the court, in which an individual is given legal authority over another when that person is unable to make safe and sound decisions regarding his or her person, or property.

If it’s not an emergency, a guardian also will need to be appointed to make medical decisions for an incapacitated person who hasn’t signed a health care proxy. This is a legal document that gives a surrogate the authority to make health care decisions for an incapacitated person. It will take effect, if the principal is incapacitated or unable to communicate. The agent will make decisions that reflect the wishes of the incapacitated individual.

It’s typically not necessary to be appointed as an agent under a power of attorney or health care proxy or legal guardian for another person to sign an assisted living or nursing home admissions contract or a Medicaid application.

However, prior to signing another person’s admissions contract, read the fine print to be certain that you don’t become responsible for the bills!

Talk with a qualified estate planning attorney to find out more about the power of attorney requirements in your state and to add this important document to your estate plan.

Reference: nj.com (July 22, 2019) “Who can sign for an incapacitated person if there’s no power of attorney?”

Get These Three Estate Planning Documents In 2019

These may not be the first things you are thinking about as we launch into a brand-new year, but the idea is not to wait until you’re not thinking clearly or when it’s too late and you don’t have what you need to protect yourself, your family and your property. The details, from the Fox Business news article, “3 financial documents everyone needs,” are straightforward. Put this on your to-do list today.

A Will. The essential function of a will is to ensure that your wishes are carried out, when you are no longer alive. It’s not just for rich people. Everyone should have a will. It can include everything from your financial assets to life insurance, family heirlooms, artwork and any real estate property.

A will can also be used to protect your business, provide for charities and ensure lifelong care for your pets.

If you have children, a will is especially important. Your will is used to name a guardian for your minor children. Otherwise, the state will decide who should raise your children.

Your will is also used to name your executor (referred to as the Personal Representative in Florida). That is the person who has the legal responsibility for making sure your financial obligations are honored and your assets are distributed according to your wishes. Without an executor, the state will appoint a person to handle those tasks.

An Advanced Medical Directive. What would happen if you became ill or injured and could not make medical decisions for yourself? An advanced medical directive and health care proxy are the documents you need to assign the people you want to make decisions on your behalf. The advanced medical directive, also called a living will, explains your wishes for care, including end-of-life care. The healthcare proxy appoints a person to make healthcare decisions for you. As long as you have legal capacity, these documents aren’t used, but once they are needed, you and your family will be glad they are in place.

A Durable Power of Attorney. This document is used to name someone who will make financial decisions if you are not able to do so. Be careful to name a person you trust implicitly to make good decisions on your behalf. That may be a family member, an adult child or an attorney.

Once you’ve had these documents prepared as part of your estate plan they documents should be reviewed and updated every now and then. Life changes, laws change and what was a great tax strategy at one point may not be effective, if there’s a change to the law. Your estate planning attorney will help create and update your estate plan.

Reference: Fox Business (Dec. 19, 2018) “3 financial documents everyone needs”

Another Celebrity Death, Another Estate Mess

With less than half of Americans having an estate plan in place, we are in the same boat as celebrities, like Aretha Franklin or Prince. While our estates may not match their assets, the messes left behind are just as painful to family members.

A recent survey from caring.com found that only 42% of adults have estate planning documents, including a will. That means that almost 60% of Americans are going to leave our families a mess after we die. Here’s what’s even scarier: a recent article from the Chicago Tribune, “Don't leave a mess for your heirs,”reports that only a third of Americans with children under age 18 have an end-of-life plan. They have not named guardians for their own children, in the event of their own deaths.

MP900178564Many of those who haven’t done any estate planning, say they just haven't gotten around to it. That’s understandable, but it’s important that you conquer your anxieties associated with this emotional subject and take control.

For Aretha Franklin's estate, Michigan (her state of residence) will decide who will get what. The local probate court will oversee everything from property, retirement accounts and the residuals that flow from her music catalog. It’s possible that her assets will be split among her four children. However, as many parents know, some kids are more prepared to manage financial distributions than others—a big reason why estate planning is so important.

If you have property you want to go to specific individuals, you should create a document with instructions as to who gets what.

Some people think that because they don't have a high net worth, they don’t need to worry about such things. However, estate planning isn’t just about money—anyone with young children should have a will, because a will names the guardians of minor children. You want to be certain that you, and not the courts, designate your children’s guardians.

When you’re ready to start or revisit the planning process, talk to a qualified estate attorney (yes, pay for a lawyer and don’t do it yourself), here are the basic documents to consider:

  • Will: A document that makes certain your assets are passed to designated beneficiaries in accordance with your instructions. The will designates an executor who will oversee the distribution of your assets. If you have minor children, you must name a guardian for them.
  • Letter of Instruction:This may include the appointment of someone who will ensure the proper disposition of your remains. That can be important, if you’re choosing a method that’s contrary to your family's traditions.
  • Power of Attorney: This gives a person you select the authority to act as your agent, in certain circumstances.
  • Health Care Proxy:This gives a person you select, the power to make health care decisions on your behalf, if you lose the ability to do so.
  • Trusts: Revocable (changeable) or irrevocable (not-changeable) trusts may be useful, depending on family and tax situations. You need an experienced trust attorney to help you decide, if this is a sound strategy and to properly prepare the documents.

Even if your funeral plan does not include a gold-plated coffin (like Aretha) or a multi-million estate (like Prince), sit down with an estate planning attorney and prepare these documents to protect your family sooner, not later.

Reference: Chicago Tribune (August 30, 2018) “Don't leave a mess for your heirs”

Can an Estate Plan Become a Legacy Plan?

Creating a legacy might give you better odds of success.

The old saying that the first generation builds the business, the second generation struggles to maintain it and the third squanders everything, is sadly, statistically true. However, creating a legacy might give you better odds of success.

Bigstock-Extended-Family-Outside-Modern-13915094If you’ve been responsible and had an estate plan created, you are way ahead of most of your peers. You’ve planned for your family and your heirs with a will, powers of attorney, an advanced directive and likely created the appropriate trusts to hold life insurance policies to minimize estate taxes and protect the proceeds from creditors. You may have even done some succession planning, using family trusts and other planning vehicles. However, will this be enough for a lasting legacy?

Forbes’ recent article, “How To Turn Your Estate Plan Into A Legacy Plan,” says that perhaps you’ve heard that legacy planning is the solution to your problem.  However, you are worried about the expense. If you create a legacy plan, does it mean you’ve wasted time and money? No, it doesn’t. The documents you’ve already prepared for estate planning can most likely be used and incorporated into a more effective legacy plan. Let’s look at how to turn an estate plan into a legacy plan.

Form A Legacy Team. This effort takes a team. You need a team of professional advisors working together to move you towards success. A legacy team will typically begin with three main areas of expertise: legal (estate planning attorney), tax (accountant) and wealth/financial planning (wealth advisor). From there, the legacy team may expand, based on your needs and circumstances. Your team’s makeup will depend on you and your family’s specific needs and circumstances.

Get A Legacy Mindset. Think “process” versus “plan.” Traditional estate planning is often seen as complete, once estate planning documents have been prepared and signed. However, the reality is that after you’ve created legal entities and a structure for your estate and/or legacy, you’re just at the start of the process. The legacy plan is a recipe for your success and the framework through which your legacy is going to thrive and grow.

Educate Yourself on What You’ve Already Created. With your legacy team in place and with your legacy mindset, understand what your existing estate plan does and doesn’t do. Review your estate plan and determine if it distinguishes between legacy and non-legacy assets (which almost always should be handled differently on your death). You also need to plan for your life and how to build the legacy you ultimately want to leave behind through specific assets in your estate.

Put the Plan into Action. Creating the plan is the first step, the second is implementing the plan. That will ensure that your legacy will continue, ideally for generations to come.

Reference: Forbes (August 22, 2018)“How To Turn Your Estate Plan Into A Legacy Plan”

Now That Same-Sex Marriages are Legal, Do They Make Financial Sense?

Every couple’s situation is different, and there are pluses and minuses for couples considering whether or not to tie the knot.

Every couple’s situation is different, and there are pluses and minuses for couples considering whether or not to tie the knot.

Bigstock-Smiling-Gay-Couple-44953600In June 2015, the U.S. Supreme Court ruled that same-sex couples had the right to marry. A 2017 Gallup poll, reported in a recent WTOParticle, “Gay and Getting Married? Financial Advantages and Disadvantages,”found that only 10.2 percent of gay couples in America have wed.

Financial implications may not be at the top of the list for gay couples deciding to marry, but, there are several to consider. Some may not be beneficial, but some are. The most significant issues for married gay couples, like married straight couples, should be retirement planning, estate planning and tax planning.

The major benefit for gay couples marrying is the survivor’s Social Security benefits. If you’re lucky enough to have a retirement plan where there is a pension benefit, it can be transferred from spouse to spouse. The other big issue is gifting: spouses can leave an unlimited amount of money between spouses. But if you’re not married, that doesn’t happen.

A major difference in what each partner makes can gum up the works, especially with the IRS. Consider the marriage penalty tax and figure out if you’re better off being married or not being married. You could be subject to not getting some of the tax exclusions that would’ve worked to your advantage, if you weren’t married. This is especially true, if there is a wide variance in income between both partners. You should also think about loss-limit deductions on things such as investment property, IRA and retirement account deductions, and other tax planning situations that can become significant considerations when one partner earns much more than the other.

When combining the income of the two spouses, it may put them both into a higher tax bracket. This will add more tax liabilities. You should also think about homeownership and retirement. For unmarried gay couples with a big variance in incomes, who own their home as joint tenants with right of survivorship, the surviving individual will get the house, when the first one passes away.  However, there could be some gift consequences, depending on how the money went into paying for the house and who put more money into it versus who didn’t.

There are also retirement accounts to look at. Married couples can pass IRAs or 401(k)s to one another at death, without triggering taxes. If you die with money in your retirement accounts, the IRS starts taxing that money as soon as your beneficiaries withdraw the money.  It also forces a withdrawal within a certain amount of time. However, there’s an exception for distributions to spouses, allowing the money to keep growing tax deferred.

You should also analyze health care. Many businesses offer health care coverage to their employees’ domestic partners. Depending on company policy for family coverage, legal marriage ensures it. There’s also a financial benefit for surviving spouses in a health saving account because that money can be transferred to the surviving spouse. Likewise, a married couple in a joint health savings account can contribute more pretax dollars.

All married couples also legally speak for each other in terms of medical decisions. Unmarried couples, either straight or gay, don’t automatically have that legal representation. For gay couples who opt not to marry, that can be solved with a medical power of attorney,an advanced medical directiveor health care proxy. These legally binding documents should be drafted, certified and available, in the event of an emergency. A power of attorney can cover both health care and financial decisions, if one unmarried partner becomes incapacitated.

When it comes to the legal and financial matters of marriage, it’s wise for all couples to meet with an estate planning attorney before walking down the aisle. You should know what rights and responsibilities come with marriage, and prepare the correct legal documents, so that you are both able to care for each other in every sense of the word, in good times and bad, in sickness and health.

Reference: WTOP (May 30, 2018) “Gay and Getting Married? Financial Advantages and Disadvantages”

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