Read more about the article What are Big Mistakes When Writing Financial Power of Attorney? Annapolis and Towson Estate Planning

What are Big Mistakes When Writing Financial Power of Attorney? Annapolis and Towson Estate Planning

A financial power of attorney can be a powerful tool in your estate planning tool belt. However, if you don’t take careful consideration when creating this document, you could face serious consequences. Read Kiplinger’s recent article entitled “5 Mistakes to Avoid When Writing a Financial Power of Attorney” to learn five of the biggest mistakes to avoid when writing your financial power of attorney.

  1. Not Designating an Alternative Agent. The most protective plans consider contingencies — including if your primary agent is unable or unwilling to serve. Naming an alternative agent lets you say who will manage your affairs if your first choice dies, becomes incapacitated, resigns, or simply refuses to act. It can also help avoid having the court appoint a new agent, someone you wouldn’t have chosen.
  2. Creating a “Springing” Agency. When an agency is conditioned on the incapacity of the principal, it’s sometimes called a “springing” agency,” because its “springs” into existence upon a triggering event. However, not all states recognize springing agencies.
  3. Overbroad Gifting Powers. A powerful term that can be granted to an agent under a power of attorney is the authority to give away the principal’s property. Granting your agent this power gives them powerful control over your estate. Before granting this power, you should carefully consider the potential risks involved — including financial abuse or fraud. You can also limit your agent’s gift-making authority and specify to whom your agent is authorized to make gifts, including if the agent should be permitted to make a gift to themselves. You should also specify the total value of gifts your agent will be authorized to make in a given year.
  4. Not Telling Current Agents of a Change. Most powers of attorney include an express statement that all old powers of attorney are revoked or canceled whenever the document is updated or replaced. Any agents acting under a previously authorized power that’s now void should be told (in writing) to avoid any confusion or potential issues.
  5. Failing to Plan for Real Estate Powers. One of the most common powers principals grant their agents is the power to manage their real estate. This may include renting or selling real estate, paying for repairs or renovations or hiring a real estate agent to help carry out transactions. If you want to grant your agent this power, you may be required to file your POA with your local land records office.  Contact us to review your estate plan with one of our experienced estate planning attorneys.

Reference: Kiplinger (Dec. 27, 2022) “5 Mistakes to Avoid When Writing a Financial Power of Attorney”

 

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Read more about the article Why Do I Need an Estate Plan? – Annapolis and Towson Estate Planning

Why Do I Need an Estate Plan? – Annapolis and Towson Estate Planning

Money Talks News’ recent article entitled “Why Everyone Needs an Estate Plan” reminds us that estate plans aren’t just for the wealthy. People of all ages and income levels can benefit from drafting an estate plan. An estate plan provides instructions about how your assets will be distributed, as well as how you’ll pay for your debts, final arrangements and even your medical care if you become incapacitated.

With everything stated explicitly in an estate plan, your family can work through their grief after your death instead of battling each other about who gets what.

An estate plan describes your wishes regarding how assets such as your house, vehicle bank accounts, investments and valuables will be transferred to your beneficiaries after you die. Most of this is included in your will. You’ll also name the executor of your estate in your will, as well as a guardian for your minor children, and even someone to take care of your pets when you’re no longer here.

Many people will confuse an estate plan with a will. However, that’s just a part of a comprehensive estate plan. There is much more involved in an estate plan than just who gets what after you die. An estate plan can also include your wishes, if you’re medically unable to manage your own affairs. Your plan can designate your durable power of attorney (DPA), who can make medical and financial decisions in your stead, along with medical directives on what medical procedures you do or don’t want to prolong your life.

One of the most compelling reasons to have an estate plan is that it can help avoid probate and prevent your family from winding up in court to access the assets you’ve left behind for them. Another reason to have an estate plan is to help reduce any estate or inheritance taxes imposed on your estate when your assets are transferred to your beneficiaries.

Federal estate taxes typically only apply to the very wealthy. In 2022, the threshold, or estate tax exemption, is $12.06 million, for 2023 that number is $12.93 million.

Unless your assets are valued over the applicable exemption in the year of death, you’re exempt from federal estate taxes. However, while you may be exempt from federal-level estate taxes, the state you live in may impose its own estate taxes. Some states also levy inheritance taxes on beneficiaries who receive assets from your estate.

If you are interested in designing your estate plan, contact us to speak with one of our experienced estate planning attorneys.

Reference: Money Talks News (Oct. 21, 2022) “Why Everyone Needs an Estate Plan”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

The Basics of Estate Planning – Annapolis and Towson Estate Planning

No matter how BIG or small your net worth is, estate planning is a process that ensures your assets are handed down the way you want after you die.

Forbes’ recent article entitled “Estate Planning Basics” explains that everybody has an estate.

An estate is nothing more or less than the sum total of your assets and possessions of value. This includes:

  • Your car
  • Your home
  • Financial accounts
  • Investments; and
  • Personal property.

Estate planning is the process of deciding which people or organizations are to get your possessions or assets after you’ve died.

It’s also how you leave directions for managing your care and assets if you are incapacitated and unable to make financial or medical decisions. That is done with powers of attorney, a healthcare directive and a living will.

Your estate plan details who gets your assets. It also designates who can make critical healthcare and financial decisions on your behalf should you become incapacitated. If you have minor children, your estate plan also lets you designate their legal guardians, in case you die before they reach 18. It also allows you to name adults to safeguard their financial interests.

Your estate plan directs assets to specific entities or people in a legally binding manner. If you want your daughter to have your coin collection or your favorite animal rescue organization to get $500, it’s all mapped out in your estate plan.

You can also create a trust to safeguard a minor child’s assets until they reach a certain age. You can also keep assets out of probate. That way, your beneficiaries can easily access things like your home or bank accounts.

All estate plans should include documents that cover three main areas: asset transfer, medical needs and financial decisions. Ask an experienced estate planning attorney to help you create your estate plan.

Reference: Forbes (Nov. 16, 2022) “Estate Planning Basics”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Read more about the article What Documents are Needed in an Emergency? – Annapolis and Towson Estate Planning Attorneys

What Documents are Needed in an Emergency? – Annapolis and Towson Estate Planning Attorneys

Most people don’t have any idea where to start when it comes to their emergency documents.  This often keeps them from going anywhere near their estate planning. This is a big mistake, says a recent article, “3 tasks your family needs to complete to ease any anxiety over unexpected emergencies,” from MarketWatch.

Estate planning is not just about wealthy people putting assets into trusts to avoid paying taxes. Estate planning includes preparing for life as well as death. This includes a parent preparing for surgery, for instance, who needs to have the right documents in place so family members can make emergency medical or financial decisions on their behalf. Estate planning also means being prepared for the unexpected.

Power of Attorney. Everyone over age 18 should have a POA, so a trusted person can take over their financial decisions. The POA can be as specific or broad as desired and must follow the laws of the person’s state of residence.

Medical Directives. This includes a Medical Power of Attorney, HIPAA authorization and a Living Will. The Medical POA allows you to appoint an agent to make health care decisions on your behalf. A HIPAA authorization allows someone else to gain access to medical records—you need this so your agent can talk with all medical and health insurance personnel. A living will is used to convey your wishes concerning end of life care. It’s a serious document, and many people prefer to avoid it, which is a mistake.

All of these documents are part of an estate plan. They answer the hard questions in advance, rather than putting family members in the terrible situation of having to guess what a loved one wanted.

An estate plan includes a will, and it might also include a trust. The will covers the distribution of property upon death, names an executor to be in charge of the estate and, if there are minor children, is used to name a guardian who will raise them.

A list of important information is not required by law. However, it should be created when you are working on your estate plan. This includes the important contacts from doctors to CPAs and financial advisors. Even more helpful would be to include a complete health profile with dates of previous surgeries, current medications with dosage information and pharmacy information.

Don’t overlook information about your digital life. Names of financial institutions, account numbers, usernames and passwords are all needed if your agent needs to access funds. Do not place any of this information in your will, as you’ll be handing the keys to the vault to thieves. Create a separate document with this information and tell your agent where to find the information if they need it.

Reference: MarketWatch (Nov. 19, 2022) “3 tasks your family needs to complete to ease any anxiety over unexpected emergencies”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Read more about the article Factors to Consider when Picking Executor, Trustees and POAs – Annapolis and Towson Estate Planning

Factors to Consider when Picking Executor, Trustees and POAs – Annapolis and Towson Estate Planning

Having your estate planning documents created with an experienced professional is important, as is naming the people who will be putting your plan into action. A key sticking point is often deciding who is the right person for the role, says an article from Nasdaq titled “Estate Planning: 5 Tips to Pick Trustees, Executors and POAs.” It helps to stop thinking about how people will feel if they are not selected and focus instead on their critical thinking and decision-making abilities.

Consider who will have the time to help. Having adult children who are highly successful in their professions is wonderful. However, if they are extremely busy running a business, leading an organization, etc., will their busy schedules allow the flexibility to help? A daughter with twins may love you to the moon and back. However, will she be able to handle the tasks of estate administration?

Take these appointments seriously. Selecting someone on an arbitrary basis is asking for trouble. Just because one child is older doesn’t necessarily mean they are capable of managing your estate. Making a decision based on gender can be equally flawed. Naming agents and executors with financial acumen is more important than giving your creative child the chance to learn how to manage money through your estate.

Don’t make the process more complicated. There are many families where parents name all the siblings to act on their behalf, so no one feels left out. This usually turns into an estate disaster. An odd number of siblings can lead to one group winning decisions by sheer numbers, while aggressive, win-at-all-costs siblings—even if it’s just two of them—can lead to delayed decisions and family divisions.

Name the right person for right now. Younger people who don’t yet have children often aren’t sure who their best agent might be. Picking a parent may become problematic, if the parent becomes sick or dies. Naming a close friend in your thirties may need updating if your friendship wanes. Make it simple: appoint the best person for today, with the caveat of updating your agents and documents as time goes on and circumstances change. Remember, circumstances always change.

Consider the value of a professional trustee or fiduciary. The best person to be a trustee, executor or power of attorney may not always be a family member or friend. If a trustee is one sibling and the beneficiary of the trust is another sibling who can’t manage money, the relationship could suffer. If a large estate includes generational trusts and complex ownership structures, a professional may be better suited to deal with management and tax issues.

The value of having an estate plan cannot be overstated. However, the importance of who will be appointed to oversee and administer the estate is equally important. The success of an estate plan often rests on the people who are assigned to handle their respective tasks.

Be candid when speaking with an experienced estate planning attorney about the people in your life and their abilities to manage the roles.

Reference: nasdaq (Sep. 4, 2022) “Estate Planning: 5 Tips to Pick Trustees, Executors and POAs”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Does My College Kid Need an Estate Plan? – Annapolis and Towson Estate Planning

When it comes to estate planning, we usually think of older adults. However, it’s a topic that we should also consider for college students.

WDIO’s recent article entitled “Estate planning is for college students too” reminds us that there’s a number of documents you can put into place in the case of an emergency.

Power of Attorney. There are two types of POAs. The financial power of attorney allows a named agent to make financial decisions on behalf of the college student, in the event they are unable to do so. A medical power of attorney names a healthcare agent.

These can have HIPAA language written into them that authorizes their medical provider to release information about them. Remember, if your student travels away from home for college, you may need a POA for that state.

Will. A typical college student might not have a lot of money. However, they do have their own stuff, and someone needs to make the decision regarding what happens to that stuff. Ask the student to name the parents as the executor of his or her will.

FERPA Waiver. FERPA stands for the Family Educational Rights and Privacy Act. Without this waiver, a parent has no authority to call the college and request information about your student if they are over 18. With a waiver, you can request a transcript and student loan information.

HIPAA Waiver. A HIPAA waiver allows an adult child’s health information to be disclosed. It’s usually for medical facilities, doctors, schools, or any other person where they are in possession of the health information of a person where that individual authorizes the release of the information to a designated person.

If you have a child in college, contact us to schedule a time for your child to discuss creating an estate plan with one of our experienced estate planning attorneys.

Reference: WDIO (Sep. 28, 2022) “Estate planning is for college students too”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Read more about the article Estate Plans Can Protect against Exploitation – Annapolis and Towson Estate Planning

Estate Plans Can Protect against Exploitation – Annapolis and Towson Estate Planning

Financial exploitation is far more common than most people think, especially of the elderly. There are several types of individuals more at risk for exploitation, according to a recent article from mondaq titled “How An Estate Plan Can Protect Against Financial Exploitation.” These include someone with a cognitive impairment, in poor physical health, who is isolated or has a learning disability.

Exploiters share common characteristics as well. They are often people with mental health illness, substance abusers or those who are financially dependent on the person they are exploiting.

There are warning signs of financial abuse, including:

  • Changes in patterns of spending, transfers, or withdrawals from accounts
  • Isolation from friends and family
  • Unexplainable financial activity
  • An inability to pay for routine bills and expenses
  • Sudden changes to estate planning documents, beneficiary designations, or the addition of joint owners to accounts or property titles

One way to avoid financial exploitation is with an estate plan prepared in advance with an eye to protection. Instead of relying on a durable power of attorney, a funded revocable trust may provide more robust protection. A revocable trust-based plan includes safeguards like co-trustees and a requirement for independent party consent to any trustee change or amendment.

A support system is also important to protect a person if someone is attempting to exploit them. Estate planning attorneys team up with financial advisors, CPAs and other professionals to create a plan to avoid or end elder abuse. Other steps to be taken include:

  • Consolidating accounts with a trusted financial advisor, so all assets are easily observed
  • Have a family member or trusted person receive copies of account statements
  • Consider a credit freeze to avoid any possibility of being coerced into opening new credit card accounts or taking out loans.
  • Establishing a budget and sharing information with advisors and a trusted person, so any spending anomalies are easy flagged.

Elder financial abuse is an all-too common occurrence but taking proactive steps to safeguard the vulnerable family member is a good strategy to deter or thwart anyone intent on taking advantage of a loved one.

Reference: mondaq (Sep. 23, 2022) “How An Estate Plan Can Protect Against Financial Exploitation.”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Important Documents in Your Estate Plan – Annapolis and Towson Estate Planning

The Durable Power of Attorney (DPOA) and a Health Surrogacy or Advanced Health Directive are used for situations where you can’t make decisions for yourself, explains Parent Your Parents recent article entitled “What You Should Know about Durable Powers of Attorney and Health Surrogacies.”

A Durable Power of Attorney (DPOA). This is written authorization to represent or act on another’s behalf in private affairs, business, or legal matters. The person authorizing the other to act is the “principal” or “grantor.” The person given the power is called the “agent” or “attorney-in-fact.” There are two types of power of attorney: (1) a Springing Durable Power of Attorney, which “springs” into action when you become incapacitated; and (2) a General Durable Power of Attorney, which becomes effective as soon as it is signed and continues until you die.

If you live in a “Springing POA” state and move to a “Durable POA” state, the document is treated as a Durable Power of Attorney, and your agent can act without your consent. You should consider who you trust to be your agent.

It is typically a family member, a friend, or a professional agent. You should also have an alternate designated who can step in if something happens to your first choice and he or she is unable to serve.

Health Surrogacy or Advanced Directive. This document is called a variety of things: a Power of Attorney for Health, Designation of Health Surrogate, or a Living Will. No matter what it’s called, you’re appointing an adult to make healthcare decisions for you when you are unable to make them for yourself.

When you’re in an accident, unconscious, or injured and need a specific medical procedure, the designated agent steps in and makes important decisions in your stead.

If you’re in your 60s but still don’t have a legal document describing what you want to happen when you’re incapacitated, contact us to speak with one of our experienced estate planning attorneys.

Your family, close friends, and healthcare professionals should know how you feel about end-of-life treatments and have your detailed directions as to various circumstances and how you would like them handled.

Reference: Parent Your Parents (Sep. 15, 2022) “What You Should Know about Durable Powers of Attorney and Health Surrogacies”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Should I Know About Long-Term Care? – Annapolis and Towson Estate Planning

Long-term care insurance is a specialty type of insurance that helps pay for costs that are typically connected with long-term care. This can include items such as care given in a hospital, nursing home services, medical services provided in your home and treatment for dementia.

WGN’s recent article entitled “10 Crucial Things to Know about Long-Term Care“ looks at these important items.

  1. The Biggest Financial Threat. The most significant threat to your financial nest egg is long-term care. About 70% of people over 65 will need some kind of long-term care during their life. The national average for home health care services is $16,743 per month. However, there are ways to manage this without buying a traditional long-term care insurance policy where “you use it or lose it.”
  2. Long-Term Care Insurance is Really “Lifestyle” Insurance. It’s NOT nursing home insurance.
  3. Reverse Mortgages. These have become a popular and accepted way of paying for expenses, including the cost of long-term care. Reverse mortgages are designed to keep seniors at home longer. A reverse mortgage can pay for in-home care, home repair, home modification and other needs.
  4. Using Medicaid to Pay for Long-Term Care. This should be a last resort to pay for long-term care, but it also may be the only way to protect family assets. Medicaid will pay for long-term care, but certain criteria must be satisfied. Talk to an elder law attorney before applying for Medicaid.
  5. Important Considerations When Selecting a Long-Term Care Plan. Four things to consider: (i) go with a company with an AM BEST rating of A+ or better; (ii) the assets of the insurance company should be in the billions; (iii) some long-term care insurers will allow for group discounts through employers, or “affinity” group discounts through a local organization; and (iv) the tax advantages for tax-qualified long-term care insurance plans. At the federal level, premiums for long-term care insurance fall into the “medical expense” category. On the state level, 26 states offer some form of deduction or tax credit for long-term care insurance premiums.
  6. The Annuity-Based Long-Term Care & The Pension Protection Act. In 2006, this law was enacted to permit those with annuity contracts to have long-term care riders with special tax advantages. The Act allows the cash value of annuity contracts to be used to pay premiums on long-term care contracts.
  7. Asset-Based Long-Term Care Solutions. The best planning approach for those who choose to self-insure is to “invest” some of their legacy assets so the assets can be worth as much as possible whenever they may be needed to pay for care. If unneeded, the money would then pass to the intended heirs, with no “use it or lose it” issues as with conventional long-term care insurance.
  8. Long-Term Care Strategy Using IRA Money. Most people use their IRA to supplement retirement. However, sometimes waiting until age 72 when mandatory required minimum distribution rules apply, some people have instead opted to take a portion of their IRA and fund an IRA-based annuity which then systematically funds a 20-pay life insurance plan with long-term care features. This type of IRA-based long-term care policy is unique in the sense that it starts out as an IRA annuity policy, also known as a tax-qualified annuity, and then over a 20-year period makes equal distribution internally to the insurance carrier and funds the life insurance.
  9. Important Documents for Long-Term Care Planning. Contact us to ask one of our experienced estate planning attorneys about a power of attorney for health care and financial power of attorney, as well as an advance directive or living will.
  10. Using Veterans Benefits to Pay for Long-Term Care. The VA offers a special pension: the Aid and Attendance (A&A) Benefit. This is a “pension benefit” and is not dependent upon service-related injuries for compensation.

Reference: WGN (2022) “10 Crucial Things to Know about Long-Term Care“

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

How to Manage Aging Parent’s Finances – Annapolis and Towson Estate Planning

A day will come when age begins to catch up with your parents and they will need help with their finances. Even if your parents don’t want to feel dependent, when you think they need your assistance, you can approach the issue with sensitivity and extend your support for the management of their finances, says Real Daily’s recent article entitled “5 Tips to Manage an Aging Parent’s Finances.” Here are some tips:

  1. Start the conversation early. Your parents may not need your help with the handling of their financial matters right away. However, it is smart to begin the conversation early. Approach the issue of who will manage the financial responsibilities when they’re no longer able to do it. Parents should select a trusted family member by providing their advance written consent. This will let you to talk about your parents’ financial issues with financial advisors, doctors and Medicare representatives and carry out timely financial planning.
  2. Create a list of all pertinent legal and financial documents. Prepare a list of your parents’ important contacts, bank account details and locations of any stored documents, like wills, property deeds, insurance policies and birth certificates. Make certain all information and documentation is accurate and up to date. If information needs to be modified because of a change of circumstances, this is time to apprise them of it and help them do what’s needed.
  3. Consider executing a power of attorney. A competent adult can sign a power of attorney to authorize another person to make decisions on their behalf. A power of attorney for a specific purpose may cover medical, financial, or other decisions, and it may be designed to give limited or more sweeping powers. When your parents sign a power of attorney with you named as their attorney in fact, it will legally empower you to make key decisions when they can’t. An elder law attorney can help you draft an appropriate power of attorney according to your situation.
  4. Document your actions and keep others in the know. Transparent communication will help you avoid misunderstandings or controversy within your family. Keep your parents, siblings and any other loved ones involved with your family informed about your actions. No matter how noble your intentions may be, if others are kept in the dark, it can raise questions about your motives. Managing the finances of aging parents is a lot of work, and you can ask for the support of family members or at least keep the lines of communication open.
  5. Don’t comingle your finances with your parents’ plans. While it may look to be a convenient or cost-effective thing to do, it’s never a good idea to combine your parents’ finances with your own. Keep them separate. Using your parents’ money for your purposes or your own money to help them out is usually a slippery slope that should be avoided. Don’t forget about your own financial goals and retirement savings while you focus on helping your parents.

Reference: Real Daily (Sep. 9, 2022) “5 Tips to Manage an Aging Parent’s Finances”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys