Can I Revoke a Power of Attorney?

Spouses and partners chosen by adult children often lead to estate planning challenges. In one case, a parent worries that a second husband may be a poor influence and wants to revoke the power of attorney originally granted to a daughter. How to do that legally and without any hurt feelings is examined in the article Estate Planning: Revoking a power of attorney” from nwi.com.

A Power of Attorney is a document that allows another person to act on your behalf. The person designated is referred to as the “Attorney in Fact” or the “Agent.”

The problem this family faces, is that any revocation of a POA must be in writing, must identify the person who is to be revoked as the POA and must be signed by the person who is revoking the POA. Here’s where the hurt feelings come in: the revocation is not legal, until and unless the agent has actual knowledge of the revocation.

You can’t slip off to your estate planning lawyer’s office, revoke the POA and hope the family member will never know.

Another way to revoke a POA is to execute a new one. In most states, most durable POAs include a provision that the new POA revokes any prior POAs. By executing a new POA that revokes the prior ones, you have a valid revocation that is in writing and signed by the principal.

However, a daughter who is duly appointed must be notified. If she is currently acting under the POA and has a copy of it, there’s no way to avoid her learning of the parent’s decision.

If, however, the daughter has never seen a copy of the POA and she is not currently acting on it, then you may be able to make a new POA without notifying her. However, it may create a sticky situation in the future. Notification may be your only option.

If the POA has been recorded for any reason, the revocation must reference the book, page and instrument number assigned by the recorder’s office and be recorded. If the POA has been provided to any individuals or financial institutions, such as banks, life insurance companies, financial advisors, etc., they will need to be properly notified that it has been revoked or replaced.

Two cautions: not telling the daughter and having her find out after the parent has passed or is incapacitated might be a painful blow, with no resolution. Telling the daughter while the parent can discuss the change may be challenging but reaching an understanding will at least be possible. A diplomatic approach is best: the parent wishes to adjust her estate plan and the attorney made some recommendations, this revocation among them, should suffice.

Not revoking the power of attorney correctly could also lead to an estate planning disaster, with the daughter challenging whoever was named as the POA without her knowledge.

Talk with your estate planning lawyer to ensure that the POA is changed properly, and that all POAs have been updated.

Reference: nwi.com (March 7, 2021) “Estate Planning: Revoking a power of attorney”

Is My Estate Plan Set with a Power of Attorney?

A June 2020 Transamerica Center for Retirement Studies survey showed that a mere 28% of retirees have a financial power of attorney (POA)—and many people don’t understand that there are two types of these advance directives that serve different purposes.

MarketWatch recently published an article “Does your estate plan use the right type of Power of Attorney for you?” that says knowing how both types work is crucial in the pandemic, especially in the event that you get sick with coronavirus.

A Durable Power of Attorney for Finance can be either “springing” or “immediate.” “Durable” refers to the fact that this Power of Attorney will endure after you have lost mental or physical capacities, whether temporary or permanent. It lists when the powers would be granted to the person of your choosing and the powers end at your death.

An “immediate” Durable Power of Attorney for Finance is effective, as soon as you sign the document. In contrast, a “springing” POA for Finance means two physicians must first examine you and confirm in writing that you can no longer manage independently.

Therefore, to begin paying your bills, your agent must have those two physicians’ letters, and he or she doesn’t automatically have the authority to ask for them.

When issues, such as doctors’ letters, are required before the agent you chose can serve you, ask your estate planning attorney for guidance.

An obstacle for a Durable Power of Attorney for Finance can come upon you very fast and possibly include you and your spouse at the same time. For example, you both might get COVID-19.

The powers granted by a typical POA for Finance are often broad and permit selling and buying assets; managing your debt, car and Social Security payments; filing your tax returns; and caring for any assets not named in a trust you may have, such as your IRA.

If you recover your capacity, your agent must turn everything back over to you when you ask.

Remember that your advance directive documents are only as good as the people who implement them. You should also make certain anyone named knows that they’ll have the job, if needed. They must know where to find your POA and all other important information.

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Reference: MarketWatch (Oct. 9, 2020) “Does your estate plan use the right type of Power of Attorney for you?”

Protect Your Estate with Five Facts

It is true that a single person who dies in 2020 could have up to $11.58 million in personal assets and their heirs would not have to pay any federal estate tax. However, that doesn’t mean that regular people don’t need to worry about estate taxes—their heirs might have to pay state estate taxes, inheritance taxes or the estate may shrink because of other tax issues. That’s why U.S. News & World Report’s recent article “5 Estate Planning Tips to Keep Your Money in the Family” is worth reading.

Without proper planning, any number of factors could take a bite out of your children’s inheritance. They may be responsible for paying federal income taxes on retirement accounts, for instance. You want to be sure that a lifetime of hard work and savings doesn’t end up going to the wrong people.

The best way to protect your family and your legacy, is by meeting with an estate planning attorney and sorting through all of the complex issues of estate planning. Here are five areas you definitely need to address:

  1. Creating a last will and testament
  2. Checking that beneficiaries are correct
  3. Creating a trust
  4. Converting traditional IRA accounts to Roth accounts
  5. Giving assets while you are living

A last will and testament. Only 32% of Americans have a will, according to a survey that asked 2,400 Americans that question. Of those who don’t have a will, 30% says they don’t think they have enough assets to warrant having a will. However, not having a will means that your entire estate goes through probate, which could become very expensive for your heirs. Having no will also makes it more likely that your family will challenge the distribution of assets. As a result, someone you may have never met could inherit your money and your home. It happens more often than you can imagine.

Checking beneficiaries. Once you die, beneficiaries cannot be changed. That could mean an ex-spouse gets the proceeds of your life insurance policy, retirement funds or any other account that has a named beneficiary. Over time, relationships change—make sure to check the beneficiaries named on any of your documents to ensure that your wishes are fulfilled. Your will does not control this distribution and is superseded by the named beneficiaries.

Set up a trust. Trusts are used to accomplish different goals. If a child is unable to manage money, for instance, a trust can be created, a trustee named and the account funded. The trust will include specific directions as to when the child receives funds or if any benchmarks need to be met, like completing college or staying sober. With an irrevocable trust, the money is taken out of your estate and cannot be subject to estate taxes. Money in a trust does not pass through probate, which is another benefit.

Convert traditional IRAs to Roth retirement accounts. When children inherit traditional IRAs, they come with many restrictions and heirs get the income tax liability of the IRA. Regular income tax must be paid on all distributions, and the account has to be emptied within ten years of the owner’s death, with limited exceptions. If the account balance is large, it could be consumed by taxes. By gradually converting traditional retirement accounts to Roth accounts, you pay the taxes as the accounts are converted. You want to do this in a controlled fashion, so as not to burden yourself. However, this means your heirs receive the accounts tax-free.

Gift with warm hands, wisely. Perhaps the best way to ensure that money stays in the family, is to give it to heirs while you are living. As of 2020, you may gift up to $15,000 per person, per year in gifts. The money is tax free for recipients. Just be careful when gifting assets that appreciate in value, like stocks or a house. When appreciating assets are inherited, the heirs receive a step-up in basis, meaning that the taxable amount of the assets are adjusted upon death, so some assets should only be passed down after you pass.

Reference: U.S. News & World Report (Sep. 30, 2020) “5 Estate Planning Tips to Keep Your Money in the Family”

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Can a Power of Attorney Protect My Assets as I Get Older?

Elder law attorneys help protect individuals as they grow older and then protect their beneficiaries when they pass away.

The Street’s recent article entitled “Guide to Protect Your Assets as You Age – Power of Attorneys” asks us to think about visiting your family doctor for the last 30 years but then needing to see a specialist for the first time. That’s because your family doctor isn’t a specialist, and they might miss something. The article explains that elder law attorneys are the specialists of the legal profession—they take a fresh look at a client’s situation and develop strategies to protect them and their families from the risks as we grow older.

Elder law attorneys show you how to protect yourself and your family. When partnering with an elder law attorney, they make certain that your estate goes to your family as you intended, with little or no tax liability.

An important tool for elder law attorneys is the Power of Attorney (POA). There are two of them: a medical POA and a financial POA. These allow you to designate a trusted agent to make your medical and financial decisions, when you are unable.

Unfortunately, the coronavirus pandemic has placed everyone in difficult circumstances. As a result, many hospitalized patients are without the proper estate planning documents. While things are letting up some, hospitals, nursing homes, and assisted living homes have shuttered their doors to visitors and non-essential workers in an attempt to minimize the spread of this disease. As a result, many patients are unable to get these documents signed.

Although some states initially prevented electronic signatures and notarization that would keep contact to a minimum, many have now permitted patients access to elder law and estate planning attorneys, when needed. These states have signed executive orders that allow for electronic signatures, which has been a huge help. Even so, this can be challenging for an elder individual.

Financial powers of attorney are not all the same either. They are just one tool in the toolbox.

A power of attorney can have a list of things you will permit your designated agent to do for you. Many of these documents do not give your agent enough power to protect you. That’s because they limit your agent’s abilities. That may sound good when you first sign them, but the result is that it makes things harder for your family, if you have a stroke and your loved one needs to protect your finances.

Reference: The Street (Sep. 24, 2020) “Guide to Protect Your Assets as You Age – Power of Attorneys”

Why Everyone Needs an Estate Plan

Many people think you have to be a millionaire to need an estate plan and investing in an estate plan is too costly for an average American. Not true! People of modest means actually need an estate plan more than the wealthy to protect what they have. A recent article from TAPinto.net explains the basics in “Estate Planning–Getting Your Affairs in Order Does Not Need to be Complicated or Expensive.”

Everyone needs an estate plan consisting of the following documents: a Last Will and Testament, a General Durable Power of Attorney and an Advance Medical Directive or Living Will.

Unless your estate is valued at more than $11.58 million, you may not be as concerned about federal estate taxes right now, but this may change in the near future. Some states, like New Jersey, don’t have any state estate tax at all. There are states, like Pennsylvania, which have an “inheritance” tax determined based on the relationship the person has with the decedent. However, taxes aren’t the only reason to have an estate plan.

If you have young children, your will is the legal document used to tell your executor and the court who you want to care for your minor children by naming their guardian. The will is also used to explain how your minor children’s inheritance should be managed by naming trustees.

Why do you need a General Power of Attorney? This is the document that you need to name a person to be in charge of your affairs, if you become incapacitated and can’t make or communicate decisions. Without a POA in place, no one, not even your spouse, has the legal authority to manage your financial and legal affairs. Your family would have to go to court and file a guardianship action, which can be expensive, take time to complete and create unnecessary stress for the family.

An Advance Medical Directive, also known as a Living Will, is used to let a person of your choice make medical decisions, if you are unable to do so. This is a very important document to have, especially if you have strong feelings about being kept alive by artificial means. The Advance Medical Directive gives you an opportunity to express your wishes for end of life care, as well as giving another person the legal right to make medical decisions on your behalf. Without it, a guardianship may need to be established, wasting critical time if an emergency situation occurs.

Most people of modest means need only these three documents, but they can make a big difference to protect the family. If the family includes disabled children or individuals, owns a business or real estate, there are other documents needed to address these more complex situations. However, simple or complex, your estate and your family deserve the protection of an estate plan.

Reference: TAPinto.net (Sep. 23, 2020) “Estate Planning–Getting Your Affairs in Order Does Not Need to be Complicated or Expensive”

How to Plan for Incapacity

Planning for incapacity is just as important as planning for death. One is certain, the other is extremely likely. Therefore, it makes sense to prepare in advance, advises the article “Planning ahead for incapacity helps you and family” from The Press-Enterprise.

Let’s start by defining capacity. Each state has its own language but for the most part, incapacity means that a person is incapable of making decisions or performing certain acts. A concerned adult child is usually the one trying to have a senior parent declared incapacitated.

A person who has a mental or physical disorder may still be capable of entering into a contract, getting married, making medical decisions, executing wills or trusts, or performing other actions. However, before a person is declared incapacitated by medical professionals or a court, having a plan in place makes a world of difference for the family or trusted person who will be caring for them. Certain legal documents are needed.

Power of Attorney. This is the primary document needed in case of incapacity. There are several kinds, and an estate planning attorney will know which one will be best for your situation. A “springing” power of attorney becomes effective, only when a person is deemed incapacitated and continues throughout their incapacity. A POA can be general, broadly authorizing a named person to act on different matters, like finances, determining where you will live, entering into contracts, caring for pets, etc. A POA can also be drafted with limited and specific powers, like to sell a car within a certain timeframe.

The POA can be activated before you become incapacitated. Let’s say that you are diagnosed with early-stage dementia. You may still have legal capacity but might wish a trusted family member to help handle matters. For elderly people who feel more comfortable having someone else handle their finances or the sale of their home, a POA can be created to allow a trusted individual to act on their behalf for these specific tasks.

A POA is a powerful document. A POA gives another person control of your life. Yes, your named agent has a fiduciary duty to put your interests first and could be sued for mismanagement or abuse. However, the goal of a POA is to protect your interests, not put them at risk. Choosing a person to be your POA must be done with care. You should also be sure to name an alternate POA. A POA expires on your death, so the person will not be involved in any decisions regarding your estate, burial or funeral arrangements. That is the role of the executor, named in your will.

Advance health care directive, or living will, provides your instructions about medical care. This document is one that most people would rather not think about. However, it is very important if your wishes are to be followed. It explains what kind of medical care you do or do not want, in the event of dementia, a stroke, coma or brain injury. It gets into the details: do you want resuscitation, mechanical ventilation or feeding tubes to keep you alive? It can also be used for post-death wishes concerning autopsies, organ donation, cremation or burial.

The dramatic events of 2020 have taught us all that we don’t know what is coming in the near future. Planning in advance is a kindness to yourself and your family.

Reference: The Press-Enterprise (July 19, 2020) “Planning ahead for incapacity helps you and family”

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What are the Different Kinds of Powers of Attorney?

If I asked you what you thought is the most important document in your estate plan, you may say it’s your last will and testament or your trust. However, that’s not always the case. In many situations, the most important planning document may be a well-drafted power of attorney, says The Miami News-Record’s recent article entitled “Power of attorney options match different circumstances.”

When a person can’t make his or her own decisions because of health, injury, or other unfortunate circumstances, a power of attorney (POA) is essential. A POA is implemented to help their loved ones make important decisions on their behalf. It helps guide decision-making, enhances comfort and provides the best care for those who can’t ask for it themselves. A POA permits the named individual to manage their affairs.

To know which type of POA is appropriate for a given circumstance, you should know about each one and how they can offer help. There are five power of attorney forms.

Durable and Non-Durable Power of Attorney. This is the most common. These leave a person with full control of another person’s decisions, if they’re unable to make them. A Durable POA continues to be in effect when you are incapacitated. That is what the “durable” part means. A Non-Durable Power of Attorney is revoked, when you become incapacitated. Be sure you know which version you are signing.

Medical Power of Attorney. Especially in a hospice setting, it permits another person to make medical decisions on the patient’s behalf, if they lose the ability to communicate. This includes decisions about treatment. In this situation, the POA takes the role of patient advocate, typically with the presiding physician’s consent.

Springing Power of Attorney. This POA is frequently an alternative to an immediately effective POA, whether it durable or non-durable. Some people may not feel comfortable granting someone else power of attorney, while they’re healthy. This POA takes effect only upon a specified event, condition, or date.

Limited Power of Attorney. This POA provides the agent with the authority to handle financial, investment and banking issues. It’s usually used for one-time transactions, when the principal is unable to complete them due to incapacitation, illness, or other commitments.

If you don’t have a power of attorney, ask a qualified elder law or estate planning attorney to help you create one. If you already have a POA, review it to be sure it has everything needed, especially if you have a very old POA or one that was drafted in a state other than the one in which you reside.

Reference: The Miami (OK) News-Record (July 7, 2020) “Power of attorney options match different circumstances”