King & Wood, P.A.

Make Sure These Documents are Part of Your Estate Plan

“Assembling legal documents pertaining to your estate is key to ensuring that your final wishes are carried out.”

Let’s be frank—no one likes to think about death and end-of-life arrangements. However, being prepared for the inevitable is not only a smart thing, it’s a kindness for loved ones. A recent article, “12 Documents to Prepare Now for Your Heirs,” from U.S. News & World Report, explains what you must do and how much harder it will be for loved ones if you don’t take these steps.

Failing to put your estate in order means family or friends will have to rely on probate court to determine the distribution of your property. Depending on your jurisdiction, this could create lengthy delays, additional court costs and unwanted outcomes. Heirs may also miss out on life insurance proceeds, or accounts may be overlooked if no one knows they exist.

Last Will and Testament. A will is used to name an executor to manage your estate, outline your wishes for property distribution and name a guardian for any minor children. You can use it to make arrangements for pets. However, a pet trust is enforceable and may be a better solution.

Trusts. A “funded” trust bypasses probate and gives more control over how assets are distributed. For instance, a trust can stipulate minor children do not receive access to their funds until a specific age or milestone is reached. Even with a trust, parents of minor children still need a will to name a guardian.

Letter of Explanation. Sometimes called a letter of intent, this document provides the rationale for instructions in the will. This can be especially important if assets are not being divided equally. Expressing your intentions may help avoid animosity between family members. Consider having a family meeting at your estate planning attorney’s office if this is awkward. With your attorney present, a neutral location may be easier and less confrontational than a discussion at home.

Asset Inventory. Create a complete list of all financial accounts and named beneficiaries. Each account may have a designated beneficiary or transfer on death provision. People often forget about these beneficiaries, so they should be checked to be sure they are correct.

Personal Items Inventory. If you want specific items to go to specific people, list them in your will. In some states, a personal property memorandum can be used for tangible property.

Power of Attorney. The POA is for use while you are living. If you become incapacitated because of an illness or accident, the POA lets a designated person make financial and legal decisions on your behalf. A Health Care POA allows a person to make medical decisions. Everyone should have these documents.

Life Insurance Policies. Heirs won’t know if you have policies unless you tell them. Keep records of your life insurance plans with important financial papers.

Real Estate Documents. Records like deeds, assessments, titles, mortgage statements and tax information should be included with documents prepared for heirs.

Recent Tax Returns. Tax returns contain a wealth of information for executors. Share the name of your CPA, so they can guide your family through filing final tax returns for your estate.

Online Accounts. Create a list of usernames and passwords and store it where heirs can access the information.

Digital Estate Plan. You’ll need a digital estate plan to provide directives of what you want to happen with your digital assets, including social media accounts, websites, digital photos, intellectual property and other files and documents. On certain platforms, you can designate a legacy contact who can access and manage your data after death.

Final Wishes and Arrangements. Your final wishes should be shared with your executor and family members. If you’ve made prearrangements for a funeral, memorial service, burial, or cremation, make sure that the information is shared. It’s a great relief for family members to know what you want rather than having to guess.

Reference: U.S. News & World Report (Oct. 27, 2023) “12 Documents to Prepare Now for Your Heirs”

Estate Planning in Seven Steps

“Estate planning is a profound journey that transcends generations, ensuring that your legacy endures with precision and care.”

From defining financial objectives and understanding legal issues to safeguarding assets and establishing directives, every step in the creation of an estate plan is a brushstroke in the painting of your personal legacy. A recent article from Market Business News, “Crafting Your Legacy: 7 Steps in the Estate Planning Process,” describes the process of creating what is essentially a testament to protect loved ones.

Create an inventory of assets. You’ll need to be meticulous about this to ensure that all your assets are accounted for. This includes properties, investment accounts, items of value and sentimental possessions. It should include detailed descriptions and appraisals. This forms the foundation of your estate plan.

Consider your family’s needs after your death. Anticipate your family’s financial, practical, and emotional needs. Consider things like educational expenses, healthcare costs, ongoing support for basics, and, depending on your situation, recreational activities. Address this concern in your estate plan, so your family will have a secure foundation after your passing.

Select beneficiaries. This is simple in some cases and more complicated in others. You may have a traditional family or one including non-family members who are like family to you. Are there charitable concerns you want to address?

How do you want your estate divided? Be specific to avoid confusion and ensure that assets are distributed according to your intentions. Language needs to be specific and clear, with no room for ambiguity.

Store documents properly. Safeguard estate planning documents, which include your will, Power of Attorney, Health Care Power of Attorney, Living Will and others, in a secure location, like a fire and water-proof home safe. Do not put them in a bank safe deposit box, as the bank may seal the box upon your death and not allow representatives to access the box’s contents. Talk with your estate planning attorney about their recommendations.

Update your estate plan on a regular basis. Life changes, and so should your estate plan. It should be reviewed every three to five years or whenever there is a life event, including marriage, divorce, birth, or changes in your financial situation. Keeping an estate plan updated ensures that it remains relevant to your life.

Seek help from an experienced estate planning attorney. An estate planning attorney will help you navigate the complexities of legal documentation, tax implications and probate. You’ll want to be sure that your estate plan aligns with state laws. The knowledge of an estate planning attorney will provide you with peace of mind, knowing you’ve done the right thing to protect your family and ensure your legacy.

Reference: Market Business News (Oct. 28, 2023) “Crafting Your Legacy: 7 Steps in the Estate Planning Process”

Estate Planning for Digital Assets

“Your digital life includes dozens of usernames and passwords. Providing a digital estate plan can help your family deal with your accounts with minimal fuss.”

What happens to digital assets when you die? There are state laws offering the executor of an estate or an estate planning attorney to obtain access to a person’s online accounts after incapacitation or death. These laws—including RUFADAA (Revised Uniform Fiduciary Access to Digital Assets Act)—will help to protect digital assets, but only if you have a digital estate plan, reports the article “How to Tackle Digital Estate Planning in Four Easy Steps” from Kiplinger.

RUFADAA has a three-tier process for accessing digital assets:

Tier One: Some digital service platforms offer a way to designate what happens to digital assets after death. Yahoo has an inactive account manager to designate a friend, which guides what happens to digital assets.

Tier Two: If there is no such tool, the owner’s estate planning documents must dictate what should happen with the asset.

Tier Three: If neither of these tiers is in place, refer to the platform’s Terms of Service Agreement (TOSA) to see how the executor may access these accounts.

What makes up your digital estate? It includes all electronic and virtual accounts and assets, including:

• Social media
• Email
• E-Commerce accounts
• Photos saved in cloud-based storage
• Cryptocurrency keys, wallet, and any related accounts
• Cellphone and cellphone apps
• Domain accounts
• Text, graphic and audio files and any other intellectual property
• Blogs and domains
• Loyalty benefit programs, like credit card perks and frequent flier rewards programs
• Utility accounts, including electricity and cable tv
• Online banking
• Gaming
• Online shopping accounts

Electronic bank accounts are considered digital assets. However, the money in the bank account is not a digital asset. Likewise, cryptocurrency account access platforms, such as Coinbase, are digital assets, but the actual cryptocurrency, such as Ethereum or Bitcoin, is not a digital asset.

Here are the four steps to creating a digital estate plan:

Create a complete digital asset inventory. This should include all account names, usernames, passwords and the URL or address of the digital asset.

Decide how you want digital assets handled. List intentions for every account, so your executor knows what you want to happen. This is known as a “directive” and will likely be required by the platform to indicate your wishes. Some companies have conditions in the TOSA, so make sure your wishes can be followed. For example, Twitter and Google have “legacy” policies. Facebook lets family members memorialize your account.

Name a digital executor. This person doesn’t need to be the same as your executor. You’ll want to select someone familiar with the online world.

Store your digital estate plan in a secure place. Make sure that your digital executor knows where the information can be accessed. There are online platforms to help organize digital estate plans in the event of an emergency. Note that they are not the same as password managers, which store passwords. These platforms should include directives indicating what you want to happen with your digital assets.

The digital estate plan is considered informal, if your state has not passed RUFADAA. Ask your estate planning attorney if you can formalize it by making it a codicil to your will.

Reference: Kiplinger (May 16, 2023) “How to Tackle Digital Estate Planning in Four Easy Steps”

What Is a Digital Asset for Estate Planning?

“At any given time, the average American maintains between 30 and 50 online accounts. These may be with banks, financial institutions, utility companies, email providers, social media outlets, commercial shopping or travel sites and accounts unique to technology, such as an account to purchase apps for a smartphone.”

Most of us don’t even realize just how much of our life is lived online, from streaming services and banking to apps to monitor our front door. All of these online accounts are digital assets and need to be included in estate plans says a recent article, “Estate planning and online accounts,” from American Legion.

Start by making a complete list of all of your online accounts, together with information about each account. Your list should include username, password, account number and a description of what each account includes. If you change passwords frequently, as recommended by cybersecurity experts, you’ll need to update your inventory every time.

Digital assets fall into four major types: personal, business, financial and social media. Personal accounts including emails, photos, videos, music and apps used on smart phones or tablets. This information is typically backed up on a computer hard drive or cloud-based storage account.

Financial assets include savings and checking accounts, retirement accounts, investment accounts, utility accounts and shopping and frequent flyer accounts. If you do banking or investing online, or if you own cryptocurrency, you’ll want to include these accounts.

Business related accounts include intellectual property, websites or blogs, written work, photos, videos, musical compositions and software. If your side gig includes selling items on eBay or Esty or similar websites, this information also needs to be included in your digital asset inventory.

Social media accounts include well-known platforms like Facebook, LinkedIn, Twitter, Snapchat, WhatsApp and any other platform where you are actively engaged. Gaming sites, e-sports and gambling sites should also be included.

Storage and protection is the second part of a digital estate plan. This involves saving the list and backing up important files and account information. The inventory itself needs to be secured, as it could easily be used to access your identity and steal your entire online life. The inventory can be as simple as a list on a pad of paper, stored in a secure location. If it is stored in a digital manner, make sure it is encrypted. There are programs to store and encrypt passwords. However, they are only as good as the software used to create them.

Saving the information on a desktop, laptop or tablet is risky, since these devices are hacked and contents are compromised fairly often. An external thumb drive might work. However, what if it was lost?

Select a digital executor and discuss your digital assets with them. Many states have now passed laws governing digital assets. Speak with an experienced estate planning attorney to learn if yours is among them. On some platforms, the executor needs to have been named in advance as a legacy contact before they are legally permitted to access the digital asset. In many cases, having the user’s name and password doesn’t give the executor a legal right to access the accounts according to the Terms of Service Agreement (TOSA) between the user and the platform.

Your estate plan should include a letter of instruction to the digital executor to tell them specifically what you wish to happen to your online accounts and digital assets. It should include recommendations for the distribution of various accounts, assets, files and information to heirs. It may be needed to prove your wishes or directives for digital assets, if there should be a challenge to the executor.

Digital estate planning is a new and changing area of the law. Making provisions for your digital estate will make it possible for your executor to protect your digital assets, as much as a traditional estate plan protects traditional, tangible property.

Reference: American Legion (Dec. 13, 2022) “Estate planning and online accounts”

Do You Need an Estate Plan or Will?

“Have you thought about how you'd like your family to continue after you're gone? Having an estate plan isn't just for the ultra-wealthy.”

No one wants to squander a lifetime of sacrifice and hard work. However, if there is no estate plan, it’s entirely possible for this to occur. The aim of every estate plan, no matter how larger or small the estate, is to protect loved ones. What steps need to be taken are described in the article “Estate Planning for Everyone” from The Street. An estate plan can include almost any of your goals, and it’s not something to postpone.

Think of estate planning as a means of efficiently transferring the assets you’ve accumulated over a lifetime, while protecting your family from unnecessary expenses, stress and yes, taxes. Without an estate plan, the laws of your state and the federal government will determine who receives what, and your estate will be reduced considerably by taxes. The process will take months, or even years. If you have ever been divorced, own property in more than one state, own a business or care for a family member with special needs, the complications and costs grow exponentially.

The core of any estate plan is the answer to a few simple questions: how do you want future generations to carry out your wishes? Who would you like to take care of? And how do you want to be remembered? An estate plan can allow you to set up a roadmap for future generations, manage how and when wealth is distributed, create a legacy for your family and, if you are charitably minded, for your community.

A Will, or Last Will and Testament. This document is used to spell out how your assets should be distributed upon your death. It also includes naming a guardian if you have minor children and names an executor, the person who will be in charge of carrying out the directions in the will. You can also use a will to name gifts to individuals or institutions. Without a will, assets may be distributed in accordance with state law, which may not be the same as your wishes. Heirs will almost assuredly pay more in estate taxes and the family may find themselves battling over personal items.

The will forms the foundation of estate planning, but it is by no means the only document you’ll need.

Living Will. This is a legal document used to communicate end-of-life decisions. In some states, it’s referred to as an Advance Healthcare Directive. It often includes a Do Not Resuscitate (DNR) order, if you do not want life-extending treatments, like a breathing or feeding tube, blood transfusion, dialysis, or pain medication. The living will only work if the family knows where it is and shares it with your healthcare providers. Let loved ones know your wishes and tell them where the living will is located.

Power of Attorney—Healthcare and Financial. Power of Attorney, or POA documents, name people to manage specific tasks for you if you are incapacitated, whether by illness or injury. Don’t make the mistake of using a standard form because it may not reflect your wishes. For instance, you may want to name one person to handle your finances, but you may not want the same person to handle the sale of your home. The POA can be as broad or as narrow as you want, but only if it is created for your needs.

Without a POA, the family will need to go to court and have one or more people named to act as your guardian. This takes time, is expensive and extremely stressful. What if the court names a family member to make all of your decisions, and it is someone you don’t want? The matter will be out of your control.

Trusts are used to avoid certain assets passing through probate, minimize taxes and maintain privacy. Trusts are legal entities, funded with a wide range of assets, which are transferred out of your control and into the trust, where they are the responsibility of the trustee. When the trust is a “revocable living trust,” then you will likely serve as the trustee as long as you are able. The person who receives the assets at the direction of the trust is known as the beneficiary. There are numerous types of trusts, and your estate planning attorney will recommend the one that works best for your purposes.

Reference: The Street (Nov. 4, 2021) “Estate Planning for Everyone”

What Items Should Not Be Stored in a Safe Deposit Box?

“Locking up certain important documents and valuables in a bank vault could turn into a headache for you or your heirs.”

We’re reminded daily about living in a digital world where anything of importance is stored in the cloud. However, if you were thinking about getting rid of your safe deposit box, says the article “9 Things You’ll Regret Keeping in a Safe Deposit Box,” from Kiplinger, think again.

By all means keep your prized possessions like baseball cards in a safe deposit box. Some documents also do belong in a bank vault. However, it’s not the right place for everything.

Even if the bank’s ATMs are open 24/7, access to the safe deposit box is limited to hours when the bank is open. If you need something in an emergency on a weekend, holiday or at night, you’re stuck. The same goes for natural disasters, which seem to be happening more frequently in certain parts of the country. Reduced operations and branch closures happened because of the pandemic and today’s hiring problems might mean a longer wait even during regular business hours at a bank branch.

Here’s a look at what not to put in your safe deposit box:

Cash money. Most banks are very clear: cash should not be kept in a safe deposit box. Read your contract with the bank. The FDIC does not protect cash, unless it’s in a bank account.

Passports. Unless you travel often enough to keep a passport next to your wallet, it may be tempting to put it in the safety deposit box. However, if an emergency arises, or you get a great last minute travel bargain, you won’t have quick access to your passport.

An original will. Keeping copies of your will in a safe deposit box is fine, but not the original. After death, the bank seals the safe deposit box until an executor can prove they have the legal right to access it.

Letters of Intent. A letter of intent, or letter of instruction, is a letter to your family, telling them what your wishes are for your funeral or memorial service and giving details on specific bequests. However, if it’s locked up in a safe deposit box, your final wishes may not see the light of day for months. Keep the letter of intent with your original will. You might also wish to send the letter of intent to anyone who is designated to receive a specific item.

Power of Attorney. Similar to the will, the POA needs to be accessible any time, day, or night. Keep it with your original will and provide copies to anyone who might need it. The same goes for your Advance Directives for Health Care or Living Will. It won’t do you any good to say you don’t want to be kept alive on a heart and lung machine if your agents can’t get to these documents.

Valuables, Jewelry or Collectibles. The FDIC does not insure safe deposit boxes or their contents. There are no federal laws governing safe deposit boxes and no law says the bank has to reimburse you for stolen items. Protect valuables with a supplemental policy or a rider to your homeowner’s insurance policy and keep them at home.

Spare House Keys. How likely are you to be able to get to your house keys even if the bank is open, if your key to the safe deposit box is in your home? Enough said.

Illegal, Dangerous, or Liquid Items. When you opened your safe deposit box, you signed a contract listing what you may and may not keep in a safe deposit box. Firearms, explosive, illegal drugs, and hazardous materials are among the things prohibited from being kept in a safe deposit box. The same goes for less dramatic items: if you have a collection of rare whiskey, keep it at home.

Reference: Kiplinger (Sep. 24, 2021) “9 Things You’ll Regret Keeping in a Safe Deposit Box”

What Happens If an Unmarried Partner Dies?

“A proper estate plan will help those left navigate the disposition of assets and the probate court system, especially for unmarried couples and some married same-sex couples.”

If you, like so many others, found yourself settling the affairs of a loved one in the last 18 months, you may be well aware of the challenges created when there is no estate plan. The lack of planning can create an enormous headache for loved ones, explains a recent article titled “3 Estate Planning Tips for Same-Sex Couples” from The Street. If this is true for married couples, then it’s even more important for unmarried couples.

Planning for incapacity and death is not fun, but unmarried couples in serious relationships need to plan for the unknown. Even married same-sex couples may face hostility from family members, including will contests and custody battles over children. There are three key issues to address: inheritance, incapacity and end-of-life care and beneficiary designations.

If a partner in an unmarried relationship dies and there is no will, assets belonging to the decedent pass to their family, which could leave their partner with nothing. With no will, the estate is subject to the laws of intestacy. These laws almost always direct the court to distribute the property based on kinship.

A will establishes an unmarried partner’s right to inherit property from the decedent. It is also used to name a guardian for any minor children. Concern about the will being contested by family members is often addressed by the use of trusts. When property is transferred to a trust, it no longer belongs to the individual, but to the trust. A trustee is named to be in charge of the trust. If the surviving partner is the trustee, he or she has access and control of the trust.

A trust helps to avoid probate, as property does not go through probate. A will also only goes into effect after the person who created the will passes away. A revocable living trust is effective as soon as it is established. Trusts allow for more control of assets before and after you pass. The trustee is legally bound to carry out the precise intentions in the trust document.

Establishing a trust is step one—the next step is funding the trust. If the trust is established but not funded, there is no protection from probate for the assets.

Incapacity and end-of-life planning allows you to make decisions about your care, while you are living. Without it, your unmarried partner could be completely shut out of any decision-making process. Here are the documents needed to convey your wishes in an enforceable manner:

Healthcare power of attorney (proxy). This document allows you to name the person you wish to make healthcare decisions on your behalf. You may be very specific about what treatments and care you want—and those you don’t want.

Healthcare directive. The healthcare directive lets you designate your wishes for end-of-life care or any potentially lifesaving treatments. Do you want to be resuscitated, or to have CPR performed?

Durable financial power of attorney. By designating someone in a financial power of attorney, you give that person the right to conduct all financial and legal matters on your behalf. Note that every state has slightly different laws, and the POA must adhere to your state’s guidelines. You may also make the POA as broad or narrow as you wish. It can give someone the power to handle everything on your behalf or confine them to only one part of your financial life.

Beneficiary designations. Almost all tax-deferred retirement accounts and pensions permit a beneficiary to be named to inherit the assets on the death of the original owner. These accounts do not go through probate. Check on each and every retirement account, insurance policies and even bank accounts. Any account with a beneficiary designation should be reviewed every few years to be sure the correct party is named. Estranged ex-spouses have received more than their fair share of happy surprises, when people neglect to update their beneficiaries after divorce.

Some accounts that may not have a clear beneficiary designation may have the option for a Transfer on Death designation, which helps beneficiaries avoid probate.

Review these steps with your estate planning attorney to ensure that your partner and you have made proper plans to protect each other, even without the legal benefits that marriage bestows.

Reference: The Street (June 2, 2021) “3 Estate Planning Tips for Same-Sex Couples”

How to Protect Digital Property

“While cryptocurrency isn’t new, it’s attracted a lot of attention in the past year because of its skyrocketing value, promotion from prominent figures like billionaire Elon Musk, and bitcoin offerings from traditional financial firms like Morgan Stanley.”

When people built wealth, assets were usually tangible: real estate, investments, cash, or jewelry. However, the last year has seen a huge jump in digital assets, which includes cryptocurrency and NFTs (Non-Fungible Tokens). Combine this growing asset class with the coming biggest wealth transfer in history, says the article “What happens to your NFTs and crypto assets after you die?” from Tech Crunch, and the problems of inheriting assets will take more than a complete search of the family attic.

One survey found only one in four consumers have someone in their life who knows the details of their digital assets, from the location of the online accounts to passwords. However, digital assets that require two factor authentication or biometrics to gain access may make even this information useless.

There are many reports about people who purchased digital assets like Bitcoin and then lost their passwords or threw away their computers. More than $250 million in client assets vanished when a cryptocurrency exchange founder died and private keys to these accounts could not be found.

Digital assets need to be a part of anyone’s estate plan. A last will and testament is used to dictate how assets are to be distributed. If there is no will, the state’s estate law will distribute assets. A complete list of accounts and assets should not be part of a will, since it becomes a public document when it goes through probate. However, a complete list of assets and accounts needs to be prepared and shared with a trusted person.

Even traditional assets, like bank accounts and investment accounts, are lost when no one knows of their existence. If a family or executor doesn’t know about accounts, and if there are no paper statements mailed to the decedent’s home, it’s not likely that the assets will be found.

Things get more complicated with digital assets. By their nature, digital assets are decentralized.  This is part of their attraction for many people. Knowing that the accounts or digital property exists is only part one. Knowing how to access them after death is difficult. Account names, private keys to digital assets and passwords need to be gathered and protected. Directives or directions for what you want to happen to the accounts after you die need to be created, but not every platform has policies to do this.

Password sharing is explicitly prohibited by most website and app owners. Privacy laws also prohibit using someone else’s password, which is technically “account holder impersonation.” Digital accounts that require two factor authentication or use biometrics, like facial recognition, make it impossible for an executor to gain access to the data.

Some platforms have created a means of identifying a person who may be in charge of your digital assets, including Facebook and more recently, LinkedIn. Some exchanges, like Ethereum, have procedures for death-management. Some will require a copy of the will as part of their process to release funds to an estate, so you will need to name the asset (although not the account number).

A digital wallet can be used to store access information for digital assets, if the family is reasonably comfortable using one. A complete list of assets should include tangible and digital assets. It needs to be updated annually or whenever you add new assets.

Reference: Tech Crunch (April 5, 2021) “What happens to your NFTs and crypto assets after you die?”

Good Planning for Life Is Also Good Planning for a Pandemic

 

“It’s hard to plan for next week, let alone the future, when our environment, the advice from the experts and indeed the outbreak itself, seems to change on a daily basis.”

The fear of the unknown and a sense of loss of control is sending many people to estate planning attorney’s offices to have wills, advance directives and other documents prepared, reports the article “Legal lessons from a pandemic: What you can plan for” from The Press-Enterprise.

However, people are not just planning because they are worried about becoming incapacitated or dying because of COVID. High net-worth people are also planning because they are concerned about the changes the election may bring, changes to what are now historically advantageous estate tax laws and planning to take advantage of tax laws, as they stand pre-December 31, 2020.

Regardless of your income or assets, it is always good to take control of your future and protect yourself and your family, by having an up-to-date estate plan in place. Anyone who is over age 18 needs the following:

• Health Care Directive
• Power of Attorney
• HIPPA Release Form
• Last Will and Testament

Any assets without beneficiary designations should be considered for a trust, depending upon your overall estate. Trusts can be used to take assets out of a taxable estate, establish control over how the assets are distributed and to avoid probate. You don’t have to be wealthy to benefit from the use of trusts.

Preparing estate planning documents in a last-minute rush, is always a terrible idea.

If you have more free time during the pandemic, consider using some of your free time to have your estate plan implemented or updated. This should be a top priority. The state of the world right now has all of us thinking more about our mortality, our values and the legacy we want to leave behind. Most estate planning attorneys encourage clients to think about the next three to five years. What would be important to you, if something were to happen in that time frame?

Estate planning is about more than distributing assets upon death. It addresses incapacity—what would happen if you became too ill or injured to care for yourself? Who would make medical decisions for you, such as what kind of medical care would you want, who will your doctors be and where will you live in the short-term and long-term? Incapacity planning is a big part of an estate plan.

When naming people to care for you in the event of incapacity, provide your estate planning attorney with three names, in case your first or second choices are not able to act on your behalf. Most people name their spouse, but what if you were both in an accident and could not help each other?

In recent months, Advance Health Care Directives have received a lot of attention, but they are not just about ventilator use and intubation. An Advance Health Care Directive is used to state your preferences concerning life-sustaining treatment, pain relief and organ donation. The agent named in your health care directive is also the person who will carry out post-death wishes, so provide as many details as you can about your wishes for cremation, burial, religious services, etc.

Trusts are a way to preserve a family legacy. A living trust gives you the ability to decide who you want involved, in case of your death or incapacity. You decide on your beneficiaries, and if you want your assets going directly to those beneficiaries or if they should be held in trust until certain goals are met, like finishing college or reaching a certain age or life milestone.

Your estate planning attorney will help you clarify family legacy goals, whether they include a beneficiary with special needs, a supplement for children who go into public service careers, etc.

Reference: The Press-Enterprise (Oct. 18, 2020) “Legal lessons from a pandemic: What you can plan for”

The Wrong Power of Attorney Could Lead to a Bad Outcome

“When do you need your estate plan to ‘go to work’ for you? While you may think the right answer is ‘after I die,’ the actual answer is ‘if I lose the ability to manage my own affairs.’”

There are two different types of advance directives, and they have very different purposes, as explained in the article that asks “Does your estate plan use the right type of Power of Attorney for you?” from Next Avenue. Less than a third of retirees have a financial power of attorney, according to a study done by the Transamerica Center for Retirement Studies. Most people don’t even understand what these documents do, which is critically important, especially during this Covid-19 pandemic.

Two types of Durable Power of Attorney for Finance. The power of attorney for finance can be “springing” or “immediate.” The Durable POA refers to the fact that this POA will endure after you have lost mental or physical capacity, whether the condition is permanent or temporary. It lists when the powers are to be granted to the person of your choosing and the power ends upon your death.

The “immediate” Durable POA is effective the moment you sign the document. The “springing” Durable POA does not become effective unless two physicians examine you and both determine that you cannot manage independently anymore. In the case of the “springing” POA, the person you name cannot do anything on your behalf without two doctors providing letters saying you lack legal capacity.

You might prefer the springing document because you are concerned that the person you have named to be your agent might take advantage of you. They could legally go to your bank and add their name to your accounts without your permission or even awareness. Some people decide to name their spouse as their immediate agent, and if anything happens to the spouse, the successor agents are the ones who need to get doctors’ letters. If you need doctors’ letters before the person you name can help you, ask your estate planning attorney for guidance.

The type of impairment that requires the use of a POA for finance can happen unexpectedly. It could include you and your spouse at the same time. If you were both exposed to Covid-19 and became sick, or if you were both in a serious car accident, this kind of planning would be helpful for your family.

It’s also important to choose the right person to be your POA. Ask yourself this question: If you gave this person your checkbook and asked them to pay your bills on time for a few months, would you expect that they would be able to do the job without any issues? If you feel any sense of incompetence or even mistrust, you should consider another person to be your representative.

If you should recover from your incapacity, your POA is required to turn everything back to you when you ask. If you are concerned this person won’t do this, you need to consider another person.

Broad powers are granted by a Durable POA. They allow your representative to buy property on your behalf and sell your property, including your home, manage your debt and Social Security benefits, file tax returns and handle any assets not named in a trust, such as your retirement accounts.

The executor of your will, your trustee, and Durable POA are often the same person. They have the responsibility to manage all of your assets, so they need to know where all of your important records can be found. They need to know that you have given them this role and you need to be sure they are prepared and willing to accept the responsibilities involved.
Your advance directive documents are only as good as the individuals you name to implement them. Family members or trusted friends who have no experience managing money or assets may not be the right choice. Your estate planning attorney will be able to guide you to make a good decision.

Reference: Market Watch (Oct. 5, 2020) “Does your estate plan use the right type of Power of Attorney for you?”