What Is Power of Attorney and Is It Important? – Annapolis and Towson Estate Planning

Most people realize the importance of the last will and testament. However, they remain unaware of the importance of a durable power of attorney. This document authorizes another person to act on your behalf while you are alive and expires upon death, as explained in a recent article titled “Power of attorney likely to be first vital estate document” from The News-Enterprise.

The power of attorney is used to give authorization regarding legal and financial matters. It can be tailored to be as broad or as narrow as one wishes. A healthcare proxy, also known as a healthcare power of attorney, is used to give authorization for medical decisions.

The general POA is used when a person is unable to act for themselves due to illness or injury. It is also needed when a person is unable to act on their own behalf because of mental incapacity. The POA is also used for when someone prefers to have another person manage their financial affairs.

Spouses use POAs to handle day-to-day financial tasks, from dealing with insurance companies to managing bank accounts, loans, or other financial matters. If one spouse cannot attend a real estate closing, for instance, the other will need a POA so they may represent their spouse.

Some people think just adding another person to an account will work the same way as a POA. However, this is not accurate. A co-owner might be able to pay bills. However, their ability to do anything else will be limited. They will not be able to amend the account, unless both parties are present, for instance.

POAs are state-specific documents, so any POA, whether for healthcare or finances, should be created by an estate planning attorney in the state where you live and any state where you own property.

Some powers, including the ability to make gifts of the principal’s property or to change beneficiaries for retirement accounts or life insurance policies, may sound as if they are far beyond what is needed when these documents are first drafted. However, unexpected things happen at all stages of life, and situations arise where these powers are needed. Seemingly simple tasks become far more complicated, if the POA does not permit these types of additional powers.

If there is concern about broad powers, the document can include limited language. For instance, a POA can include a limit on gifting the principal’s property pursuant to any previously documented wishes. This will allow gifting to be completed, but only to the terms already indicated. However, be careful about broad limiting language, like limiting gifts to annual gift exclusions. Prohibiting an agent from acting in ways to protect the principal’s property and best interest could be counterproductive.

Drafted by an experienced estate planning attorney to suit the specific needs of the individual, a power of attorney can make it possible for a trusted individual to conduct your wishes and protect your best interests. Make sure that you have one and update it whenever you update your overall estate plan.

Reference: The News Enterprise (June 25, 2022) “Power of attorney likely to be first vital estate document”

 

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Should I Update My Estate Plan? – Annapolis and Towson Estate Planning

An estate plan exists to accomplish three things.

  1. Preserving your accumulated wealth
  2. To specify who will inherit your assets after your death; and
  3. To indicate who will make health care and financial decisions on your behalf if you are unable.

Real Daily’s recent article entitled “4 Good Reasons to Update Your Estate Plan” says that as you age, you should consider updating your estate plan. Why? Well, your feelings may change over time, or you may experience a significant life event that requires you to update things. These are events such as a marriage or divorce, a new child or grandchild, or a significant change in your health, wealth and outlook on life.

In addition to your will and trusts, you need to review your power of attorney, healthcare directive, living will and HIPAA waiver.

It is critical to recognize the life events that may necessitate updating your estate plan.

For example, if you are recently married or divorced, according to some state laws, existing wills are nullified when someone gets married or divorced.

It is also possible that your wealth has increased significantly, which may affect the way you view how your assets should be distributed to your beneficiaries.

Another reason to update your plan, is if you want to give more (or less) to charity or to your heirs.

Your executor or trustees may change their minds about their roles, no longer live nearby, or they themselves have died. If an individual is no longer interested in assuming those responsibilities, no longer alive, or no longer in good health or of repute, then there is a need to revise the document.

Some other reasons to update your plan include if you are in the process of retiring, moving to another state, or buying or selling real estate.

Each of these events calls for a comprehensive estate plan review.

Finally, your goals may evolve over the years as a result of changes to your lifestyle or circumstances, such as an inheritance, career change, marriage, house purchase, or a growing family.

Reference: Real Daily (June 13, 2022) “4 Good Reasons to Update Your Estate Plan”

 

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How Do I Store Estate Planning Documents? – Annapolis and Towson Estate Planning

It is a common series of events: an elderly parent is rushed to the hospital in the middle of the afternoon and once children are notified, the search for the Power of Attorney, Living Will and Health Care Power of Attorney begins. It is easily avoided with planning and communication, according to an article from The News-Enterprise titled “Give thought to storing your estate papers.” However, just because the solution is simple does not mean most people address it.

As a general rule, estate planning documents should be kept together in a fire and waterproof container in a location known to fiduciaries.

Most people think of a bank safe deposit box as a protected place. However, it is not a good location for several reasons. Individuals may not have access to the contents of the safe deposit box, unless they are named on the account. Even with their names on the account, emergencies do not follow bankers’ hours. If the Power of Attorney giving the person the ability to access the safe deposit box is inside the safe deposit box, bank officials are not likely to be willing to open the box to an unknown person.

A well-organized binder of documents in a fire and waterproof container at home makes the most sense.

Certain documents should be given in advance to certain agencies or offices. For instance, health care documents, like the Health Care Power of Attorney and Advance Medical Directive (or Living Will) should be given to each healthcare provider to keep in the person’s medical record and be sure they are accessible 24/7 to health care providers. Make sure that there are copies for adult children or whoever has been designated to serve as the Health Care Power of Attorney.

Power of Attorney documents should be given to each financial institution or agency in preparation for use, if and when the time comes.

It may feel like an overwhelming task to contact banks and brokerage houses in advance to make sure they accept a Power of Attorney form in advance. However, imagine the same hours plus the immense stress if this has to be done when a parent is incapacitated or has died. Banks, in particular, require POAs to be reviewed by their own attorneys before the document can be approved, which could take weeks to complete.

Depending upon where you live, Durable General Powers of Attorney may be filed at the county clerk’s office. If a POA is filed but is later revoked and a new document created, or if a fiduciary needs to convey real estate property with the powers conferred by a POA, the document at the county clerk’s office should be updated.

Last will and testaments are treated differently than POA documents. Wills are usually kept at home and not filed anywhere until after death.

Each fiduciary listed in the documents should be given a copy of the documents. This will be helpful when it is time to show proof they are a decision maker.

Having estate planning documents properly prepared by an experienced estate planning attorney is the first step. Step two is ensuring they are safely and properly stored, so they are ready for use when needed.

Reference: The Times-Enterprise (June 11, 2022) “Give thought to storing your estate papers”

 

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Can I Make Decisions for My 18-Year-Old ‘Kid’ If She Becomes Incapacitated? – Annapolis and Towson Estate Planning

The Press-Enterprise’s recent article entitled “Legal documents for young adults” describes some of the important legal and estate planning documents your “kid” (who is now an adult) should have.

HIPAA Waiver. This form allows medical personnel to provide information to the parties you have named in the document. Without it, even mom would be prohibited from accessing her 19-year-old’s health information—even in an emergency. However, know that this form does not authorize anyone to make decisions. For that, see Health Care Directives below.

Health Care Directive. Also known as a health care power of attorney, this authorizes someone else to make health care decisions for you and details the decisions you would like made.

Durable Power of Attorney. Once your child turns 18, you are no longer able to act on their behalf, make decisions for them, or enter into any kind of an agreement binding them. This can be a big concern, if your adult child becomes incapacitated. A springing durable power of attorney is a document that becomes effective only upon the incapacity of the principal (the person signing the document). It is called a “springing” power because it springs into effect upon incapacity, rather than being effective immediately.

A durable power of attorney, whether springing or immediate, states who can make decisions for you upon your incapacity and what powers the agent has. The designated agent will typically be able to access bank accounts, pay bills, file insurance claims, engage attorneys or other professionals, and in general, act on behalf of the incapacitated person.

They will always be your babies, but once your child turns 18, he or she is legally an adult.

Be certain that you have got the legal documents in place to be there for them in case of an emergency.

Remember a spring break, when they are home for summer after their 18th birthday, or a senior road trip are all opportunities when these documents may be needed.

Reference: The Press-Enterprise (April 2, 2022) “Legal documents for young adults”

 

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Do Single People Need Estate Planning? – Annapolis and Towson Estate Planning

In evaluating your needs for estate planning, look at what might happen if you die intestate – that is, without a last will and testament. Your assets will likely have to go through the probate process, which means they will be distributed by the court according to the state intestate succession laws, says Hood County News’ recent article entitled “Even ‘singles’ need estate plans.”

Even if you do not have children, you may have a few nephews or nieces—or children of cousins or friends— to whom you would like to leave some of your assets. This can include automobiles, collectibles and family memorabilia. However, if everything you own goes through probate, there is no guarantee that these individuals will end up with what you wanted them to have.

If you want to leave something to family members or close friends, you will need to say this in your will. However, you also may want to provide support to one or more charitable organizations. You can just name these charities in your will. However, there may be options that could provide you with more benefits.

One option is a charitable remainder trust. With this option, you would transfer appreciated assets – such as stocks, mutual funds or other securities – into an irrevocable trust. The trustee, whom you have named (note that you could serve as trustee yourself) can then sell the assets at full market value, avoiding the capital gains taxes you would have to pay if you sold them yourself, outside a trust. If you itemize, you may be able to claim a charitable deduction on your taxes. The trust can purchase income-producing assets with the proceeds and provide you with an income stream for the rest of your life. At your death, the remaining trust assets will pass to the charities you have named.

There is also a third entity that is part of your estate plans: you. Everyone should make arrangements to protect their interests. However, without an immediate family, you need to be especially mindful of your financial and health care decisions. That is why, as part of your estate planning, you may want to include these two documents: durable power of attorney and a health care proxy.

A durable power of attorney allows you to name a person to manage your finances, if you become incapacitated. This is especially important for anyone who does not have a spouse. If you become incapacitated, your health care proxy (health care surrogate or medical power of attorney) lets you name another person to legally make health care decisions for you, if you cannot do so yourself.

Reference: Hood County News (Dec. 17, 2021) “Even ‘singles’ need estate plans”

 

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Does an Elder Orphan Need an Estate Plan? – Annapolis and Towson Estate Planning

Estate planning for the future is even more important for elder orphans than for those with a spouse or family members, according to this recent article “Savvy Senior: How to get help as an elder orphan” from The Virginia Gazette. There is no one single solution, but there are steps to take to protect your estate, health and provide for long-term care.

Start with the essential estate planning documents. These documents will protect you and ensure that your wishes are followed, if you become seriously ill or when you die. These documents include:

A durable Power of Attorney to designate someone to handle financial matters in the event of incapacity.

An Advanced Health Care Directive, including a Living Will, to tell your health care provider what kind of care you want if you become incapacitated.

A Health Care Power of Attorney, naming a person of your choice to make medical decisions on your behalf, if you are unable to do so.

A Will to direct how you want your property and assets to be distributed upon your death and to name an Executor who will be in charge of your estate.

Your best option to prepare these documents is an experienced estate planning attorney. Trying to do it yourself is risky. Each state has its own laws for these documents to be valid. If the documents are not accepted, the court could declare your will invalid and your directions will not be followed.

People with families typically name a responsible adult child as their power of attorney for finances, as executor or for health care decisions. If you do not have adult children, you may ask a trusted friend or colleague. Name a person who is younger than you, organized and responsible and who will likely be available and willing to service.

If the person you name as executor lives in another state, you will need to check with your estate planning attorney to see if there are any special requirements.

If you do not have a friend or even a distant relative you feel comfortable assigning this role to, your estate planning attorney may be able to suggest alternatives, such as an aging life care manager. These professionals are trained in geriatric care and often have backgrounds in social work or nursing.

If you are reluctant to complete the legal documents mentioned above or start having them prepared and then fail to complete them, you may face some unpleasant consequences. A judge may appoint a guardian to make decisions on your behalf. This guardian is likely to be a complete stranger to you. They will be legally empowered to make all decisions for you regarding your health care, end-of-life care and even your burial and funeral services.

Unless you are comfortable with a court-appointed person making health care and other decisions for you, call an estate planning attorney and start making plans for the future.

Reference: The Virginia Gazette (April 1, 2022) “Savvy Senior: How to get help as an elder orphan”

 

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Taking Care of Dying Parent’s Financial Affairs Can Be Challenging – Annapolis and Towson Estate Planning

It is not uncommon for adult children to have to face a parent’s decline and a stay in hospice at the end of their life. The children are tasked with trying to prepare for his passing. This includes how to handle his financial matters.

Seniors Matter’s recent article entitled “How do I handle my father’s financial matters now that he’s in hospice?” says that caring for a sick family member is a challenging and emotional time. Because of this major task, it is easy to put financial considerations on the back burner. Nonetheless, it is important to address a few key issues.

If a family member is terminally ill or admitted to hospice – and you are able to do so – it may be a good idea to start by helping to take inventory of your family member’s assets and liabilities. A clear idea of where their assets are and what they have is a great starting point to help you prepare and be in a better position to manage the estate.

An inventory may include any and all of the following:

  • Real estate
  • Bank accounts
  • Cars, boats and other vehicles
  • Stocks and bonds
  • Life insurance
  • Retirement plans (such as a 401(k), a traditional IRA, a Roth IRA and a SEP IRA);
  • Wages and other income
  • Business interests
  • Intellectual property; and
  • Any debts, liabilities and judgments.

Next, find out what, if any, estate planning documents may be in place. This includes a will, powers of attorney, trusts, a healthcare directive and a living will. You will need to find copies.

This is hard to do while a loved on is dying, but it can make the aftermath easier and less stressful.

Reference: Seniors Matter (Feb. 22, 2022) “How do I handle my father’s financial matters now that he’s in hospice?”

 

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Who Is the Best Choice for Power of Attorney? – Annapolis and Towson Estate Planning

Picking a person to serve as your Power of Attorney is an extremely important part of your estate plan, although it is often treated like an afterthought once the will and trust documents are completed. Naming a POA needs to be given the same serious consideration as creating a will, as discussed in this recent article “Avoid powers of attorney mistakes” from Medical Economics.

Choosing the wrong person to act on your behalf as your Power of Attorney (“POA”) could lead to a host of unintended consequences, leading to financial disaster. If the same person has been named your POA for healthcare, you and your family could be looking at a double-disaster. What’s more, if the same person is also a beneficiary, the potential for conflict and self-dealing gets even worse.

The Power of Attorney is a fiduciary, meaning they are required to put your interests and the interest of the estate ahead of their own. To select a POA to manage your financial life, it should be someone who you trust will always put your interests first, is good at managing money and has a track record of being responsible. Spouses are typically chosen for POAs, but if your spouse is poor at money management, or if your marriage is new or on shaky ground, it may be better to consider an alternate person.

If the wrong person is named a POA, a self-dealing agent could change beneficiaries, redirect portfolio income to themselves, or completely undo your investment portfolio.

The person you name as a healthcare POA could protect the quality of your life and ensure that your remaining years are spent with good care and in comfort. However, the opposite could also occur. Your healthcare POA is responsible for arranging for your healthcare. If the healthcare POA is a beneficiary, could they hasten your demise by choosing a substandard nursing facility or failing to take you to medical appointments to get their inheritance? It has happened.

Most POAs, both healthcare and financial, are not evil characters like we see in the movies, but often incompetence alone can lead to a negative outcome.

How can you protect yourself? First, know what you are empowering your POAs to do. A boilerplate POA limits your ability to make decisions about who may do what tasks on your behalf. Work with your estate planning attorney to create a POA for your needs. Do you want one person to manage your day-to-day personal finances, while another is in charge of your investment portfolio? Perhaps you want a third person to be in charge of selling your home and distributing your personal possessions, if you have to move into a nursing home.

If someone, a family member, or a spouse, simply presents you with POA documents and demands you sign them, be suspicious. Your POA should be created by you and your estate planning attorney to achieve your wishes for care in case of incapacity.

Different grown children might do better with different tasks. If your trusted, beloved daughter is a nurse, she may be in a better position to manage your healthcare than another sibling. If you have two adult children who work together well and are respected and trusted, you might want to make them co-agents to take care of you.

Your estate planning attorney has seen all kinds of family situations concerning POAs for finances and healthcare. Ask their advice and do not hesitate to share your concerns. They will be able to help you come up with a solution to protect you, your estate and your family.

Reference: Medical Economics (Feb. 3, 2022) “Avoid powers of attorney mistakes”

 

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Write a Letter of Instruction for Loved Ones – Annapolis and Towson Estate Planning

A letter of intent is frequently recommended for parents of disabled children to share information for when the parent dies. However, letters of intent or a letter of instruction can also be a helpful resource for executors, says the article “Planning Head: For detailed instructions consider a letter of instruction” from The Mercury. This is especially valuable, if the executor does not know the decedent or their family members very well.

For disabled children, legal documents address specific issues and are not necessarily the right place to include personal information about the child or the parent’s desires for the child’s future. Estate plans need more information, especially for a minor child.

The goal is to create a document to make clear what the parents want for the child after they pass, whether that occurs early or late in the child’s life.

For a disabled child, the first questions to be addressed in the estate plan concern who will care for the child if the parent dies or becomes incapacitated, where will the child live and what funds will be available for their care. Once those matters are resolved, however, there are more questions about the child’s wants and needs.

The letter of intent can answer questions about the special information only a parent knows and is helpful in future decisions about their care and living situation.

The letter of intent concerning an estate should also include information about wishes for a funeral or burial and contain everything from directions for the music list for a ceremony to the writing on the headstone.

Once the letter of intent is created, the next question is, where should you put it so it is secure and can be accessed when it is needed?

Do not put it in a bank safe deposit box. This is a common error for estate planning documents as well. The executor may only access the contents of the safe deposit box after letters of administration have been issued. This happens after the funeral, and sometimes long after the funeral. By then, it will be too late for any instructions.

Keeping estate planning documents in a safe deposit box presents other problems. If the bank seals the safe deposit box on notification of the owner’s death, the executor will not be able to proceed. This can sometimes be prevented by having additional owners on the safe deposit box, if permitted by the bank . Any additional owners will also need to know where the key is located and be able get access to it.

The better solution is to keep all important documents including wills, financial power of attorney, health care powers, living wills, or health care directives, insurance forms, cemetery deeds, information for the family’s estate planning attorney, financial advisor, and CPA, etc., in one location known to the trusted person who will need access to the documents. That person will need a set of keys to the house. If they are kept in a fire and waterproof safe in the house; they will also need the keys to the safe.

If the parents move or move the documents, they will need to remember to tell the trusted person where these documents have moved. Otherwise, a lot of work will have been for naught.

Reference: The Mercury (Jan. 19, 2022) “Planning Head: For detailed instructions consider a letter of instruction”

 

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Is It Necessary to have a Medical Power of Attorney? – Annapolis and Towson Estate Planning

There is no way around it, this is a difficult conversation to have with aging parents or loved ones. Who will take care of parents when they cannot take care of themselves? Do they have their estate plan in order? According to this article from Health, an important detail is often overlooked: “A Health Care Power of Attorney Is Essential for Aging Parents—Here’s Why.”

Referred to as a health care proxy or a medical power of attorney, a health care power of attorney allows a person to choose someone to make medical decisions on their behalf, if they are unable to do so. This is a different document than a living will, which serves to let a person outline their wishes if they cannot communicate for end-of-life care.

Naming a medical proxy in advance lets the person conduct their wishes, with full and complete knowledge of what those wishes are.

A health care power of attorney is also not the same as a last will and testament, which goes into effect after a person dies. There is nothing in a health care power of attorney concerning wealth distribution. The will and trusts address those matters.

Giving a trusted person the legal power to make medical decisions is a big step, but one that provides a sense of control and peace of mind. There should be a first choice and an alternate, in case the first person, usually a spouse, is unable or unwilling to serve.

Without a medical power of attorney, the family may need to go to court to get legal permission to make decisions. It is the last thing anyone wants to do when their loved one is in a critical medical situation. Imagine having to leave the hospital to go to court, when the minutes are ticking away and your parent is in the midst of medical crisis.

If someone fails to name a medical proxy and becomes incapacitated, the hospital itself will most often step in to make treatment decisions or rely on the rules of the state to pick a family member to make decisions. The person named by the hospital might not be the person the family wants, but it will have no choice.

Like having an estate plan in place, having a medical proxy in place eliminates a lot of unnecessary stress. Most parents name the adult children they feel will make decisions in their best interest. The responsible, dependable child, regardless of their age relative their siblings, is often named. If siblings do not get along and have a history of fighting, it may be best to name a cousin or trusted family friend.

An experienced estate planning attorney will make sure the health care proxy documents comply with the laws in the person’s state of residence. Every state has its own forms, and its own laws.

A discussion needs to take place between the person and the people they name in the health care proxy. Make sure the proxy is willing to take on the role and understands the person’s wishes.  The form should also be submitted to a health care facility or doctor’s office, so it is on file if it is needed. Unexpected events occur every day—being prepared makes it easier for loved ones.

Reference: Health (Dec. 1, 2021) “A Health Care Power of Attorney Is Essential for Aging Parents—Here’s Why”

 

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