Power of Attorney

Friday, May 20, 2011

Recent Press Coverage of Estate Planning (May 20, 2011)

Kelley Greene and Jessica Silver-Greenberg of the Wall Street Journal report that as baby boomers enter retirement, abuse of documents known as financial powers of attorney is increasing. According to the article, it takes careful planning to bulletproof these legal documents and improve the chances that banks and other financial institutions will honor them. See Power Grab! (May 14, 2011).

Deborah L. Jacobs of Forbes writes that estate planning affects women more profoundly than men, in large part because they usually outlive their spouses and have lower lifetime earnings. Without proper estate planning, women are far more likely to see their living standards compromised in retirement. For these reasons, Jacobs offers a list of estate planning questions every woman should be able to answer. See Estate Planning for Women (And the Men Who Love Them) (May 19, 2011).

Rob Clarfeld of Forbes provides several reasons why do-it-yourself estate planning is a bad idea, pointing out, for example, that legal requirements for a valid will vary from state to state. He notes that people who do their own legal planning may think everything is fine, but after their death their family and loved ones have to deal with the consequences of an inadequate estate plan. See Do It Yourself Estate Planning – A Uniquely Bad Idea! (May 17, 2011).

Paul Sullivan of the New York Times reports that the wealthy are hesitant to take advantage of unusually high gift tax exemptions, in part because they don’t want to give their money away in case they need it later, and in part because they don’t want to take away their children’s incentive to work. Some are building incentive provisions into trusts, such as income-matching distributions, but those have potential downsides too. See Wealthy Hesitate to Take a Break on Estate Taxes (May 13, 2011).

Monday, April 25, 2011

NEET Tips

NEET Tips answers questions posed by visitors to the NEET website

What does power of attorney mean?

Power of attorney is a phrase deriving from agency law, which is concerned with a person (the principal) granting another person (the agent) the authority to act on the principal’s behalf. The concept is important particularly in contract law, where the question is often posed: did an agent who signed a contract on behalf of a principal have the authority to bind the principal to the agreement. In estate planning, the term most often arises in two documents: the power of attorney for finances, and the power of attorney for health care, also known in Vermont as an Advance Directive.

In a power of attorney for finances, the principal names an agent to make financial decisions and take related actions on the principal’s behalf. Powers of attorney can be limited to specific actions such as signing closing documents for purchasing a house, or very broad in anticipation that the principal may become incapacitated due to old age or illness.

A power of attorney for health care allows the agent to make medical decisions on behalf of the principal, for instance if the principal is in an accident and can not express their health care wishes.

Both of these documents are important, and should be included in your overall estate plan.

For more information on powers of attorney, see the NEET articles:

Schiavo Predicament Illustrates Need for Advance Directives

Updated Law Expands Advance Directive Options

Friday, January 07, 2011

Press Coverage of Estate Planning this Week (January 7, 2011)

Deborah L. Jacobs of Forbes discusses the new portability provisions included in the tax law passed by Congress in December, and asks if portability eliminates the need for trusts. She then provides several situations where trusts still make sense, and others where relying on portability alone may suffice. See Planning for a Disappearing Estate Tax Break (Jan. 3, 2011).

Ashlea Ebeling of Forbes argues there is no longer any excuse to put off estate planning, and suggests four steps to take soon: write a will, complete a financial power of attorney, complete a health care advance directive, and review the beneficiary designations on your life insurance policies and retirement accounts. See No Excuse For No Estate Plan (Jan. 3, 2011).

Friday, March 19, 2010

Press Coverage of Estate Planning this Week (Mar. 19, 2010)

Paul Sullivan of the New York Times writes about incorporating strategies to deal with state estate taxes into your estate plan. Two issues to watch for are the use of formula clauses and qualified terminal interest property (QTIP) trusts. Some states allow a separate QTIP election from that made on a federal return, other states do not. See No Federal Estate Tax, But What About Your State? (Mar. 11, 2010).

Donald J. Korn of Investor’s Business Daily discusses the importance of a financial power of attorney as part of your estate plan, and provides some advice on who to pick as your agent, who to give the document to, and how to improve the odds that your financial institution will accept yours. See Don’t Let Power of Attorney Fool You (Mar. 12, 2010).

Ian Mount of the New York Times provides advice on how to prepare a family business for the next generation, including identifying successors, grooming the new leaders, retaining key employees and minimizing tax liabilities, among others. See How to Prepare Your Business for Succession (Mar. 17, 2010).

Friday, October 16, 2009

Press Coverage of Estate Planning This Week (October 16, 2009)

Laura Saunders of the Wall Street Journal recommends checking your will or trust to determine if the provision funding the “bypass” or “credit shelter” trust requires the full federal exemption amount be placed in that trust. While sensible planning a couple of years ago, because the exemption amount is much higher now, such provisions may leave the surviving spouse little or nothing. See Is There a Trap Lurking in the Language of Your Will? (Oct. 16, 2009).

Ashlea Ebeling of Forbes cautions about what can go wrong with a power of attorney for finances, and suggests seven tips to protect against the misuse of a power of attorney. See Protect Your Assets: Write a Safe Power of Attorney (Oct. 15, 2009).

Van Sievers writes in the Montgomery Advertisor reasons people give for not doing an estate plan, including being too busy and not wanting to think about death. He adds that he has never had a client say they were glad their parents did not do any estate planning. See 7 Reasons Given for Not Doing An Estate Plan (Oct. 13, 2009).

Tuesday, October 06, 2009

Estate Planning Tip of the Week

What is the Difference Between a Power of Attorney and an Executor?

Literally, a lifetime of difference. Powers of attorney of all sorts are effective only during the principal’s lifetime, whereas an executor’s powers come into being only after the death of the principal.

Powers of attorney are documents whereby an individual (the principal) authorizes someone else (the agent) to act on the principal’s behalf. This could entail the agent’s signing papers to bind the principal to a contract, engaging in financial transactions on behalf of the principal, or in the case of an Advance Directive, declaring what medical treatment the principal would want, or not want, if the principal is unconscious or otherwise unable to communicate their medical wishes. Powers of attorney are important documents that can be invaluable if the principal is injured or falls ill. However, because many powers of attorney for finances are very broad, it is essential that the principal pick as an agent only someone that they have absolute trust in. Even though the agent has fiduciary obligations to the principal, a broad power of attorney in the wrong hands can cause all sorts of problems.

An executor is someone you name in your will to manage your probate estate. Because a will does not take effect until your death and your choice of executor must be approved by the Probate Court, an executor does not have any authority to act until after the probate process has been initiated. Choosing an executor, much like an agent, is an important issue. Executor’s should be detailed, fair-minded and conscientious, and someone who will carry out your instructions in your will as precisely as possible.

Friday, September 25, 2009

Press Coverage of Estate Planning This Week (September 25, 2009)

Jamie Downey of the Boston Globe provides a checklist of 16 items to complete for an orderly closing of one’s estate, including incapacity planning documents, wills and trusts, naming an executor and trustee, and completing a power of attorney for finances. See Organize Your Estate in 16 Steps (Sept. 24, 2009).

Bob Carlson of KCI Investing notes a few common estate planning mistakes to avoid, including overlooking non-probate assets, failing to fund a living trust, and not completing a financial power of attorney. He also points out the importance of designating guardians, keeping a record of important financial accounts, and providing instructions to your executor or trustee.  See Avoiding Estate Planning Mistakes (Sept. 22, 2009).

Dennis Fordham, Esq., writes in the Lake County News (Lakeport, Calif.) about discretionary spendthrift trusts, also known as beneficiary trusts, and the advantages for your children in receiving an inheritance in trust, rather than outright. See Estate Planning: Protecting Your Beneficiaries’ Inheritances (Sept. 19, 2009).

Clare Schwemlein of the Chillicothe Gazette (Chillicothe, Oh.) discusses using college savings plans, known as 529 Plans, as part of your estate plan.  By making a five-year contribution up front, you can get assets out of your taxable estate quickly.  See Education Savings As An Estate-Planning Strategy (Sept. 20, 2009).

Friday, September 18, 2009

Press Coverage of Estate Planning This Week (September 18, 2009)

Jon Tevlin of the Star Tribune (Minneapolis, Minn.) recounts a cautionary tale of misapplied trust in naming an agent on a power of attorney for finances to manage funds for an adult with autism.  When naming a power of attorney for finances, choose someone whose trustworthiness is beyond doubt.  See What Happened to a Vulnerable Man’s Money? (Sept. 12, 2009).

Nolan Baker and Mark Clair write in the Toledo Free Press on the importance of planning when you have a blended family.  If you are not careful, your children could be left with no inheritance.  See If You Re-Marry, Make Sure to Protect Your Children (Sept. 18, 2009).

Charles Ross of the St. Louis American lists several problems with the probate process that many people would prefer to avoid, including delays in receiving an inheritance, costs of going through probate, and the lack of family privacy.  See What Are the Pitfalls of Probate? (Sept. 18, 2009).

James P. O’Malley writes in The Ledger (Lakeland, Fla.) about how too many family businesses fail after the first generation, and how to prevent that from happening to you. His advice includes writing a buy-sell agreement, gifting the family business to the next generation to reduce estate taxes, and most importantly, starting the planning process now instead of putting it off.  See Working on Your Estate Plan Now Will Pay Off Later (Sept. 14, 2009).

Michaela Cavallaro of Dow Jones Newswires recounts how an Irrevocable Life Insurance Trust paired with creative funding mechanisms to pay for a new insurance policy allowed an elderly widow to save her beneficiaries a big chunk of her estate from estate taxes.  See A Sophisticated Solution to a Tax Issue (Sept. 15, 2009).

Tuesday, September 08, 2009

Estate Planning Tip of the Week

Does a Person in Their 20s or 30s Need Estate Planning?

There are levels of estate planning applicable to every age.  While many people in their 20s and 30s do not need an elaborate estate plan, they should complete a few basic documents.  The most important documents for this age focus on planning for accidents or illness, and include an Advance Directive for Health Care, which allows someone to make medical decisions on your behalf and provides guidance as to the types of medical care you want and don't want; a General Durable Power of Attorney for Finances, which allows someone to make financial decisions for you; and a HIPAA Release, which allows hospitals and medical institutions to release your medical information to family members or others.  Additionally, if you have a family of your own, a basic will is advised so that you can name who would raise your children in the event you and your spouse were severely injured or killed. 

Planning doesn't have to be complicated, but life tends to get very complicated when no planning is involved.

For more information on planning for young people, see Misconceptions About Estate Planning on the Articles Page.

Friday, May 22, 2009

Press Coverage of Estate Planning This Week (May 22, 2009)

Carolyn Bigda of Money Magazine points out that the depressed economy and recent federal estate tax changes may have made your current estate plan obsolete.  She lists five important questions to ask when determining if your estate plan needs updating.  See Rethinking Your Estate Plan (May 18, 2009).

Matthew M. Wallace, Esq. writes in the Times Herald (Port Huron, Mich.) about factors to consider and questions to ask a prospective attorney if you are seeking estate planning advice.  One nugget: "Planning an estate is the equivalent of legal heart surgery. You don't go to a family doctor for heart surgery, why would you go to a general practitioner for estate planning services?"  See Planning Matters: Picking Estate Attorney Complex (May 17, 2009).

Deborah Jacobs of the New York Times includes three stories in a recent section highlighting estate planning.  First, the benefits and pitfalls of powers of attorney for finances. See Putting Your Faith in a Power of Attorney (May 21, 2009).  Second, the importance of creating a record of accounts and passwords for online financial accounts and authorizing a trusted child or friend to manage the accounts if you become incapacitated.  See When Others Need the Keys to Your Online Kingdom (May 21, 2009).  Third, the practice of adult adoption, why it's done, and what can go wrong.  See Adult Adoption a High-Stakes Means to an Inheritance (May 21, 2009).

Arden Dale of Dow Jones Newswires writes about giving away stocks as gifts.  Several factors should be considered when choosing which stocks to give, and you will need to analyze the interplay between gift taxes, estate taxes and income taxes.  See Thinking About Taxes When Giving Stock (May 18, 2009)