A recent study by Ameriprise Financial found that more than one-third of adult children say they haven’t had a conversation about their parents’ long-term financial goals. Even though discussing this delicate topic may seem uncomfortable, addressing it now can help avoid challenges and uncertainty in the future. To that end, the Ameriprise Family Wealth Checkup study found that those who talk about money matters, feel more confident about their financial future.
The challenge in tasking a family member or trusted friend is not just making sure they have the necessary skills, but to navigate family dynamics so that no fights occur says Considerable.com in the article “How to assign power of attorney without sparking a family feud.” Every family situation is different, but in almost all cases, transparency is the best bet.
Start by understanding exactly what is meant by power of attorney, how it functions within the estate plan, and how siblings can all be involved to some degree with the family’s decision-making process.
Power of attorney is a term that gives an individual, or sometimes, individuals, the legal authority to act on behalf of someone else. It is usually used when a person, usually a parent or a spouse, is unable to make decisions for themselves because of illness or injury. It must be noted that power of attorney relates to financial and legal decisions. There are methods to address making decisions for another person for their health care or end-of-life decisions, but they are not accomplished by the power of attorney (POA).
It should be noted that there is a distinct difference between power of attorney and executor of the estate. Power of attorney is in effect while the person who has granted the authority is alive, but unable to act on their own behalf. The executor of the estate assumes responsibility for managing the estate through the probate process. While they are two different roles, they are often held by the same person, usually an adult child who is responsible and has good decision-making skills.
There are different types of power of attorney roles. The most common is the general power of attorney, followed by the health care or medical power of attorney. The general power of attorney refers to the person who has the authority to handle financial, business or private affairs. If a parent grants power of attorney to one of their children, that child then has the authority to act on behalf of the parent.
Trouble starts if the relationship between siblings is rocky, or if major decisions are made without discussions with siblings.
It’s not easy for siblings when one of them has been granted the power of attorney. That means they must accept the inherent authority of the chosen sibling to make all decisions for their parent. The sibling with the power of authority will have a smoother path if they can be sensitive to how this makes the others feel.
“Mom always liked you best,” is not a sentence that should come from a 50 year old, but often childhood dynamics can reappear during these times.
Remember that the power of attorney is also a fiduciary obligation, meaning that the person who holds it is required to act in the best interest of the parent and not their own. If the relationship between siblings is not good, or there’s no transparency when decisions are made, things can get bumpy.
Here are some tips for parents to bear in mind when deciding who should be their power of attorney:
- Understand the great power that is being given to another person.
- Make sure the person who is to be named POA understands the entire range of responsibilities they will have.
- The siblings who have not been named will need to understand and respect the arrangement. They should also be aware of the potential for problems, keeping their eyes open and being watchful without being suspicious.
Some families appoint two siblings as a means of creating a “checks and balances” solution. This can be set up so the agents need to act jointly, where both agree on an action, or independently, where each has the full authority to act alone. In some cases, this will lesson the chances for jealousy and mistrust, but it can also prolong the decision-making process. It also creates the potential for situations where the family is engaged in a deadlock and important decisions don’t get made.
Parents should discuss these appointments with their estate planning attorney. Their years of experience in navigating family issues and dynamics give the attorneys insights that will be helpful with assigning these important tasks.
Call us (228) 460-5243 or email us at email@example.com to find our how your estate planning attorney can help you.
Legal disclaimer: The information in this article is provided for information purposes only and should not be construed as legal advice. Your should not act or refrain from acting on the basis of any content included in this article or on our website (www.perklawgroup.com) without seeking legal or professional advice.
Reference: Considerable.com (July 10, 2019) “How to assign power of attorney without sparking a family feud”
There are three categories of property, but just one requires probate to access it when the owner dies.
nj.com recently published an article that asked “When I die, how can I avoid probate for this account?” The article explains that there is property that passes by operation of law. This type of property is anything owned jointly with right of survivorship.
This is the type of estate scenario that demonstrates the importance of having a will, no matter how old you are. The challenge, as described in My San Antonio’s article, “Using power of attorney in daughter’s estate,” is untangling the house title, the mortgage and the taxes. Having a will would have prevented this entire situation from occurring.
The estate planning attorney in this gentleman’s neighborhood isn’t worried about this rancher’s plan to avoid the “courtroom mumbo jumbo.” It’s not the first time someone thought they could make a short-cut work, and it won’t be the last. However, as described in the article “Estate planning workaround idea needs work” from My San Antonio, the problems this rancher will create for himself, his wife, and his children, will easily eclipse any savings in time or fees he thinks he may have avoided.
Retirement is a theoretical event happening way off in the future — until you celebrate your 55th birthday, when it starts to become all too real. When that lightening bolt strikes, says The Street, some mistakes may become obvious, as described in the article “Avoid These Big Mistakes in Your Retirement Planning.”
The biggest, most obvious and perhaps least followed lesson: do as much of the planning in advance as possible. Don’t wait until you wake up on your first day of retirement to figure it out.
Here are the top four mistakes people make:
Overlooking the impact of healthcare costs. Inflation in healthcare is more than three times the Consumer Price Index’s annual increase. Medical inflation hit an average of 6.8% in 2018, and it’s not likely going down any time soon. Medicare covers hospitalization (Part A) and doctor visits (Part B) but it does not cover many other critical costs. You’ll need to pay for long-term care, vision, dental, co-pays and deductibles.
As we age, our healthcare costs go up. When you are in the early stages of retirement, active, busy and healthy, it rises around 5%. But as you age, if you are lucky enough to do so, your health insurance costs could leap by 15% annually.
Planning for Medicare options is very important. It is where many retirees make big mistakes. You’ll need Medigap insurance to cover areas that Medicare does not. You’ll also want Part D to cover prescriptions.
The bigger Medicare mistake is failing to enroll at age 65. If you miss it, you’ll have to pay a penalty just to get enrolled in the program. It’s not easy to figure it out, and the instruction book is 130 pages long. The website is also confusing. However, you have to do it and do it right.
Neglecting to save. Really save. It’s next to impossible if you are twenty-something, have enormous student loans and have not gotten your career on track, to even think about retirement. It’s not easy and it’s not the first thing younger people are thinking about. However, the sooner you start putting money away for retirement, the more time you have for the money to grow. If your company offers a retirement plan, start putting something away, even if it’s a small amount. Over time, that will grow, their income will grow and you will be better positioned for retirement. Automatic deductions will make this more likely to happen. If your parents are nagging you about retirement, make them happy: sign up for the plan at work and go for the auto deductions. It’s one less thing for them — and you — to worry about.
Poor investments. People who take a do-it-yourself approach to their investment portfolio, vary in levels of success. Some devote a lot of time to it, including educating themselves about industry sectors and market performance, and others follow the ‘brother-in-law’ school, which usually tanks. That’s when your brother-in-law boasts about how much money he made in a particular stock. However, he neglects to tell you about how many losses he’s taken along the way. A team approach of an educated investor with a professional financial advisor is a better way to go.
Thinking you know it all. Overconfidence has sunk many retirements. People who are highly successful in life, think that career success will automatically translate into retirement and financial planning. It’s also very hard for these types of people to accept that there’s something they do not know and cannot control. It is even harder for them to ask for help.
Failing to plan, includes the failure to work with an experienced estate planning attorney in creating an estate plan that addresses tax planning, incapacity, transferring wealth to the next generation and asset distribution. Just like early savings make a big difference, having an estate plan created early in your life and updating as you go through life, will help protect you and your loved ones.
Reference: The Street (April 11, 2019) “Avoid These Big Mistakes in Your Retirement Planning.”
The plain truth is, everyone needs a will. The value of someone’s personal property has very little to do with the need for a will or estate plan. Without one, the process of settling an estate and having heirs receive their inheritance could be delayed for many months, or even years, says the article “Where there’s a will, there is a plan in place” from The Advertiser. For wills to be legally acceptable, there are certain things that need to be included:
Identification of the person making the will, also known as the testator. The will must contain the person’s name, address, state their intention to create a distribution process for assets and the statement that this will is intended to be their last will and testament and all other wills are revoked. The will must also be dated to be sure to know hold old it is, with regard to other wills.
Outstanding debt payment. The will needs to explain how any outstanding bills will be paid, including funeral costs, medical costs, taxes owed, and any other expenses that a person may have at the time of their death. This may vary by state, so speak with a local estate planning attorney to find out what your state’s laws are.
Name any heirs and what they are being given. You may give your property to whomever you want, or to a charity. The bequest needs to be carefully written, so it is very specific and there are no misunderstandings. Since it may be hard to know what will be left after final expenses are paid, it may be wise to give percentages of assets, rather than specific figures. An estate planning attorney will know how to best handle this aspect of a will.
Chose an executor and name them in the will. The executor is responsible for carrying out the wishes of the testator and is in charge of paying debts, taxes, distributing assets and any tasks assigned in the will. Choosing the right person for this task is very important. They need to be able to handle the responsibility and be able to execute your wishes, without being bullied by family members or friends. Always name a secondary executor, in case the first predeceases you, or if the person is unable or unwilling to serve.
Name a guardian for minor children. This is why parents of young children must have a will. If there is no will, the court will determine who should raise the children, following the laws of kinship of your state. You may not agree with the court’s decision. Select a person (or couple) you believe will raise the children, as close as possible to how you would raise the children.
Plan for your funeral. This is a kindness to your loved ones. If you don’t plan in advance, your loved ones may spend more than you would wish on an elaborate funeral. The opposite may also happen. A simple paragraph may do the job, or you could visit the local funeral home and prepay, selecting everything so that it will be done according to your own wishes.
In addition to a will, you’ll want a power of attorney and health care power of attorney in place to protect you, in case of incapacity. This way, someone will be able to take care of your finances and someone else will be able to make health care decisions, if you can’t.
An estate planning attorney can work with you to make sure that all these documents are properly prepared according to your state’s laws. They have worked with many others, know what kind of issues crop up and how to prepare for them. This is especially important with blended families or families where there are complicated histories. Think of the estate plan as a gift to your heirs, a chance to express your wishes and a way to create a legacy for your loved ones.
Reference: The Advertiser (March 10, 2019) “Where there’s a will, there is a plan in place”
Attorneys who focus their practices on estate planning, know that not every story has a happy ending. For some of them, it’s a professional mission to make sure that young parents are prepared for the unthinkable, says KTVO in the article “Family 411: Thinking about estate planning while your kids are young.”
It’s a very easy thing to forget, because it’s so unpleasant to consider. The idea of becoming seriously ill or even dying while your children are young, is every parent’s worst fear. But putting off having an estate plan with a will that prepares for this possibility is so important. Doing it will provide peace of mind, and a road forward for those who survive you, if your worst fears were to come true.
Start with a will. In a will, you’ll name a guardian, the person who would be in charge of rearing your children and have physical custody of them. Don’t assume that your parents will take over, or that your husband’s parents will. What if both sets of parents want to be the custodians? The last thing you want is for your in-laws and parents to end up in a court battle over custody of your children.
Another important document: a trust. You should have life insurance that will be the source for paying for the children’s education, including college, summer camps, after-school activities and their overall cost of living. In addition, proceeds from a life insurance policy cannot be given to a minor.
However, what if your son or daughter turned 18 and were suddenly awarded $500,000? At that age, would they know how to handle such a large sum of money? Many adults don’t. A trust allows you to give clear directions regarding how old the child must be, before receiving a set amount of money. You can also stipulate that the child must complete college before receiving funds or reach certain milestones.
An estate plan with young children in mind, must have a Power of Attorney for financial decisions and one for medical decisions. That allows a named person to make important financial and medical decisions on behalf of the child. You may not want to have their legal guardian in charge of their finances; by dividing up the responsibilities, a checks and balances system is set into place.
However, for medical decisions, it is best to have one primary person named. In that way, any care decisions in an emergency can be made swiftly.
While you are creating an estate plan with your children in mind, make sure your estate plan has the same documents for you and your spouse: Power of Attorney, medical Power of Attorney, a HIPAA release form and a living will.
Speak with a local estate planning attorney who has experience in planning for young families.
Reference: KTVO.com (Feb. 6, 2019) “Family 411: Thinking about estate planning while your kids are young”
Without the right documents in place, you do not have the legal right to protect your own children, once they turn 18, says The National Law Review in an unsettling but must-read article titled “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children.”
There are only three documents and they are fairly straightforward. There is no reason not to have them in place. If your adult child was incapacitated by an accident or an illness, you would want to speak with the medical staff to find out how they are and what decisions need to be made. Whether you were making a phone call or arriving at the hospital, a nurse or doctor would not be permitted to speak with you about your own adult child’s condition or be involved with making any medical decisions.
It sounds unreasonable, and perhaps it is, but that is the law. There are steps you can take to ensure that you are not in this situation.
HIPAA Authorization Form gives you the authority to speak with healthcare providers. This is a federal law (Health Insurance Portability and Accountability Act of 1996) that safeguards who can access an adult’s private health data. HIPAA prevents healthcare providers from revealing any information to you or anyone else about a patient’s status. The practitioners could face severe penalties for violating HIPAA.
This is why you want to have a HIPAA authorization signed by your adult child and naming you as an authorized recipient. This will give you the ability to ask for and receive information about your child’s health status, progress and treatment. This is especially important, if your child is unconscious or in an unresponsive state. The alternative? Going to court. That’s not what you want to be doing during a health emergency.
A Healthcare Power of Attorney needs to be in place, so you can be named his or her “medical agent” and have the ability to view their medical records and make informed decisions on their behalf. Without this (or a court-appointed guardianship), healthcare decisions will be in the hands of healthcare providers only. That’s not a bad thing, if you implicitly trust your child’s doctor. However, if your child is incapacitated in an out-of-town hospital with healthcare providers you don’t know, you will want to be able to make decisions on his or her behalf.
Note that physicians prefer a single medical agent, not a handful. The concern is that if time is a critical factor and a group of family members do not agree on care, it may compromise the healthcare services that can be provided. You can name multiple agents in priority order. A mother might be listed as the medical agent, and if she is unable or unwilling to serve, the second person would be the father.
The third document is a General Power of Attorney. This would give you the right to make financial decisions on your child’s behalf, if they were to become incapacitated. You would have the legal right to manage bank accounts, pay bills, sign tax returns, apply for government benefits, break or apply a lease and conduct activities on behalf of your child. Without this document, you won’t be able to help your child without a court-appointed conservatorship.
Keep in mind that these documents need to be updated every few years. If you try to use an older document, the bank or hospital may not accept them. Your adult child also has the ability to revoke these documents at any time, just by saying they revoke them or by putting it in writing. If you have an adult child living out of state, you want to have these documents prepared for your home state and their state of residence.
Finally, this is not a time to download forms and hope for the best. An estate planning attorney will know more specifically what forms are used in your state and help you make sure that they are prepared correctly.
Reference: The National Law Review (Feb. 11, 2019) “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children”
Will planning and estate planning are very different processes. Both provide family members with instructions on how assets should be distributed after death, but estate planning goes beyond that, to provide instructions on your health, finances and more while you are living, according to an article from Lexology titled “The Differences Between Will Planning & Estate Planning.”
An estate planning lawyer can help you determine exactly what kind of planning you need, help you create the documents that will support your needs and give you and your family guidance in more complex matters.
Will planning is a relatively simple process that involves creating a document known as a last will and testament. It conveys instructions for after you have died. That may include naming a guardian to rear your children or who should take over your business, who should be in charge of your estate, the executor and who will receive your assets.
Everyone needs a will. It avoids family disputes about property, saves money on legal expenses that occur when there is no will and makes many decisions about your estate much easier. It is a kindness to your loved ones, to have a will.
Estate planning is a little different. It is more detailed and involves tax planning and certain protections for you while you are living. A living will is used to convey your wishes about what kind of medical care you want, if you should become unable to speak on your own behalf. The living will includes end-of-life care, the use of extraordinary measures, like a respirator or feeding tube and more. This is also a kindness to your loved ones, since it spares them from having to guess what your wishes might be.
You’ll also want to have a financial Power of Attorney created to instruct a named person regarding how to handle your money, your business and your investments, if you are unable to function. This person can do anything you could do, from transacting business to moving money into accounts, etc.
A living trust can be used to outline your wishes regarding your property and finances. An estate planning attorney will be able to review your assets and determine whether you need a living trust or if there are other trusts that may be more appropriate for your situation.
Beneficiaries are the individuals named on various accounts. They will receive assets directly from the institution that holds the assets, like insurance policies, retirement accounts, investment accounts and the like. It’s very important to understand that when there is a beneficiary named in a document, that beneficiary will get the assets, regardless of what your will says. These should be updated on a regular basis and if possible, you should always have a primary beneficiary and a secondary beneficiary.
An estate planning attorney will review your situation and talk with you about your goals for your family and your assets after your death. They will create a comprehensive plan with the necessary documents.
Reference: Lexology (January 28, 2019) “The Differences Between Will Planning & Estate Planning”