New Year's Resolution - Look at that Will or Estate Plan

Early January is a great time of year.  Everyone is full of enthusiasm for all we are going to accomplish this year.  Maybe you even sat down over the weekend and made a list of goals for 2012. One of your 2012 goals may very well be "Get a Will", "Review my Will", of "Find out if I need a Will."  Luckily, unlike some other New Year's Resolutions, meeting these goals is easy.

First, why do you need a Will?  We have answered this an some other estate plan "overview" questions with "Why do I need a Will?  And other frequently asked questions about Estate Planning". You can use this short article as a starting point about:

  • Why do I need a Will?
  • What happens if I die without a Will?
  • What is a "Living Will"?
  • Do I need a Power of Attorney?
  • What is a Trust?
  • What is a Living Trust or Revocable Trust?
  • Will a Will or a Revocable Trust help me save taxes?

Next, if you have an estate plan or Will already, is it still working for you?  Have you planned for today's tax laws, as opposed to the ones in place when you originally  put the plan together?  Are your named fiduciaries (Executor, Trustee, Guardian) still appropriate?  Has there been a material change in your circumstances so your current Will or estate plan just doesn't fit you anymore?  To address these questions and many others we have created a detailed "Estate Plan Review Checklist" to help you determine the suitability of your current estate planning documents.  The Checklist includes both questions to ask about your estate plan, and explanation of why to ask them. Questions asked on the Checklist, and the reasons for them, include:

  • Do you have the 3 documents every estate plan must contain? (Will, Living Will/Health Care Proxy, Power of Attorney)
  • Have you moved since you last updated your estate planning documents?
  • Do you have a separate personal property designation?
  • Is any person receiving your personal property a minor (under 18)?
  • Do you have any specific gifts or bequests you want to make?
  • Are your total combined assets, including life insurance death benefits, greater than $675,000?
  • Do you own assets held in joint accounts, or where you have a named beneficiary?
  • Are your residuary beneficiaries correct?
  • Are assets being distributed to your beneficiaries outright or in trust?
  • If you currently have a trust established, are the terms still appropriate?
  • Do any of your beneficiaries have special needs?
  • *Does your estate plan contain provisions to allow you and your family to be as flexible as possible in meeting your goals?
  • *What authority does the Trustee have to distribute the assets in the trust?
  • Are your alternate beneficiary designations appropriate?
  • Are your Executors, Trustees, and Guardians still the appropriate people, in the appropriate order?
  • If you have a taxable estate (assets exceeding $675,000), have you and your spouse reallocated ownership of and title to your assets to minimize estate taxes?
  • Is your General Durable Power of Attorney more than 10 years old?
  • Does your General Durable Power of Attorney continue to name appropriate attorneys-in-fact?
  • Does your General Durable Power of Attorney allow for Medicaid planning?
  • Does your Health Care Power of Attorney continue to name appropriate Health Care Representatives?
  • Does your Health Care Power of Attorney reference the Health Insurance Portability and Accountability Act (“HIPAA”)?
  • Does your Living Will clearly state your desire about what medical treatment you want to receive or refuse in a terminal situation?
  • Does somebody know where all of your estate planning documents are?
     

Considering that 88% of New Years Resolutions fail, why not look at your estate plan to find out how to keep at least one of those resolutions this year?

Happy 2012!

Image: Grant Cochrane / FreeDigitalPhotos.net

When a Power of Attorney isn't Enough a Guardianship may be Needed

Power of AttorneyStacey Crowell Maiden, Esq. was the speaker at the 2011-2012 opening meeting of the Estate and Financial Planning Council of Central New Jersey (EFPCCNJ) on September 7, 2011, presenting the topic: Guardianships & Conservatorships: Court Strategies When You Question Your Client’s Capacity.

The goal of the presentation was to educate estate and financial planners of the court procedures involved if a client’s diminished capacity prevents effective representation of the client.
We always encourage our estate planning clients to execute comprehensive Powers of Attorney and Living Wills/Advanced Health Care Directives to appoint surrogate decision makers of their choosing to handle financial and medical affairs during their life, along with their Wills, which address disposition of assets after death. If properly drafted, a Power of Attorney and Living Will/Advanced Health Care Directive can supply all of the authority required to obviate the need for a court proceeding to appoint a legal guardian.

However, the mere existence of a Power of Attorney does not bar the need for a legal guardian. Sometimes, the reasons are benign, such as the agent named has passed away and there is no successor agent named, or the Power of Attorney prepared in New Jersey does not comply with the requirements of another state. Other times, there are disputes among multi-party agents, e.g., son and daughter disagreeing as to how mom’s finances should be managed or spent. Unfortunately, there are also situations where the appointed agent under the Power of Attorney is not acting in accordance with the fiduciary standards imposed by New Jersey Statute or generally not in the best interests of the principal.


There is another legal aspect of a Power of Attorney, which may rise to the need for a guardianship. It is important to realize that executing a Power of Attorney does not mean that the person can not continue to act of his or her own behalf. That person may continue to enter into contracts, withdraw large sums of money from bank accounts, take out credit cards, purchase items, gift assets, and execute stock trades, to name just some of the transactions that a person with diminished capacity might engage in to potential personal and family harm. Comments from members of the EFPCCNJ indicated that this is not an uncommon issue. Even though a Power of Attorney is in place, a guardianship action still may be required to foreclose the client with diminished capacity from acting on his own behalf to the detriment of his or herself and family.  

College Bound Checklist should include a Power of Attorney and Living Will...

GraduationThe Wall Street Journal recently reported five pieces of advice from financial advisors for families of college-bound children to consider. #5 on the list: Help children protect their health and finances from uncertainty and risk.

Veronica Dagher reports:

Once a child turns 18, parents no longer have the legal authority to access the child's medical records or make health or financial decisions for the child, says Laura Mattia, a Fair Lawn, N.J., certified financial planner. 

That loss of control over a child's care "is a hard thing for a parent to hear," she says, but families need to create a "game plan" to address the unexpected.

It should include three documents—a health-care directive, a HIPAA release and power of attorney—which together allow parents to access a child's medical records and make decisions on the child's health care and finances if necessary.

Ms. Mattia gave this advice to a client whose child was going to study in London for a semester. The client initially was shaken by the realization that she could no longer make crucial decisions on her daughter's behalf without taking legal action, Ms. Mattia says.

This is really good and practical advise.  Those who are long-time readers might recall that I have said from time to time there are situations where I refer people to legalzoom.com.  This is one of them because I tend to get a call the day before the child is leaving that these documents are needed right away.  While I suggest that it would be valuable for an attorney to help the family understand the importance and significance of these documents, something is better than nothing.

On a practical note, if you have a joint account with your child, you will be able to continue to access the account once the child turns 18.

Image: Ian Kahn / FreeDigitalPhotos.net

What's In an Estate Plan - The Wealthy and Wise Episode 2

Check out the second episode of The Wealthy and Wise

In this episode we acknowledge that that estate plans can seem remote, mysterious, complicated and expensive when you don’t know “What makes up an estate plan” and don’t have an overview the information necessary to make informed decisions about your estate.We clear the air on the episode of The Wealthy and Wise as we talk to you about:

What makes up an estate plan?
What happens to your assets if you die without an estate plan?
Determining your net worth from an estate perspective
Sorting out powers of attorney, living wills, health care proxy and advanced directives
Your beneficiaries – who gets your assets, how and when?
Is the government your beneficiary?
How are trusts tools to protect money?
Probate v. Non-Probate assets
And much, much more

The goal of The Wealthy and Wise, as always, is to educate you about how you can take steps in your own life to protect and build your wealth. How’d we do? We’d love your questions and comments, either below or to questions@thewealthyandwise.com. You may find yourself featured in an upcoming episode or podcast!

Military Power of Attorney and Advanced Directives

U.S. Army Staff Sgt. Kevin Reese and his military working dog GrekUnder the "learn something new every day" heading, Pet Trust Law Blog reports today on a federal statute providing for a Military Power of Attorney for service personnel.    The statute (US Code Title 10, Section 1044b) providing for Military Powers of Attorney has some interesting provisions:

  • A document will be a "Military Power of Attorney" if it is notarized in any state, or as set forth in US Code Title 10, Section 1044a (dealing with what military personnel have the power to act as notary)
  • A  Military Power of Attorney does not have to meet the format or substance of any State's laws to be deemed valid. So, if the document is a Military Power of Attorney, but it doesn't meet a state's standards (ie: there are no witnesses, or a specific form isn't used) it still needs to be given full force and effect.
  • The document should be specifically identified as a Military Power of Attorney per Section 1044b according to specific language prescribed by regulations (but failure to properly identify it will not make it invalid).
  • If a person is missing in action, the power of attorney will continue in full force and effect during that time.

There are similar provisions for Advanced Medical Directives found in  US Code Title 10, Section 1044c.

And what does this all have to do with pets?  As blogger Dan Meek points out, "A Special Military Power of Attorney for Pets can designate an individual or individuals to care for and maintain your pet (s) during your absence, and authorize any and all medical care necessary, including major surgery and humane disposal, as deemed necessary by the Veterinary Service".

While it is important for every adult to have a Power of Attorney to allow someone else to make financial decisions if they cannot. it is critical for military servicemen and servicewomen.  If I wasn't aware of these special provisions, I am guessing other estate planners might not be as well. The military provides the documents - we planners might consider adding into our talks a 20 second did you know infomercial on Military Powers of Attorney and Advance Medical Directives. 

Photo courtesy of soldiersmediacenter.

Avoid a Guardianship - Acquire a Power of Attorney

Many times estate planning is focused on "what happens when I die"?  Often overlooked is the element of estate planning for while you are alive - namely designating and empowering someone to make decisions for you if you can't make them for yourself. Guest blogger Stacey Crowell Maiden, Esq. describes below why a Power of Attorney and Living Will/Health Care Proxy are so important, because the alternative, a Guardianship proceeding, can be so painful.

When a client consults with us to prepare an estate plan, we encourage the client to make sure he also has in place a Power of Attorney and Living Will/Health Care Proxy. While there are a number of reasons to have these documents, one that we stress particularly in conjunction with our Elder Law practice is their value in a potential Guardianship action.

The possibility of becoming mentally incapacitated is not something most people like to consider. But unfortunately, a decline or diminishment in cognitive abilities to the point of no longer having capacity to handle financial and medical affairs can happen gradually, such as with Alzheimer’s, or suddenly, as a result of a stroke for example. If the afflicted person has not appointed someone to act for him under a Power of Attorney of Health Care Proxy, then a Guardian must be appointed by the Court to act on his behalf.

A Guardianship action is brought by filing a Complaint in Court. Generally, two physicians must certify that the alleged incapacitated person is unable to handle medical and financial affairs and is in need of a legal guardian. An attorney is appointed by the Court to represent the alleged incapacitated person, and is paid from the incapacitated person’s funds. In most cases, a hearing is held in Court. Once a Judgment of Guardianship is entered, the guardian will have to post a bond, also paid from the incapacitated person’s assets. The guardian must account to the Court as to the finances and well being of the incapacitated person.

As you can see, a Guardianship action is costly, time consuming and a matter of public record. In addition to offering considerable cost savings, allowing for efficient administration of your affairs, and maintaining privacy, preparing a Power of Attorney and Living Will/Health Care Proxy allows you to control who you wish to act for you, rather than a Court.

Does your Estate Plan reflect Who You Are Today?

I came across this interesting article "8 Life Stages of Estate Planning".  The premise is simple, but often overlooked in today's busy lifestyle.  You aren't the same person at 45 you were at 30, or at 65 you were at 45, or at 85 you were at 65 - your estate plan should reflect the you of today, not who you were yesterday.

1. Young, Single and Carefree - Until you turn 18, your parents make financial decisions for you.  Once you hit that magic age, they no longer have the legal authority to do so.   Give them the power to make decisions for you if you can't by at least having:

  • A General Durable Power of Attorney naming your parents to make financial decisions for you if you can't
  • A Health Care Proxy/Living Will naming your parents to make medical decisions for you if you can't

2. Single, but Committed - Unless you have a Will or Trust that says otherwise, upon  your death all your assets will pass to your parents or siblings.  You may want to create a Will or Trust that names your partner as beneficiary, or perhaps name them as a beneficiary of life insurance or IRA or 401(k), or own assets in joint name with a right of survivorship.

3. We're Engaged! - Congratulations, but face the fact that a lot of marriages don't work out.  A Prenuptial Agreement can protect assets you acquired before marriage so they can be security for you if the marriage ends.  Parents, if your children don't get a prenuptial agreement, you may want to change your estate plan to leave inheritances in trust instead of outright to your children to protect them from claims of equitable distribution in a divorce.

4.  Just Married - This is a major life change that calls for taking another look at all your estate planning documents.

  • Update your Power of Attorney and Living Will/Health Care Proxy to name your spouse (or other appropriate person).
  • Create a new Will or Trust benefiting your spouse and perhaps other family members.  Bear in mind that when you get married your spouse becomes entitled to some part of your estate when you die (typically 1/3 to 1/2) just by virtue of being married.
  • Change your Beneficiary Designations on things such as life insurance, pension, 401(k), IRA, 403(b) - the beneficiary does not automatically become your new spouse just because you got married.  Speak to your Human Resources department about such things as health insurance, flexible spending accounts, health savings accounts, etc.

5 - The Joys of Parenting - You MUST, MUST, MUST create a new Will naming a Guardian for your minor child.  The Will is the only place you can name a Guardian, and as difficult as it may be to consider this decision, it is incumbent upon you as a parent to provide for who will care for your child if you can't - it is not fair to your family or your child to leave the decision to some overworked judge.

You should also consider revising your Will to leave any assets passing to your children in trust until such age as they can manage them.  You will need to name a Trustee (who can be different from the Guardian or the same) to manage the money until a certain age.  I recommend mandatory distributions be no earlier than 25 (they may still be in school at that age) and staggered over time (such as 1/2 at 25, the balance at 40) so the child has time to learn financial skills before the dollars are turned over to him or her.  The Trustee should have broad discretion to make distributions from the trust to the child before the mandatory distribution ages.

You may also want to consider life insurance (particularly term insurance) at this point to create additional assets for your spouse and children in the event of your death.

6 - The Agony of Divorce - Divorce is a reality.  In some states becoming separated or divorced cuts any benefits to or fiduciary roles of your former spouse  - in other, it doesn't.  You need to change your Will to reflect your new status.  You may need to change your Will or Trust once during the separation stage and once when the divorce is final.  Some people still name their former spouse in some roles, others don't want the person in their life ever again.

Divorce does not automatically rescind all Beneficiary Designations.  So just like you did when you got married, you need to change your Beneficiary Designations on thing such as life insurance, pension, 401(k), IRA, 403(b).  Speak to your Human Resources department about such things as health insurance, flexible spending accounts, health savings accounts, etc.

If you get re-married, you need to consider how to best provide from children from one marriage and a spouse and children from another marriage.  You may wan to consider life insurance owned by a trust to create an additional pool of assets upon your death.

7.  The Middle Years - Here, your estate may be increasing to the point you need to consider estate tax planning.  In New Jersey, estate tax planning is relevant for estates over $675,000.  You may want to create trusts within your Wills or Trust that are designed to minimize estate tax so more of your assets eventually pass to your children.

You may also want to look at long term care insurance at this point to create a source of dollars to pay for your care should you become ill and need assistance as you age.

8. The Golden Years - At this point, you likely know what you have and know how you spend it.  Your plan needs to be focused not so much on "What happens if I die?" (as all your prior planning addresses that), but "What happens if I live?".

You may want to engage in a gifting strategy, either to reduce taxes, or just to see your beneficiaries enjoy while you are still here.  You can do outright gifts, pay for grand-children's education, gift real estate or businesses over time, or a myriad of other strategies.

You may also be concerned about asset protection - either for yourself if you get sick, or in how your beneficiaries receive assets.  Trusts can be designed to make sure only the beneficiaries have the benefit of the assets, not their creditors or spouses.

Care of Parents Means Care of Finances - Underscoring the Need for a Power of Attorney

In a companion piece to "How to Talk Money with Mom and Dad" ,  in Money Magazine this month, the New York Times has an article "Taking Care of Parents Also Means Taking Care of Finances".

The article illustrates that "care" goes beyond health and safety - caregivers also have to look to where the money is coming from and how they, as caregivers, can have access to it.  I appreciate the article emphasizing caregivers to READ and UNDERSTAND their parents General Durable Power of Attorney.

As an Elder Law Attorney, I believe that a General Durable Power of Attorney is the single most important document for seniors to have and to update.  A General Durable Power of Attorney allows you to name an person to make financial decisions for you if you cannot.  

  • Without any General Durable Power of Attorney should you become incapacitated, a court supervised Guardianship proceeding must take place (trust me, a circumstance to be avoided at all costs).  
  • Without a complete and current General Durable Power of Attorney, a Guardianship may still be necessary because your attorney-in-fact is not clearly authorized to take some action (making gifts is a big one here in NJ).
  • Without looking at State law, a General Durable Power of Attorney may be new and done, but not address all the issues of agency law in that state.  New York just substantially changed its General Durable Power of Attorney laws this month, and out of state forms (or Internet generated forms) may not be effective.

The article ends with great advice - search the National Association of Elder Law Attorneys Website for a attorney who can advise you if your General Durable Power of Attorney is working for or against you.