Avoiding a Family Feud When Choosing a Power of Attorney
family upset over power of attorney decisions

Avoiding a Family Feud When Choosing a Power of Attorney

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 generally 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.  The executor of the estate assumes responsibility for managing the estate through the probate process. While they are two different roles, they can be 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.

Reference: Considerable.com (July 10, 2019) “How to assign power of attorney without sparking a family feud”, and edited for Florida relevance 

 

Why It’s Always Better to Plan Ahead

Why It’s Always Better to Plan Ahead

Two stories of two people who managed their personal lives very differently illustrate the enormous difference that can happen for those who refuse to prepare themselves and their families for the events that often accompany aging. As an article from Sedona Red Rock News titled “Plan ahead in case of sudden sickness or death” makes clear, the value of advance planning becomes very clear. One man, let’s call him Ben, has been married for 47 years and he’s always overseen the family finances. He has a stroke and can’t walk or talk. His wife Shirley is overwhelmed with worry about her husband’s illness. Making matters worse, she doesn’t know what bills need to be paid or when they are due.

On the other side of town is Louise. At 80, she fell in her own kitchen and broke her hip, a common injury for the elderly. After a week in the hospital, she spent two months in a rehabilitation nursing home. Her son lives on the other side of the country, but he was able to pay her bills and handle all the Medicare issues. Several years ago, Louise and her son had planned what he should do in case she had a health crisis.

More good planning on Louise’s part: all her important papers were organized and put into one place, and she told her son where they could be found. She also shared with him the name of her attorney, a list of people to contact at her bank, primary physician’s office, financial advisor, and insurance agent. She also made sure her son had copies of her Medicare and any other health insurance information. Her son’s name was added to her checking account and to the safe deposit box at the bank. And she made sure to have a legal document prepared so her son could talk with her doctors about her health and any health insurance matters.

And then there’s Ben. He always handled everything and wouldn’t let anyone else get involved. Only Ben knew the whereabouts of his life insurance policy, the title to his car, and the deed to the house. Ben never expected that someone else would need to know these things. Shirley has a tough job ahead of her. There are many steps involved in getting ready for an emergency, but as you can see, this is a necessary task to start and finish.

First, gather up all your important information. That includes your full legal name, Social Security number, birth certificate, marriage certificate, divorce papers, citizenship or adoption papers, information on employers, any military service information, phone numbers for close friends, relatives, doctors, estate planning attorney, financial advisor, CPA, and any other professionals.

Your will, power of attorney, health care power of attorney, living will and any directives should be stored in a secure location. Make sure at least two people know where they are located. Talk with your estate planning attorney to find out if they will store any documents on your behalf.

Financial records should be organized. That includes all your insurance policies, bank accounts, investment accounts, 401(k), or other retirement accounts, copies of the most recent tax returns, and any other information about your financial life.

Advance planning does take time, but not planning will create havoc for your family during a difficult time.

Reference: Sedona Red Rock News (July 9, 2019) “Plan ahead in case of sudden sickness or death”

 

What Can I Do with a Trust to Help My Kids?

What Can I Do with a Trust to Help My Kids?

Young people like to keep things simple. Millennials don’t want their parents’ furniture or antiques. They want to be able to move easily without a lot of headache. Millennials are okay with jewelry, art, and cash. Likewise, with estate planning, Millennials want a simple will. This can be a wise choice if they’re just married and under the estate tax threshold. But when they have children of their own, they should consider a trust.

Forbes’s recent article, “Why A Simple Will Won’t Cut It If You Have Young Children,” explains that without a trust, minor children inherit assets outright when they turn 18. And that may be a problem if your kids are apt to blow through their inheritance in a few years, instead of using the money wisely.

But an inheritance could last a lifetime if the beneficiary lives within her means, doesn’t tap into the principal, and works to help support her lifestyle and supplement her income. But this isn’t always the case.

A trustee can make certain that your children and young adults are cared for long-term. If you’re not alive to guide and direct your children, a trust can set the necessary limitations for their finances. Also, the trustee can help with your children’s financial literacy, so they’ll possess tools if and when they’re given additional responsibility for their inherited assets.

This isn’t just for minor kids who are under 18 years old, but also for young adults. The fact that a child is “legal” in the eyes of the law doesn’t mean she’s responsible enough to invest a million-dollar inheritance. A trust sets up an experienced advisor to manage inherited assets along the way.

One option, when they’re mature enough, is to set up the trust so they will become a co-trustee. This lets them have a say with the trustee and to make decisions about the management of the trust assets. Your trust can also give them access to distributions of principal slowly over time, so they get used to managing large sums of money.

Other options include appointing a Trust Advisor/Trust Protector that can oversee and protect the trust, its assets & the beneficiaries as time goes on and things change regarding same.

Simple solutions can work for some people, and there are definitely situations in which a simple will is appropriate. But if you have minor children, you usually don’t want to allow them to inherit money at 18.

Ask your estate planning attorney about the options available to set up a trust to work for your family.

Reference: Forbes (July 12, 2019) “Why A Simple Will Won’t Cut It If You Have Young Children”

 

Something we don’t want to think about but we must: Selling a Parent’s Home after They Pass

Something we don’t want to think about but we must: Selling a Parent’s Home after They Pass

Family members who are overtaken with grief are often unable to move forward and make decisions. If a house was not being well maintained while the parent was ill or aging, it might fall into further disrepair. When siblings have emotional attachments to the family home, says the article “With proper planning, selling a parent’s house can be a relatively painless process,” from The Washington Post, things can get even more complicated.

The difficulty of selling a parent’s home after their passing, depends to a large degree on what kind of advance planning has taken place. Much also depends on the heir’s ability to ask for help and working with the right professionals in handling the sale of the home and managing the estate. The earlier the process begins, the better.

Parents can take steps while they are still living to ward off unnecessary complications. It may be a difficult conversation but having it will make the process easier and allow the family time to focus on their emotions, rather than the sale of property. Here are a few pointers:

Make sure your parents have a will. Many Americans do not. A survey from Caring.com found that only 42% of American adults had a will and other estate planning documents.

Be prepared to spend some money. Before a home is sold, there may be costs associated with maintaining the property and fixing any overdue repairs. Save all receipts and estimates.

Secure the property immediately. That may mean having the locks changed as soon as possible. Once an heir (or someone who believes they are or should be an heir) moves in, getting them out adds another layer of complications.

Get real about the value of the property. Have a real estate agent run a competitive market analysis on the property and consider an appraisal from a licensed appraisal. Avoid any accusations of impropriety—don’t hire a friend or family member. This needs to be all business.

Designate a contact person, usually the executor, to keep the heirs updated on how the sale of the house is progressing.

The biggest roadblock to selling the family house is often the emotional attachment of the children. It’s hard to clean out a family home, with all of the mementos, large and small. The longer the process takes, the harder it is.

This is not the time for any major renovations. There may be some cosmetic repairs that will make the house more marketable, but substantial improvements won’t impact the sale price. Remove all family belongings and show the house either empty or with professional staging to show its possibilities. Clean carpets, paint, if needed and have the landscaping cleaned up.

Keep tax consequences in mind. Depending on where the property is, where the heirs live and how much money is being inherited, there can be estate, inheritance and income taxes.  It is usually best to sell an inherited property, as soon as the rights to it are received. When a property is inherited at death, the property value is “stepped up” to fair market value at the time of the owner’s death. That means that you can sell a property that was purchased in 1970 but not pay taxes on the value gained over those years.

Talk with an experienced estate planning attorney about what will happen when the home needs to be sold. It may be better for parents to create a revocable trust in advance, which will direct the sale, allow a child to continue living in the home for a certain period of time, or instruct the one child who loves the home so much to buy it from the trust. Trusts are typically easier to administer after parents pass away and can be very helpful in preventing family fights.

Reference: The Washington Post (May 16, 2019) “With proper planning, selling a parent’s house can be a relatively painless process”

 

Lucky Enough to Work for a Company That Matches 401 (k) Contributions?

Lucky Enough to Work for a Company That Matches 401 (k) Contributions?

There is no such thing as a free lunch, except for those who are Lucky Enough to Work for a Company That Matches 401 (k) Contributions?  This is the closest to free money you’ll ever get.

If you’re fortunate enough to work for a company that has a matching plan, congratulations–not everyone does! A matching plan means that the company you work for contributes a certain amount of money to your retirement savings plan. How much it contributes will depend on the 401(k) plan, how much you contribute to your 401(k) and how generous your company is. Many will match a percentage of employee contributions, with a cap on a portion of the total salary, while others match up to a certain dollar amount, regardless of the salary.

Investopedia published an article, “How 401 (k) Matching Works,” that explains the mysteries of employer match contributions.

The specific terms of 401(k) plans vary considerably. Other than the requirement to adhere to certain required contribution limits and withdrawal regulations of the Employee Retirement Income Security Act (ERISA), the sponsoring employer decides on the specific terms of each 401 (k) plan. Whatever the match amount, it’s free money added to your retirement savings.

Employers typically match employee contributions, up to a percentage of annual income. However, this limit may be imposed in one of a few different ways. You employer may elect to match 100% of your contributions, up to a percentage of your total compensation, or to match a percentage of contributions up to the limit. Although the total limit on employer contributions remains the same, the second situation requires you to contribute more to your plan to get the maximum match possible.

Some companies match up to a certain dollar amount, regardless of income. This limits their liability to highly compensated employees.

A partial matching scheme with an upper limit is common. If your employer matches 50% of your contributions that equal up to 6% of your annual salary, and you earn $60,000, the contributions equal to 6% of your salary, or $3,600, are eligible for matching. However, your employer only matches 50%, so the total matching benefit is capped at $1,800. Under this formula, you must contribute twice as much to your retirement to reap the full benefit of employer matching. However, if your employer matches a certain dollar amount, you have to contribute that amount to maximize benefits, regardless of what percentage of your annual income it may represent.

All deferrals are subject to an annual contribution limit dictated by the IRS. For employers in 2019, the total contributions to all 401(k) accounts held by the same employee (regardless of current employment status) is $56,000, or 100% of compensation, whichever is less. However, elective salary deferrals made by employees are limited to $19,000. Thus, an employee can contribute up to the annual salary deferral limit to their 401(k) each year, and an employer may contribute up to the IRS annual limit via match or additional compensation. The sum your employer matches doesn’t count toward your annual salary deferral limit.

The IRS also allows those over age 50 to make additional “catch-up” contributions to motivate employees close to retirement to ramp up their savings. For 2019, the annual catch-up contribution limit is $6,000.

In addition to understanding your company’s 401(k) plan, you’ll also want to get up to speed about the vesting schedule of your plan. This dictates the degree of ownership you have in employer contributions, based on how many years you have worked at the company. Note that regardless of the matching plan, you could lose some or all of these matches, if you stop working at the company—whether it’s because you left or were terminated–before a certain amount of time has goes by. In most cases, it takes five years to be fully vested. At that point, any contributions you make to your retirement are 100% vested and they’re all yours, no matter what happens.

Reference: Investopedia (February 4, 2019) “How 401(k) Matching Works”

What Are Some Smart Second Marriage Planning Tips?

What Are Some Smart Second Marriage Planning Tips?

Forbes’s recent article, “6 Second Marriage Planning Tips For You And Your Significant Other Before Walking Down The Aisle,” says it’s wise to provide some reality into your romance.

This begins with practicing good communication, a trait that is needed to help any marriage succeed.

You should begin this conversation well before setting a date to say, “I do.” Let’s look at some tips for making sure your next marriage gets off on the right financial foot:

Be open. This means frank talk about your plans and obligations to any children and former spouses. Talk about your credit history, assets, debts and any financial support you must provide.

Look at your property. Review the assets that each of you will bring into the marriage and how they ultimately will be used or bequeathed.

Update your accounts. Be sure that all your records are up to date when you remarry.

Sign a prenup. This isn’t just to protect the assets of the wealthier spouse. It can be important if you both already have established careers, children or significant assets. A prenup lets you decide together and in advance, which assets you’ll share and those to keep separate, in case you divorce.

Work with an experienced estate planning attorney. He or she will help you retitle your investments, update your accounts and modify any beneficiaries on retirement, life insurance and annuity accounts. Since the probate laws aren’t typically designed for blended families, also be sure you create an estate plan, especially if you or your new spouse have children and grandchildren from previous marriages.

Without an estate plan, most probate laws stipulate that your assets will pass to your current spouse and then to his or her children, if you die first.

That’s a great recipe for feuding, bitter feelings and big legal expenses among your survivors.

Reference: Forbes (June 20, 2019) “6 Second Marriage Planning Tips For You And Your Significant Other Before Walking Down The Aisle”

 

Estate Planning Can Solve Problems Before They Happen

Estate Planning Can Solve Problems Before They Happen

Estate Planning Can Solve Problems Before They Happen:  Creating an estate plan, with the help of an experienced estate planning attorney, can help people gain clarity on larger issues, like who should inherit the family home, and small details, like what to do with the personal items that none of the children want. Until you go through the process of mapping out a plan, these questions can remain unanswered. However, according the East Idaho Business Journal, “Estate plans can help you answer questions about the future.”

Let’s look at some of these questions:

What will happen to my children when I die? You hope that you’ll live a long and happy life, and that you’ll get to see your children grow up and have families of their own. However, what if you don’t? A will is used to name a Guardian to take care of your children, if their parents are not alive. A Guardian is the person who is responsible for the assets/property that any minor children might inherit.

Will my family fight over their inheritance? There is always a possibility that your family will fight over their inheritance. This can happen regardless of if you have a will or not.  However, a properly drafted Estate Plan can drastically lower the chances of this happening.  It is very important that you inform your attorney of the full family dynamic and any concerns you may have about specific family members.  You can also discuss the option of dis-inheriting a family member, if needed or applicable.

Who will take care of my finances, if I’m too sick? Estate planning includes documents like a durable power of attorney, which allows a person you name (before becoming incapacitated) to take charge of your financial affairs. Speak with your estate planning attorney about also having a medical power of attorney. This lets someone else handle health care decisions on your behalf: Further, have a revocable living trust any assets in the Trust will be managed by your successor Trustee should you become incapacitated.

Should I be generous to charities, or leave all my assets to my family? That’s a very personal question. Unless you have significant wealth, chances are you will leave most of your assets to family members. However, giving to charity could be a part of your legacy, whether you are giving a large or small amount. It may give your children a valuable lesson about what should happen to a lifetime of work and saving.

One way of giving, is to establish a charitable lead trust. This provides financial support to a charity (or charities) of choice for a period of time, with the remaining assets eventually going to family members. There is also the charitable remainder trust, which provides a steady stream of income for family members for a certain term of the trust. The remaining assets are then transferred to one or more charitable organizations.

Careful estate planning can help answer many worrisome questions. Just keep in mind that these are complex issues that are best addressed with the help of an experienced estate planning attorney.

Reference: East Idaho Business Journal (June 25, 2019) “Estate plans can help you answer questions about the future.”

 

Next Steps When the Diagnosis is Alzheimer’s

Next Steps When the Diagnosis is Alzheimer’s

Next Steps When the Diagnosis is Alzheimer’s: We hope to enjoy out golden years, relaxing after decades of working and raising children. However, as we age, the likelihood of experiencing health issue increase. That includes Alzheimer’s disease and other forms of dementia.

Learning that a loved one has Alzheimer’s or other diseases that require a great deal of health care is devastating to the individual and their families. The progressive nature of these diseases means that while the person doesn’t need intensive health care yet, eventually they will. According to an article from Newsmax, “5 Insurance Steps After Alzheimer’s Strikes Loved One,” the planning for care needs to start immediately.

Alzheimer’s Disease International predicts that 44 million individuals worldwide have Alzheimer’s or a similar form of dementia, and 25% of those living with it never receive a diagnosis. Healthcare, including assisted living, memory care and in-home care is expensive. Health insurance is an important component of managing the ongoing expenses of living with Alzheimer’s.

Look at your existing policies. There are different types of coverage, depending on the policy type and company. Review current insurance policies to determine if the level of coverage is acceptable and how much will be required to be paid out-of-pocket. See if there’s existing coverage for long-term care, hospital care, doctors’ fees, prescriptions and home health care.

Maintain those policies. The Patient Protection and Affordable Care Act does offer some protections for those diagnosed with early onset Alzheimer’s. They can now access government subsidies to help them purchase health insurance and the Affordable Care Act prohibits pre-existing condition exclusions and cancellation, because the policyholder is considered high cost.

Look into long-term care insurance. This is a way to protect the patient and the family financially, when the day arrives when long-term care is necessary. When diagnosed with Alzheimer’s, a person isn’t eligible for long-term care insurance.

In addition to verifying and reviewing insurance coverage, there are some additional tasks that every family should address in the early stages of a diagnosis.

Sign an advance directive. This document allows patients to voice how they want their healthcare and decisions handled, before they are no longer capable of making decisions for themselves. In addition, they should have a living will that states their wishes for medical treatment, a designated power of attorney to can make financial decision, and a DNR (Do Not Resuscitate) order, if that is their wish.

Get estate planning done. Time is of the essence, as the estate plan must be completed while the person still has the mental capacity to understand what they are doing. Three documents are necessary: a last will and testament, a power of attorney so that an agent be named can handle finances and a health care power of attorney for health care decisions. An estate planning attorney will be able to work with the family to make any necessary legal preparations.

Reference: Newsmax (June 28, 2019) “5 Insurance Steps After Alzheimer’s Strikes Loved One”

 

 

Helping Parents Be Sure Their Families are Protected

Helping Parents Be Sure Their Families are Protected

Helping Parents Be Sure Their Families are Protected:  Yes, it is old-school, but if your family is on the traditional side, headed up by a breadwinner dad who runs the finances, then you need to make plans to ensure that your family will be okay, if something should happen to you.

This advice also applies to mothers who are the main breadwinners and run their family’s finances, even though the title of this Forbes article is “How Fathers Can Make Sure Their Families Are Financially Protected.”

Do you have enough life insurance? Be sure you’re adequately insured, so your family won’t struggle to pay the bills without your income. Many employees only have enough life insurance from work to cover a year’s worth of salary, which may be enough for some families. However, if your spouse can’t make the mortgage payment on their own, and if they would be unwilling or unable to sell the home, you might want to at least make sure you have enough life insurance to pay off the mortgage. Once you know how much you need, buy a low-cost term policy for the maximum length of time you might need the coverage.

Are your beneficiaries updated on retirement accounts, annuities, and life insurance policies? This is an often overlooked issue. An outdated beneficiary designation could result in your ex-spouse inheriting most of your assets, your latest child being disinherited, or your family having to pay higher taxes and probate fees than is necessary.

Can you add a “payable on death” or a “transfer on death” form on any accounts? You can generally add beneficiaries to bank and investment accounts, saving your family from the time and cost of probate. In some states, you can add beneficiaries to your home and vehicles. Ask your bank for a “payable on death” form and your investment company for a “transfer on death” form.

Is your will drafted?  You need a will to name a guardian for your minor children in most states. It’s a good idea to have a qualified estate planning attorney help you.

Are you organized? Keep a record of where everything and everyone is. You can draft an “In Case of Emergency” folder that has copies of your will, revocable trust, life insurance policy and a summary of brokerage and bank accounts. Let your family know where to find it. You should also share your passwords to your digital accounts.

Making sure that your loved ones are protected when you are too sick or die unexpectedly, is a gift to them, and one that will be long remembered. Make some time in your hectic schedule to prepare your family and yourself for the future.

Reference: Forbes (June 16, 2019) “How Fathers Can Make Sure Their Families Are Financially Protected”

 

How the Blended Family Benefits from an Estate Plan

How the Blended Family Benefits from an Estate Plan

How the Blended Family Benefits from an Estate Plan: With about half of all marriages ending in divorce, second marriages and blended families have become the new normal in many communities. Estate planning for a blended family requires three-dimensional thinking for all concerned.

An article from The University Herald, “The Challenges and Complexities of Estate Planning for Blended Families, ” clarifies some of the major issues that blended families face. When creating or updating an estate plan, the parents need to set emotions aside and focus on their overall goals.

Estate plans should be reviewed and updated, whenever there’s a major life event, like a divorce, marriage or the birth or adoption of a child. If you don’t do this, it can lead to disastrous consequences after your death, like giving all your assets to an ex-spouse.

If you have children from previous marriages, make sure they inherit the assets you desire after your death. When new spouses are named as sole beneficiaries on retirement accounts, life insurance policies, and other accounts, they aren’t legally required to share any assets with the children.

Take time to review and update your estate plan. It will save you and your family a lot of stress in the future.

Your estate planning attorney can help you with this process.

You may need more than a simple will to protect your biological children’s ability to inherit. If you draft a will that leaves everything to your new spouse, he or she can cut out the children from your previous marriage altogether. Ask your attorney about a trust for those children. There are many options.

You can create a trust that will leave assets to your new spouse during his or her lifetime, and then pass those assets to your children, upon your spouse’s death. This is known as an AB trust. There is also a trust known as an ABC trust. Various assets are allocated to each trust, and while this type of trust can be a little complicated, the trusts will ensure that wishes are met, and everyone inherits as you want.

Be sure that you select your trustee wisely. It’s not uncommon to have tension between your spouse and your children. The trustee may need to serve as a referee between them, so name a person who will carry out your wishes as intended and who respects both your children and your spouse.

Another option is to simply leave assets to your biological children upon your death. The only problem here, is if your spouse is depending upon you to provide a means of support after you have passed.

An estate planning attorney who routinely works with blended families will be able to help you work through the myriad issues that must be addressed in an estate plan. Think of it as a road map for the new life that you are building together.

Reference: University Herald (June 29, 2019) “The Challenges and Complexities of Estate Planning for Blended Families”