Johnson County Estate Planning

Choose Wisely and Protect Yourself When Naming a Power of Attorney

“Children may have moved away or lost touch. Old contacts may have died or become disabled. You cannot trust everyone and criminal cases based on misuse of a power of attorney do exist.”

Deciding who to name as your power of attorney, or “agent” is not an easy decision. However, it is a necessary appointment, says this article “Ways to protect yourself when appointing a power of attorney” from The Mercury. Disaster and disability strike without advance notice, so it’s important to make this decision while you are well and can think it through.

If you don’t have a power of attorney in place and the unexpected occurs, the only way for your family to obtain legal authority to act on your behalf is through a guardianship procedure. Even when not contested, guardianship is expensive, time consuming and can limit personal freedom. Not every court will award guardianship to a family member, so the end result could be a stranger taking control of your decisions and property.

Having a power of attorney is a far better alternative, but there are seniors who are concerned about the power of a POA and how it might be abused. Here are some tips to keep you in control of your life even with a POA:

Choose wisely when you are well. Choose your agent when you are of sound mind and body. A common “test” is the checkbook test: could you, right now, hand this person your checkbook without a second thought? Do you believe this person would act responsibly, in your own best interest, follow through in paying bills, ask for help in areas they may not understand, record transactions and be scrupulously honest? If you hesitate to give them your checkbook today, you aren’t likely to trust them to run your life in the future.

Many people choose an agent based on whether the person is the oldest child or if there would be hurt feelings if the person was named. These are not good reasons. A person who has problems managing money, for whatever reason, is not a good candidate. Their own stress might make access to your funds too great to resist.

Name a secondary Power of Attorney. There should always be a back-up person named, if the person you name is not able to serve. The same goes for trustees and beneficiaries. Discuss these alternatives with your estate planning attorney to ensure the attorney knows the identities of the primary and secondary choices.

Have a Power of Attorney customized to your personal needs. Not all Powers of Attorney are the same, and one that is great for a friend may be a disaster for you. Limited powers, unlimited powers, powers to gift or powers only for a specific task or period of time are all options when creating a Power of Attorney. You may have a business to run or a partnership to dissolve. Gifting might be permitted to limit estate taxes, if that is your wish. Limited gifting generally means $15,000 a year, although your estate planning attorney can provide guidance on how to best structure gifting for you. If you own life insurance policies, you may want to permit your agent to cash in insurance policies but not allow the agent to change the named beneficiaries.

Two agents or one agent? Not all banks or investment companies will accept two agents. If they do, will the two people you select be able to work together? If not, naming two could create a financial and legal firestorm.

Financial Power of Attorney and Health Care Power of Attorney can be two separate roles. One person might be terrific with managing money, while another could be better at understanding and managing healthcare providers. Naming different people for each task will allow both to participate in caring for you and draw on their unique skillsets.

Fire when necessary. You always have the right to remove someone from their role as your agent. Your attorney will know how to do this properly to protect you and other agents.

Reference: The Mercury (Aug. 3, 2021) “Ways to protect yourself when appointing a power of attorney”

Do I Need to Update My Estate Plan?

“Even though it is critical for your assets, family and legacy, estate planning tends to fall to the bottom of people’s to-do lists. What new parent wants to draft a will, while finalizing a nursery paint color?”

Given a choice, most people will opt to do almost anything rather than talk about death and life for others after they are gone. However, estate planning is essential to ensure that your life and life’s work will be cared for correctly after you’ve passed, advises the article “Is Your Estate Plan Up to Date?” from NASDAQ.com. If you own any assets, have a family, loved ones, pets or belongings you’d like to give to certain people or organizations, you need an estate plan.

Estate planning is not a set-it-and-forget it process. Every few years, your estate plan needs to be reviewed to be sure the information is accurate. Big life changes, from birth and death to marriage and divorce—and everything in between—usually also indicate it’s time for an update. Changes in tax laws also require adjustments to an estate plan, and this is something your estate planning attorney will keep you apprised of.

Reviewing and updating an estate plan is a straightforward process, once your estate planning attorney has created an initial plan. Keeping it updated protects your wishes and your loved ones’ futures. Here are some things to keep in mind when reviewing your estate plan:

Have you moved? Changes in residence require an update, since estate laws vary by state. You also should keep your advisors, including estate planning attorney, financial advisor and tax professional, informed about any changes of residence. You’d be surprised how many people move and neglect to inform their professional advisors.

Changes in tax law. The last five years have seen big changes in tax laws. Estate plans created years ago may no longer work as originally intended.

Power of Attorney documents. A Power of Attorney authorizes a person to act on your behalf to make business, personal, legal and financial decisions. If this document is old, or no longer complies with your state’s laws, it may not be accepted by banks, investment companies, etc. If the person you designed as your POA decades ago can’t or won’t serve, you need to choose another person. If you need to revoke a power of attorney, speak with your estate planning attorney to do this effectively.

Health Care Power of Attorney and HIPAA Releases. Laws concerning who may speak with treating physicians and health care providers have become increasingly restrictive. Even spouses do not have automatic rights when it comes to health care. You’ll also want to put your wishes about being resuscitated or placed on artificial life support in writing.

Do you have an updated last will and testament? Review all the details, from executor to guardian named for minor children, the allocation of assets and your estate tax costs.

What about a trust? If you have minor children, you need to ensure their financial future with a trust. Your estate planning attorney will know which type of trust is best for your situation.

A regular check-up for your estate plan helps avoid unnecessary expenses, delays and costs for your loved ones. Don’t delay taking care of this very important matter. You can then return to selecting a color for the nursery or planning your next exciting adventure. However, do this first.

Reference: NASDAQ.com (July 28, 2021) “Is Your Estate Plan Up to Date?”

Britney Spears’ Conservatorship Battle Continues

“The legal controversy surrounding Britney Spears is no secret. Her father has controlled her career and finances since 2008, a position she's been fighting against for years.”

The release of a documentary following the star’s rise to fame, public breakdown, and recent comeback has put the spotlight back on Spears and her father, Jamie Spears, as reported in the article “Britney Spears’ conservatorship, explained” from CBS News. Jamie was named her conservator, a court-appointed role that gave him control over her estate many years ago, and she has been fighting back ever since. A financial company acting as co-conservator is also in the mix.

What is a “conservatorship?” The legal definition of a conservatorship is a court decision where an individual or organization is appointed by a judge to manage the finances and other aspects for a person who has been deemed to be unable to care for themselves, manage their finances or make good decisions. The laws about conservatorship, like most estate planning laws, vary from state to state.

Conservatorship is generally granted as a first resort when someone is unable to take good care of themselves and there is no Power of Attorney or estate plan in place. An estate plan typically includes protections for a person when they become disabled. People who fail to have an estate plan with this type of protection end up in conservatorships and guardianships, sometimes with court-appointed strangers.

James Spears was appointed his daughter’s conservator in 2008, when Britney reportedly struggled with mental health issues and was hospitalized. A Los Angeles court made the conservatorship permanent, giving her father and the other co-conservator total control over both her finances and medical decisions. His argument is simple: under his direction, Britney’s estate has gone from being in debt to being valued at more than $60 million.

However, Britney does not want her father involved in her finances. In 2020, her court-appointed attorney requested that a qualified corporate fiduciary be named in his place. In 2021, a judge granted her wish to appoint Bessemer Trust as a co-conservator and she is still asking that Bessemer Trust become the sole conservator. Her attorney called her a “high-functioning” conservatee, who deserves to know what actions her father is taking, that she is afraid of him, and has not spoken to him in many years.

Clearly this is a high-stakes battle, but the issues are similar to many conservatorship and guardian cases that take place every day for non-celebrity families.

Conservatorships limit a person’s ability to advocate for themselves, to grow, develop and even learn from mistakes. Being locked into the permanent care of another person is not always in the best interest of the person who may need help for a period of tim, but may not need to have their personal autonomy forfeited permanently.

An estate plan addresses these issues in advance and can prevent stressful and costly court proceedings for the individual and for the family.

Reference: CBS News (Feb. 13, 2021) “Britney Spears’ conservatorship, explained”

How Do I Talk to the Children about My Estate Planning?

“Many baby boomers may hesitate to discuss money with their children, but the reality is that a massive amount of wealth will be transferred in the next couple of decades.”

Some $68 trillion will move between generations in the next two decades, reports U.S. News & World Report in the article “Discuss Your Estate Plan With Your Children.” Having this conversation with your adult children, especially if they are members of Generation X, could have a profound impact on the quality of your relationship and your legacy.

Staying on top of your estate plan and having candid discussions with your children will also have an impact on how much of your estate is consumed by estate taxes. The historically high federal exemptions are not going to last forever—even without any federal legislation, they sunset in 2025, which isn’t far away.

One of the purposes of your estate plan is to transfer money as you wish. What most people do is talk with an estate planning attorney to create an estate plan. They create trusts, naming their child as the trustee, or simple wills naming their child as the executor. Then, the parents drop the ball.

Talk with your children about the role of trustee and/or executor. Help them understand the responsibilities that these roles require and ask if they will be comfortable handling the decision making, as well as the money. Include the Power of Attorney role in your discussion.

What most parents refuse to discuss with their children is money, plain and simple. Children will be better equipped, if they know what financial institutions hold your accounts and are introduced to your estate planning attorney, CPA and financial advisor.

You might at some point forget about some investments, or the location of some accounts as you age. If your children have a working understanding of your finances, estate plan and your wishes, they will be able to get going and you will have spared them an estate scavenger hunt.

If possible, hold a family meeting with your advisors, so everyone is comfortable and up to speed.

Most adult children do not have the same experience with taxes as parents who have acquired wealth over their lifetimes. They may not understand the concepts of qualified and non-qualified accounts, step-up in cost basis, life insurance proceeds, or a probate asset versus a non-probate asset. It is critical that they understand how taxes impact estates and investments. By explaining things like tax-free distributions from a Roth IRA, for instance, you will increase the likelihood that your life savings aren’t battered by taxes.

Even if your adult children work in finance, do not assume they understand your investments, your tax-planning, or your estate. Even the smartest people make expensive mistakes, when handling family estates.

Having these discussions is another way to show your children that you care enough to set your own ego aside and are thinking about their future. It’s a way to connect not just about your money or your taxes, but about their futures. Knowing that you purchased a life insurance policy specifically to provide them with money for a home purchase, or to fund a grandchild’s college education, sends a clear message. Don’t miss the opportunity to share that with them, while you are living.

Reference: U.S. News & World Report (Feb. 17, 2021) “Discuss Your Estate Plan With Your Children”

How Do You Handle Probate?

“Although there is considerable legal information and misinformation, it is generally understood that a last will and testament is the device used to distribute property after death. However, the why, how and when are less familiar.”

While you are living, you have the right to give anyone any property of your choosing. If you give your power to gift your property to another person, typically through a Power of Attorney, then that person is your agent and may give away your property, according to an article “Explaining the basic aspects probate” from The News-Enterprise. When you die, the Power of Attorney you gave to an agent ends, and they are no longer in control of your estate. Your “estate” is not a big fancy house, but a legal term used to define the total of everything you own.

Property that you owned while living, unless it was owned jointly with another person, or had a beneficiary designation giving the property to another person upon your death, is distributed through a court order. However, the court order requires a series of steps.

First, you need to have had created a will while you were living. Unlike most legal documents (including the Power of Attorney mentioned above), a will is valid when it is properly signed. However, it can’t be used until a probate case is opened at the local District Court. If the Court deems the will to be valid, the probate proceeding is called “testate” and the executor named in the will may go forward with settling the estate (paying legitimate debts, taxes and expenses), before distributing assets upon court permission.

If you did not have a will, or if the will was not prepared correctly and is deemed invalid by the court, the probate is called “intestate” and the court appoints an administrator to follow the state’s laws concerning how property is to be distributed. You may not agree with how the state law directs property distribution. Your spouse or your family may not like it either, but the law itself decides who gets what.

After opening a probate case, the court will appoint a fiduciary (executor or administrator) and may have a legal notice published in the local newspaper, so any creditors can file a claim against the estate.

The executor or administrator will create a list of all of the property and the claims submitted by any creditors. It is their job to ensure that claims are valid and have been submitted within the correct timeframe. They will also be in charge of cleaning out your home, securing your home and other possessions, then selling the house and distributing your personal furnishings.

Depending on the size of the estate, the executor or administrator’s job may be time consuming and complex. If you left good documentation and lists of assets, a clean file system or, best of all, an estate binder with all your documents and information in one place, it can alleviate a lot of stress for your executor. Estate fiduciaries who are left with little information or a disorganized mess must undertake an expensive and burdensome scavenger hunt.

The executor or administrator is entitled to a fiduciary fee for their work, which is usually a percentage of the estate.

Probate ends when all of the property has been gathered, creditors have been paid and beneficiaries have received their distributions.

With a properly prepared estate plan, your property will be distributed according to your wishes, versus hoping the state’s laws will serve your family. You can also use the estate planning process to create the necessary documents to protect you during life, including a Power of Attorney, Advance Medical Directive and Healthcare proxy.

Reference: The News-Enterprise (Feb. 2, 2021) “Explaining the basic aspects probate”

Do You Need Power of Attorney If You Have a Joint Account?

“As you know, a power of attorney (POA) allows another person, the Attorney-in-Fact (AIF), to conduct business on behalf of the principal. The POA authorizes the AIF to sign for and on behalf of the principal.”

A person with Power of Attorney for their parents can’t actually “add” the POA to their bank accounts. However, they may change bank accounts to be jointly owned. There are some pros and cons of doing this, as discussed in the article “POAs vs. joint ownership” from NWI.com.

The POA permits the agent to access their parent’s bank accounts, make deposits and write checks.  However, it doesn’t create any ownership interest in the bank accounts. It allows access and signing authority.

If the person’s parent wants to add them to the account, they become a joint owner of the account. When this happens, the person has the same authority as the parent, accessing the account and making deposits and withdrawals.

However, there are downsides. Once the person is added to the account as a joint owner, their relationship changes. As a POA, they are a fiduciary, which means they have a legally enforceable responsibility to put their parent’s benefits above their own.

As an owner, they can treat the accounts as if they were their own and there’s no requirement to be held to a higher standard of financial care.

Because the POA does not create an ownership interest in the account, when the owner dies, the account passes to the surviving joint owners, Payable on Death (POD) beneficiaries or beneficiaries under the parent’s estate plan.

If the account is owned jointly, when one of the joint owners dies, the other person becomes the sole owner.

Another issue to consider is that becoming a joint owner means the account could be vulnerable to creditors for all owners. If the adult child has any debt issues, the parent’s account could be attached by creditors, before or after their passing.

Most estate planning attorneys recommend the use of a POA rather than adding an owner to a joint account. If the intent of the owners is to give the child the proceeds of the bank account, they can name the child a POD on the account for when they pass and use a POA, so the child can access the account while they are living.

One last point: while the parent is still living, the child should contact the bank and provide them with a copy of the POA. This, allows the bank to enter the POA into the system and add the child as a signatory on the account. If there are any issues, they are best resolved before while the parent is still living.

Reference: NWI.com (Aug. 15, 2021) “POAs vs. joint ownership”

Why Do You Need a Health Care Directive?

“A heath care directive is a legal document that lets you express your health care preferences and, if you wish, designate authority to someone to make care decisions for you, if you cannot make them yourself.”

Healthy adults often make the mistake of thinking they don’t need a health care directive. However, the pandemic has made clear everyone needs this estate planning document, at any time of life, according to a recent article “Health care directive beneficial for anyone” from The Times-Tribune.

Anytime a person becomes severely incapacitated, even if just for a short time, and any time a young person becomes a legal adult, a health care directive is needed. In other words, everyone over the age of 18 needs to have a health care directive.

Several health care directives are prepared by an estate planning attorney as part of a comprehensive estate plan.

A Living Will or Advance Directive is used to express wishes for medical treatments, if you are not able to express them yourself.

A Power of Attorney for Health Care (also known as a Durable POA for Health Care or a Health Care Proxy) lets you name a trusted person who will make health care decisions on your behalf,sss if you cannot make the decisions or communicate your wishes.

A HIPAA Privacy Authorization makes it possible for health care providers to share medical information with a person of your choice. Otherwise, the health care providers are not permitted to discuss your medical history, medical status, diagnostic reports, lab results, etc., with family members.

Short term incapacity can result from illness or recovery from surgery or intense medical treatments. Having these documents in place permits a person you trust to have important conversations with your health care providers and to make decisions on your behalf.

Physicians will be permitted to discuss medical care with a named agent, who, in turn, will be able to discuss care or status with family members.

This documentation will also allow an authorized person to help you with insurance companies, billing departments at hospitals, pharmacies and to schedule medical appointments on your behalf.

If you are not married, this is especially important. Even a partner of many years has no legal right to act on your behalf.

For parents of young adults, having these documents in place will allow them to stay involved in an adult child’s healthcare. It’s not a scenario that any parent wants to contemplate, but having these documents prepared in advance can save a great deal of stress and anguish, if and when they are needed.

Reference: The Times-Tribune (Aug. 15, 2021) “Health care directive beneficial for anyone”

What are Typical Estate Planning Documents?

“If you want loved ones to remember you fondly, tackle your estate planning tasks. Your heirs will thank you for not leaving a legal mess to sort out.”

For many people, eight documents form the foundation of an estate plan. It’s not that difficult a project as it seems, explains the article “8 Documents That Are Essential to Planning Your Estate” from msn.com. When you’ve completed your estate plan, you’ll also gain the peace of mind of knowing that you’ve done what was needed to protect your family. It’s well worth the effort.

Last will and testament. This is the basic document that gives you the ability to tell your family what you want to happen with your assets. It is used to name an executor—a person who will be in charge of managing your estate. Your will is also where you name a guardian who will be in charge of raising minor children. You can use the will to convey funeral instructions, but you may want to do that in a separate document, in case your will isn’t found right away. Your estate planning attorney will help you figure out the best way to handle that.

What happens if you don’t have a will? In that case, a probate court will determine who will be your executor. It might be a spouse, a grown child, or someone you don’t know or would not want to handle your estate. It’s best to have a will and select your executor yourself. When your estate goes through probate, all of the information in your will becomes part of the public record, so don’t put anything in your will, like passwords or account numbers.

Revocable living trust. Trusts are used to pass assets and property without going through probate. Your estate planning attorney will help create the trust and you’ll decide who will be in charge of it upon your death. You can be the trustee while you are living, but then you lose any estate tax benefits. If you have substantial property or wealth, trusts are a good tool to control assets and save on estate taxes.

Beneficiary designations. Any time you purchase a new insurance policy or a retirement plan, you are asked to name a beneficiary. If your first job came with a retirement plan, you likely also named a beneficiary for that plan. These designations allow the assets to pass directly to the beneficiary upon your death. They aren’t included in your will and they don’t go through probate. The biggest problem with beneficiary designations? Neglecting to update them through the many changes in life. Review and update your beneficiary designations on a regular basis.

Durable power of attorney. This document allows you to name the person to act on your behalf, if you become incapacitated because of illness or injury. They can manage your legal and financial affairs. Here’s an important point: if you become incapacitated, you cannot assign this role to someone. It needs to be done when you are legally competent.

Health care power of attorney and living will. The health care power of attorney lets someone else make medical decisions on your behalf, if you are too sick to do so yourself. The living will gives you the opportunity to explain what kind of care you do or do not want if you are close to death. If the idea of staying alive on a heart machine makes you unhappy, for instance, you can document your wishes, so loved ones don’t have to wonder what you want. 

Digital assets. Much of our lives are lived online, and we have assets that won’t be found in a search of the attic or basement. Each online platform that you use may have a directive process, where you can clearly state who you want to have access to your digital assets and what you would like to have happen to them upon your death.

A letter of intent. Writing a letter of intent is a way to convey your wishes to loved ones for what you’d like to happen after you die. It may not be legally enforceable, like a will or a trust, but your loved ones will appreciate knowing what you want for funeral planning or a memorial service.

List of important documents. Sparing your family a post-mortem scavenger hunt is a gift to the living. Make a list of documents and make sure they know where important documents can be found. Include a list of routine bills, the professionals you rely on, including contact information and account numbers. Some families use a briefcase to store the important papers, but a fireproof and waterproof safe is more secure.

Reference: msn.com (June 19, 2021) “8 Documents That Are Essential to Planning Your Estate”

Should You Add Someone to Your Bank Account?

“I know of someone who was joint account holder with his dad for many years, then later his dad then appointed him as power of attorney. How does that work? Is the son still a joint account holder?”

Adding another person to your bank account provides both of you with complete access to the account. A person can be a power of attorney and a joint account holder, but the two are very different roles, explains the article “What are my rights when someone adds me to a bank account?” from Lehigh Valley Live.

A joint account is a bank or investment account shared by two individuals, although more than two people may be on an account. They have equal access to funds, as well as equal responsibilities for any fees or expenses associated with the account. If there are transactions, depending upon the rules of the institution, all owners may be required to sign documents. The key is how the account is titled. That’s the controlling factor in determining how the assets in the account are divided, if one of the owners dies. There are several different types of joint ownership.

One is “Joint Tenants with Rights of Survivorship,” or JTWROS. If one of the account owners should die, the assets in the account go directly to the surviving account holder. These assets do not go through probate.

Then there’s “Tenants in Common,” or TIC. With TIC, each individual account owner has the right to designate a beneficiary for their portion of the assets upon their death. The assets might not be split 50/50. How the account is titled lets the account owners divide ownership however they want.

Another one: “Joint Tenants by the Entirety.” This describes a married couple who own real estate or a financial account as a legal entity with equal ownership. Neither person may transfer their half of the property during their lifetime or through a will or a trust. When one spouse dies, the entire account goes to the surviving spouse and it transfers without passing through probate.

In the example given at the start of the article, the establishment of a joint account gives both the father and son equal access to the account. If the father is unable to handle the account at any time in the future, for whatever reason, the son will be able to step in.

Power of Attorney or POA is a completely different thing. A POA is a legal document giving a person the authority to act on behalf of another person for a specific transaction or general legal and financial matters. Just as there are numerous types of joint ownership, there are numerous types of POA.

A general POA gives a person the power to act on behalf of the principal for all legal, property and financial matters, as long as the principal’s mental capacity is sound. The Durable POA gives authority to a person to act on behalf of the principal, even after the principal becomes mentally incapacitated. Special or limited power of attorney gives authority to act only for specific matters or transactions. A Springing Durable POA provides authority to act only under certain events or levels of incapacitation, which is defined in detail in the document.

You can be both a joint owner of an account and a power of attorney. These are two different ways to help a parent with financial and legal activities. An estate planning attorney can help create the POA that best fits the situation.

Reference: Lehigh Valley Live (June 10, 2021) “What are my rights when someone adds me to a bank account?”

How Does Guardianship Work?

“As a result of illness, old age or incapacity, what may happen when you can no longer handle your own decision-making, handle your own money or make your own health care choices? Who can step in to help and how are they empowered?”

For the most part, we are free to make our own decisions regarding how we live, where we live, how we spend our money and even with whom we socialize. However, when we are no longer capable of caring for ourselves, most commonly due to advancing age or dementia, or if an accident or illness occurs and we can’t manage our affairs, it may be necessary to seek a guardianship, as explained in the recent article “Legal Corner: A guardian can be a helpful tool in cases of incapacity” from The Westerly Sun. A guardianship is also necessary for the care of a child or adult with special needs.

If no proper estate planning has been done and no one has been given power of attorney or health care power of attorney, a guardianship may be necessary. This is a legal relationship where one person, ideally a responsible, capable and caring person known as a guardian, is given the legal power to manage the needs of a ward, the person who cannot manage their own affairs. This is usually supported through a court process, requires a medical assessment and comes before the probate court for a hearing.

Once the guardian is qualified and appointed by the court, they have the authority to oversee everything about the ward’s life. They have power over the ward’s money and how it is spent, health care decisions, residential issues and even with whom the ward spends time. At its essence, a guardianship is akin to a parent-child relationship.

Guardianships can be tailored by the court to meet the specific needs of the ward in each case, with the guardian’s powers either limited or expanded, as needed and as appropriate.

The guardian must report to the court on a yearly basis about the ward’s health and health care and file an annual accounting of what has been done with the ward’s money and how much money remains. The court supervision is intended to protect the ward from mismanagement of their finances and ensure that the guardianship is still needed and maintained on an annual basis.

The relationship between the ward and the guardian is often a close one and can continue for many years. The guardianship ends upon the death of the ward, the resignation or removal of the guardian, or in cases of temporary illness or incapacity, when the ward recovers and is once again able to handle their own affairs and make health care decisions on their own.

If and when an elderly family member can no longer manage their own lives, guardianship is a way to step in and care for them, if no prior estate planning has been done. It is preferable for an estate plan to be created and for powers of attorney be created, but in its absence, this is an option.

Reference: The Westerly Sun (Sep. 19, 2020) “Legal Corner: A guardian can be a helpful tool in cases of incapacity”