Probate Attorney

What Do I Do If I’m Named Financial Power of Attorney?

A financial power of attorney (POA) is a document in which the “principal” appoints a trusted someone known as the “attorney-in-fact” or “agent” to act on behalf of the principal, especially when the principal is incapacitated. It typically permits the attorney-in-fact to pay the principal’s bills, access his accounts, pay his taxes and buy and sell investments or even real estate. In effect, the agent steps into the shoes of the principal and is able to act for him or her in all matters, as described in the POA document.

Kiplinger’s recent article entitled “What Are the Duties for Financial Powers of Attorney?” points out that these responsibilities may sound overwhelming, and it’s only natural to feel this way initially. Let’s look at the steps to take to do this important job:

  1. Start by reading the document. Review the POA document to determine precisely what the principal has given you power to do on their behalf. A POA typically includes information addressed to the agent that explains the legal duties he or she owes to the principal.
  2. See what you have to handle for the principal. Ask for a list of the principal’s assets and liabilities. If the principle is organized, it’ll be easy. If not, you will want to find about their brokerage and bank accounts, 401(k)s/IRAs/403(b)s, the mortgage, taxes, insurance and other monthly or recurring bills (like utilities, phone, cable and internet).
  3. Protect the principal’s property. Be sure the principal’s home is secure.  It’s often helpful to make a video to inventory the home. If it looks like the principal will be incapacitated for an extended period of time, you may cancel the phone and newspaper subscriptions. If you have control of the principal’s investments and their incapacitation may continue for a long time, review their brokerage statements for high-risk positions that you don’t understand, like options, puts and calls, or commodities. Get advice on any assets you don’t know how to handle.
  4. Pay all bills, as necessary. Review the principal’s bills and credit card statements, as you would your own, for potential fraud. Note that they may have bills automatically paid by credit card and plan accordingly.
  5. Pay taxes. Many powers of attorney give the agent the power to pay the principal’s taxes and deal with the IRS. If so, you’ll be responsible for filing and paying taxes on behalf of the principal. If the principal passes away, the executor or personal representative of the principal’s last will is responsible for preparing any final taxes.
  6. Keep meticulous records. Track every expenditure you make and every action you take on the principal’s behalf. You’ll be asked to demonstrate that you have upheld your duties and acted in the principal’s best interests. It will also be important for you to receive reimbursement for expenses, and (if the power of attorney provides for it) the time you spent acting as agent.

Finally, it’s important to know that your powers and obligations as the principal’s agent end when the principal passes away.  At that point, all powers conferred under the POA are extinguished and the person named as executor or personal representative in the principal’s will take over all duties.

Reference: Kiplinger (April 22, 2020) “What Are the Duties for Financial Powers of Attorney?”

When Should I Update My Estate Plan?

Forbes’ recent article entitled “Do You Need A Trust? 8 Important Goals A Trust Can Help You Achieve” discusses eight ways a trust can help you achieve specific legacy planning goals. The first step is to meet with an experienced estate planning attorney.

Everybody needs a will, but not everyone requires a trust. A trust provides greater flexibility and control over how your property and assets are distributed. Many people create a trust to avoid probate. As a result, it’s faster and easier for your named trustee(s) to distribute your assets to your heirs. There are a many different types of trusts with advantages and disadvantages. Talk about what will be best for you with your estate planning attorney.

  1. No probate. This process can take months or more to complete, and it can be very expensive. A trust is designed to settle your estate in a timely and relatively inexpensive manner.
  2. Privacy and confidentiality. Probate is public, so your will and other private financial and business info is available to everyone. However, a trust maintains privacy and confidentiality.
  3. Protection for beneficiaries. A trust can shield beneficiaries from lawsuits, creditors, or divorce. A trust can also protect the interests of a minor, by including direction for when distributions are made.
  4. Provide for children. This type of trust provides for the health care and personal needs of a minor child.
  5. Flexibility. As the creator of the trust, you determine the terms of the trust, and can put restrictions on how trust assets are managed. For instance, the trust could state that assets may only be used by the beneficiary to purchase a home or to pay medical bills but may not be distributed directly to the beneficiary.
  6. Preserve family wealth. Divorce and remarriage can result in assets that were supposed to stay in the family wind up leaving with the ex-spouse. A trust can make certain that your estate is preserved for grandchildren.
  7. Family values. A trust can be a wonderful way to pass down family values concerning education, home ownership, land conservation, community service, religious beliefs and other topics.
  8. Lessening family conflict. Challenging a trust is difficult and costly. Having a trust in place that clearly articulates your wishes for your family, reduces the potential for misunderstanding.

Whether you have a trust in place or are thinking about creating one, it’s important to meet regularly with your estate planning attorney to be certain your strategy and estate planning documents reflect any new state and federal tax laws, as well as any changes in your goals and circumstances.

Reference: Forbes (Feb. 24, 2020) “Do You Need A Trust? 8 Important Goals A Trust Can Help You Achieve”

Rules for the HIPAA Waiver Relaxed?

The United States Department of Health and Human Services has announced that it won’t enforce penalties for violations of certain provisions of the HIPAA privacy rule against healthcare providers or their business associates for good-faith disclosures of protected health information (PHI) for public health purposes during the COVID-19 emergency.

The HHS Office for Civil Rights said that it was exercising its “enforcement discrimination” in announcing its change in policy during the coronavirus pandemic, a declared emergency period, reports Modern Healthcare in its article “HHS eases HIPAA enforcement on data releases during COVID-19.”

A HIPAA waiver of authorization is a legal document that permits an individual’s protected health information (PHI) to be used or disclosed to a third party. This waiver is part of a series of patient-privacy measures set forth in the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

PHI covered under HIPAA is information that can be connected to a specific individual and is held by a covered entity, like a healthcare provider. HIPAA has set out 18 specific identifiers that create PHI, when linked to health information.

The notification was issued to support federal and state agencies, including the CMS and the Centers for Disease Control and Prevention, that require access to COVID-19 related data, including protected health information.

“The CDC, CMS, and state and local health departments need quick access to COVID-19 related health data to fight this pandemic,” OCR director Roger Severino said in a statement. “Granting HIPAA business associates greater freedom to cooperate and exchange information with public health and oversight agencies, can help flatten the curve and potentially save lives.”

HIPAA’s privacy rule only permits business associates of HIPAA-covered entities to disclose protected health information for certain purposes, under explicit terms of a written agreement.

The moratorium enforcement doesn’t extend to other requirements or prohibitions under the privacy rule, nor to any obligations under the HIPAA security and breach notification rules, OCR said.

Reference: Modern Healthcare (April 2, 2020) “HHS eases HIPAA enforcement on data releases during COVID-19”

What Should I Know about Beneficiary Designations?

A designated beneficiary is named on a life insurance policy or some type of investment account as the designated recipient of those assets, in the event of the account holder’s death. The beneficiary designation doesn’t replace a signed will but takes precedence over any instructions about these accounts in a will. If the decedent doesn’t have a will, the beneficiary may see a long delay in the probate court.

If you’ve done your estate planning, most likely you’ve spent a fair amount of time on the creation of your will. You’ve discussed the terms with an established estate planning attorney and reviewed the document before signing it.

FEDweek’s recent article entitled “Customizing Your Beneficiary Designations” points out, however, that with your IRA, you probably spent far less time planning for its ultimate disposition.

The bank, brokerage firm, or mutual fund company that acts as custodian undoubtedly has a standard beneficiary designation form. It is likely that you took only a moment or two to write in the name of your spouse or the names of your children.

A beneficiary designation on account, like an IRA, gives instructions on how your assets will be distributed upon your death.

If you have only a tiny sum in your IRA, a cursory treatment might make sense. Therefore, you could consider preparing the customized beneficiary designation form from the bank or company.

You can address various possibilities with this form, such as the scenario where your beneficiary predeceases you, or she becomes incompetent. Another circumstance to address, is if you and your beneficiary die in the same accident.

These situations aren’t fun to think about but they’re the issues usually covered in a will. Therefore, they should be addressed, if a sizeable IRA is at stake.

After this form has been drafted to your liking, deliver at least two copies to your custodian. Request that one be signed and dated by an official at the firm and returned to you. The other copy can be kept by the custodian.

Reference: FEDweek (Dec. 26, 2019) “Customizing Your Beneficiary Designations”

Fixing an Estate Plan Mistake

When an issue arises, you need to seek the assistance of a qualified and experienced estate planning attorney, who knows to fix the problems or find the strategy moving forward.

For example, an irrevocable trust can’t be revoked. However, in some circumstances it can be modified. The trust may have been drafted to allow its trustees and beneficiaries the authority to make certain changes in specific circumstances, like a change in the tax law.

Those kinds of changes usually require the signatures from all trustees and beneficiaries, explains The Wilmington Business Journal’s recent article entitled “Repairing Estate Planning Mistakes: There Are Ways To Clean Up A Mess.”

Another change to an irrevocable trust may be contemplated, if the trust’s purpose has become outdated or its administration is too expensive. An estate planning attorney can petition a judge to modify the trust in these circumstances when the trust’s purposes can’t be achieved without the requested change. Remember that trusts are complex, and you really need the advice of an experienced trust attorney.

Another option is to create the trust to allow for a “trust protector.” This is a third party who’s appointed by the trustees, the beneficiaries, or a judge. The trust protector can decide if the proposed change to the trust is warranted. However, this is only available if the original trust was written to specify the trust protector.

A term can also be added to the trust to provide “power of appointment” to trustees or beneficiaries. This makes it easier to change the trust for the benefit of current or future beneficiaries.

There’s also decanting. This is when the assets of an existing trust are “poured” into a new trust with different terms. This can include extending the trust’s life, changing trustees, fixing errors or ambiguities in the original language, and changing the legal jurisdiction. State trust laws vary, and some allow much more flexibility in how trusts are structured and administered.

The most drastic option is to end the trust. The assets would be distributed to the beneficiaries, and the trust would be dissolved. Approval must be obtained from all trustees and all beneficiaries. A frequent reason for “premature termination” is that a trust’s assets have diminished in value to the extent that administering it isn’t feasible or economical.

Again, be sure your estate plan is in good shape from the start. Anticipating problems with the help of your lawyer, instead of trying to solve issues later is the best plan.

Reference: Wilmington Business Journal (Jan. 3, 2020) “Repairing Estate Planning Mistakes: There Are Ways To Clean Up A Mess”

How Do I Incorporate My Business into My Estate Plan?

When people think about estate planning, many just think about their personal property and their children’s future. If you have a successful business, you may want to think about having it continue after you retire or pass away.

Forbes’ recent article entitled “Why Business Owners Should Think About Estate Planning Sooner Than Later” says that many business owners believe that estate planning and getting their affairs in order happens when they’re older. While that’s true for the most part, it’s only because that’s the stage of life when many people begin pondering their mortality and worrying about what will happen when they’re gone. The day-to-day concerns and running of a business is also more than enough to worry about, let alone adding one’s mortality to the worry list at the earlier stages in your life.

Business continuity is a big concern for many entrepreneurs. This can be a touchy subject, both personally and professionally, so it’s better to have this addressed while you’re in charge rather than leaving the company’s future in the hands of others who are emotionally invested in you or in your work. One option is to create a living trust and will that outs parameters in place for a trustee to carry out. With these decisions in place, you’ll avoid a lot of stress and conflict for those you leave behind.

Let them be upset with you, rather than with each other. This will give them a higher probability of working things out amicably at your death. The smart move is to create a business succession plan that names a successor to be in charge of operating the business, if you should become incapacitated or when you pass away.

A power of attorney document will nominate an agent to act on your behalf, if you become incapacitated, but you should also ask your estate planning attorney about creating a trust to provide for the seamless transition of your business at your death to your successor trustees. The transfer of the company to your trust will avoid the hassle of probate and will ensure that your business assets are passed on to your chosen beneficiaries.

Estate planning may not be on tomorrow’s to do list for young entrepreneurs and business owners. Nonetheless, it’s vital to plan for all that life may bring.

Reference: Forbes (Dec. 30, 2019) “Why Business Owners Should Think About Estate Planning Sooner Than Later”

How Do I Disinherit a Family Member?

Kiplinger’s recent article, “Four Ways to Disinherit Family Members,” says that quite a few families don’t get along. However, when considering estate planning, the problem is that without a valid will leaving money to other individuals, family members are the “default” recipient of your estate. If you decide to leave any property using your will, your next-of-kin must still be given legal notice of your estate being probated (even if they’re being disinherited), and usually they’re only ones who can legitimately contest your will.

If you do have bad family relations and don’t want family members contesting your will, there are several legal tactics you can use.

  1. Leave property outside of your will. You’ll only need to probate property that’s not already effectively left to someone outside of probate. Therefore, when you name a beneficiary or co-owner on your accounts or real estate, that property won’t go through probate. Similarly, life insurance policies and retirement plans ask you to name a beneficiary, and investment and bank accounts usually let you name a “transfer on death” beneficiary. Finally, any property passing by living trusts also avoids probate.
  2. Add a ‘no-contest’ clause to your will. If you decide to disinherit your family or leave them less than they would be entitled to if you had no will, you can use a “no-contest” (aka “in terrorem”) clause. A no-contest clause states that if someone contests your will, they get nothing. However, people mess up by adding a no-contest clause, then they leave no property to the disinherited family member. Because the disowned family member is getting nothing anyway, he has nothing to lose by contesting the document. Thus, the clause serves no purpose. For a no-contest clause to be effective, leave a more-than-nominal bequest and let the potential contestant know that there’s a decent alternative to receiving nothing. Leaving them an amount acts as an incentive to not contest the will.
  3. Documenting the reasons for disinheriting. Use descriptive letters to supplement (and not supplant) your proper legal documents, and create formal, signed memorandums with notarized signatures to support but not replace those documents.
  4. Create other legal documents to disinherit your spouse. Pre-nuptial and post-nuptial agreements can address what happens, if you get divorced and when you die. You and your spouse may also “waive” estate rights in a separate document that doesn’t even deal with a potential divorce. The only downside with these agreements, is that they require both parties to agree. They also usually require separate legal counsel to make them most effective.

Work with a qualified estate panning attorney when you want to leave someone out of your will.

Reference: Kiplinger (November 13, 2019) “Four Ways to Disinherit Family Members”

Why Do Singles Need These Two Estate Planning Tools?

Morningstar’s article, “2 Estate-Planning Tools That Singles Should Consider” explains that a living will, or advance medical directive, is a legal document that details your wishes for life-sustaining treatment. It’s a document that you sign when you’re of sound mind and says you want to be removed from life supporting measures, if you become terminally ill and incapacitated.

Powers of Attorney for healthcare and finances are often overlooked as critical estate planning documents for singles.

If you’re on life support with no chance of getting better, you’d choose to have your family avoid the expense and stress of keeping you alive artificially.

Like a living will, a durable power of attorney for healthcare is a legal document that names an agent to make healthcare decisions for you, if you are unable to make them yourself.

A durable power of attorney for healthcare can provide your instructions in circumstances in which you’re not necessarily terminally ill, but you are incapacitated.

When selecting an agent, find a person you trust enough to act on your behalf when you’re unable. Let this person know exactly how you feel about blood transfusions, organ transplants, disclosure of your medical information and other sensitive topics that may arise, if you’re incapacitated.

A power of attorney eliminates any confusion, especially if this person is someone other than your spouse. Your doctors will know exactly who the decision-maker is among your relatives and friends.

These two documents aren’t all that comprise a fully comprehensive estate plan. Singles should regularly make certain that the beneficiary designations on their checking and retirement accounts are up to date.

You should also consider your life insurance needs, especially if you have children and/or a mortgage.

It is also important to understand that a living will doesn’t address the issues of a will. A will ensures that your property is distributed after your death, in accordance with your wishes. Ask for help from an experienced estate planning attorney.

These two documents—a living will and a durable power of attorney—can help ensure that in a healthcare emergency, any medical and financial decisions made on your behalf are in accordance with what you really want. Speak with to an estate-planning attorney in your state to get definitive answers to your questions.

Reference: Morningstar (April 23, 2019) “2 Estate-Planning Tools That Singles Should Consider”

The Executor is Making a Mess of the Estate: What Now?

Estate litigation is never pleasant, but heirs have rights, and, in some situations, they have to fight back, when an executor is not acting in the best interest of the beneficiaries.

When siblings are able to work together to settle their parent’s estate, it may take a little time and there may be some negotiating.  However, the details are worked out. Sometimes the family bonds become even stronger. There are also ugly stories where families are fractured.

MP900400332This occurs when the executor acts with some (or a great deal of) self-interest, especially when it’s one of the siblings. That daughter may feel entitled to more than an equal share, because of the care she’s given the parent or because she resents her siblings’ successes, or any of a number of reasons.

What if the eldest sister gets her siblings to sign away their rights to everything? Perhaps some do, but when one sibling says no, this evil executor gets the will probated anyways. Subsequently, the lone hold-out finds out there was a testamentary trust created because she didn't sign away her rights, and—you guessed it—the eldest sister is the trustee. That’s dirty pool!

When the hold-out beneficiary requested an accounting of the trust, the evil executor/trustee refused. When an executor or trustee tries to keep the deceased parent’s estate and trust a secret, it’s not appropriate or acceptable, and she’s breaching her fiduciary duty.

nj.com’s recent article, “Your rights when family fights over a will,” explains that executors and trustees serve in a fiduciary capacity.  It means they have a legal obligation to act for another (the beneficiaries) in a fair, honest, and transparent manner. While executors and trustees have the legal authority to manage the affairs of an estate or trust, she’s accountable to the beneficiaries and must inform them of what she’s doing.

When a person dies, the executor must notify, in writing, all beneficiaries named in the will (and all heirs at law, like those entitled to inherit by intestacy) that a will has been probated. This must be done within a specific number of days of the will being probated. The executor must also provide a copy of the will upon request. After receiving the notice of probate, individuals may contest the will within a specific timeframe.

When the will is reviewed, beneficiaries can see that a testamentary trust was created. Once appointed, an executor must settle and distribute the estate as quickly and efficiently as possible. Both executors and trustees have a duty to collect and preserve assets, deal impartially with beneficiaries and act at all times with the best interests of the estate and trust in mindto be certain that the estate and trust are distributed, according to the decedent's wishes.

A fiduciary also has a duty to account to the beneficiaries.  Therefore, in the event a beneficiary has questions about how an estate or trust is being handled, he can request an accounting and copies of supporting documents. Likewise, a trustee is required to keep beneficiaries reasonably informed about the administration of the trust and information necessary for the beneficiaries to protect their interests. The trustee must promptly respond to the beneficiary's request for info on the administration of a trust. If a fiduciary willfully neglects or refuses to render an accounting or breaches her fiduciary duties, you can ask the court to remove her as the executor or trustee.

In this particular scenario, the older sister is legally bound to provide an accounting of the estate. If that shows that anything was done wrongfully, she may be personally liable for misconduct. She may even be liable to pay the legal fees incurred by other family members.

This can get messy, and it can be a tough time for everyone in the family. If it sounds all too familiar, you’ll want to speak with an attorney with experience in estate litigation.

Reference: nj.com (September 28, 2018) “Your rights when family fights over a will”

Is an Executor Responsible for Paying off a Decedent’s Debts?

Included in the list of executor’s duties, is managing the assets of the estate, including its debts.

Included in the list of executor’s duties, is managing the assets of the estate, including its debts.

Confused-DogDebts that have not been resolved before a person passes away, become the responsibility of the executor and the estate. How to handle this common issue is addressed in a recent article from nj.com,“What happens if executor doesn't pay off dead person's debt?”

An executor is the individual who is appointed under a will, to administer the estate of a person who has died. Unless there is a valid objection, the judge will appoint the person named in the will to be the executor. He or she must insure that the decedent’s desires written in the will are carried out. Some of the practical responsibilities are things like collecting and protecting the assets of the estate, obtaining contact information on all beneficiaries named in the will and any other potential heirs, collecting and arranging for payment of debts of the estate, approving or disapproving creditor's claims, making sure estate taxes are calculated, forms are filed and tax payments are made.

The executor is required to gather the assets of the estate and pay the deceased person's debts, before assets are distributed to the beneficiaries of the estate. This includes credit card debt. This can be made much easier by hiring an attorney for the estate (which the executor can select).

As an example, under New Jersey law, if the assets aren’t enough to pay all of the claims against the estate, payment must be made in the following order:

  1. Reasonable funeral expenses.
  2. Estate administration expenses.
  3. Reasonable services rendered to the deceased person by the state office of the public guardian for elderly adults.
  4. Debts and taxes with preference under federal or state law.
  5. Reasonable medical and hospital expenses of the deceased person's last illness, including compensation for those attending that person.
  6. Judgments entered against the deceased person.
  7. All other claims.

An estate planning attorney will know the time requirements for creditors making claims on the decedent’s debts for their state. Creditors are required to present claims to the executor under oath and in writing, within nine months of the day of death in New Jersey, for example. Check to be sure, as these timeframes vary. If claims aren’t presented within the time limits, the estate is not liable to the creditor. There are also timeframes for when the executor may dispute a claim, and how much time the creditor has once they have received notice of the dispute to take legal action.

If the debts of the estate are substantial, an estate planning attorney will be able to assist the executor. This can get complicated and may be less costly, if a professional is engaged.

Reference: nj.com (June 5, 2018)“What happens if executor doesn't pay off dead person's debt?”

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