Do You Need a Power of Attorney?

Did you know estate planning attorneys recommend anyone over age 18 have a power of attorney? Without one, even a long-married spouse may not be able to make financial or medical decisions if their spouse became incapacitated, according to a recent article “How to Set Up a Power of Attorney” from U.S. News & World Report. Naming someone and having the documents created to make them a Power of Attorney (POA) is part of creating an estate plan.

If someone becomes incapacitated, someone else—a family member or the state—has to be able to make decisions on their behalf. People hesitate sometimes, as they’re not sure about giving someone the power to make decisions. However, lacking one leads to problems in emergent situations.

While the 18-year-olds are usually the most upset when they learn their parents wish to be named as their POA, it is because they don’t realize how mom and dad have no legal authority over them once they become legal adults.

State laws vary for powers of attorney, so it is important to work with a local estate planning attorney who can create a POA specific to your needs and following the laws of your state.

How to get started with a Power of Attorney

The first, and possibly hardest, part of a POA is determining who should be named. The individual needs to be responsible, trustworthy and calm in emergency situations. Just because someone is related to you doesn’t necessarily qualify them to serve in this role. You should also name a secondary POA, in case the first is unable or unwilling to act on your behalf.

Next, have your estate planning attorney draft the document, which typically works in connection with other estate planning documents including your will, health care proxy and HIPAA release forms. You should have a Power of Attorney for finances and a Health Care Power of Attorney for medical care.

Be careful about what happens to copies of the documents and where they are stored. Some estate planning attorneys create documents to be stored in a fire and water-proof box at home, in the safety deposit box at a bank, or in the attorney’s fireproof safe. Others say you should never put important documents in a safety deposit box in a bank, because if the documents are needed and the bank is closed, the person won’t be able to step up and act.

The POA needs to be kept up to date, just like any part of your estate plan. Some financial institutions will refuse to honor a POA if they consider it out of date. Every three to five years, this document should be updated. It should also be updated if the person named POA becomes incapacitated, dies, or moves to another state.

Should You Have a Durable Power of Attorney?

Powers of attorney typically end when a person becomes incapacitated, which is exactly when you want to have a POA. A Durable Power of Attorney can make decisions on your behalf, even if you become incapacitated.

What is a Springing Power of Attorney?

Power of attorney for finances or healthcare can be effective immediately when the documents are signed or take effect under predetermined circumstances, such as when the principal becomes incapacitated. This is known as a springing power of attorney because it “springs” into effect at a specific time. It seems like a good idea, but a word of caution: the springing power of attorney requires a doctor’s evaluation of incapacity. This often takes time, which can be the one thing you don’t have in an urgent situation.

Reference: U.S. News & World Report (July 21, 2022) “How to Set Up a Power of Attorney”

Can Trusts Help Create Wealth?

Trusts are the Swiss Army Knife of estate planning, perfect tools for specific directions on how your assets should be managed while you are living and after you have passed. A recent article titled “This Trust Can Help You Create a Financial Dynasty from yahoo! finance explains how qualified perpetual trusts (also known as dynasty trusts) can offer more control over assets than other types of trusts.

What is a Dynasty Trust?

Called a Qualified Perpetual Trust or a Dynasty Trust, this trust is designed to let the grantor pass assets along to beneficiaries in perpetuity. Technically speaking, a dynasty trust could last for a century. They don’t end until several years after the death of the last surviving beneficiary.

Why Would You Want a Trust to Last 100 Years?

Perpetual trusts are often used to keep family wealth out of probate for a long time. During probate, the court reviews the will, approves the executor and reviews an inventory of assets. Probate can be time consuming and costly. the will and all the information it contains becomes part of the public record, meaning that anyone can find out all about your wealth.

A trust is created by an experienced estate planning attorney. Assets are then transferred into the trust and beneficiaries are named. There should be at least one beneficiary and a secondary beneficiary, in case the first beneficiary predeceases the second. A trustee is named to oversee the assets. The language of the trust is where you set the terms for when and how assets are to be distributed to beneficiaries.

Directions for the trust can be as specific as you wish. Terms may be set requiring certain goals, stages of life, or ages for beneficiaries to receive assets. This amount of control is part of the appeal of trusts. You can also set terms for when beneficiaries are not to receive anything from the trust.

Let’s say you have two adult children in their 30s. You could set a condition for them to receive monthly payments from trust earnings and nothing from the principal during their lifetimes. The next generation, your grandchildren, can be directed to receive only earnings as well, further preserving the trust principal and ensuring its future for generations to come.

Dynasty trusts are irrevocable, meaning that once assets are transferred, the transfer is permanent. Be certain that any assets going into the trust won’t be needed in the short or long run.

Be mindful if you chose to leave assets directly to grandchildren, skipping one generation, you risk the Generation Skipping Tax. There is no GST with a dynasty trust.

Assets in a trust are still subject to income tax, if they generate income. If you transfer assets creating little or no income, you can minimize this tax.

Not all states allow qualified perpetual trusts, while other states have used perpetual trusts to create a cottage industry for trusts. Your estate planning attorney will be able to advise the best perpetual trust for your situation.

Reference: yahoo! finance (July 12, 2022) “This Trust Can Help You Create a Financial Dynasty

Will Inflation Have Impact on My Retirement?

Inflation means fluctuations to the dollar’s purchasing power may have a significant effect on a retiree’s ability to cover costs of living and maintain a quality of life, says Kiplinger’s recent article entitled “Is Inflation Costing You More as a Retiree?”

  1. Why Could Inflation Impact Disproportionately Retirees. Inflation impacts people differently. There are many who may not feel the effects of inflation when compared to others. However, retirees tend to spend larger portions of their income on items highly impacted by inflation, such as housing, food, gas and health care, all of which are seeing the full effect of inflation.

The recent rise of inflation forces a lot of retirees to address tough questions about how to protect their retirement savings, while covering their costs of living.

  1. The Cost of Inflation. Retirees’ sources of income may be at risk to large inflation spikes. Retiree likely have most of their income tied to markets or in fixed income. These two sources are highly impacted by inflation. Social Security does offer COLAs, but the last increase was 5.9%, which falls short of the 8% to 9% increase in prices we’ve seen over the past year.

Retirees frequently use savings to get them through retirement. However, when inflation happens, the purchasing power of savings declines. As a result, retirees must withdraw larger amounts of savings to cover the costs of living. This shrinks the lifespan of retirement savings.

  1. Protect Yourself with Hedges against Inflation. Inflation-protected securities can be a way to keep income on pace with inflation. Treasury Inflation-Protected Securities, commonly known as TIPS, offer an interest distribution rate that keeps pace with the CPI inflation rates. This investment has helped retirees mitigate inflation and maintain their quality of life throughout retirement without worrying about outliving their savings.

Retirees and their savings face a stormy forecast ahead due to inflation. Income sources for retirees are largely inflation-exposed, and their spending habits tend to be on products and services affected by inflation.

Reference: Kiplinger (July 16, 2022) “Is Inflation Costing You More as a Retiree?”

Do Young Adults Need a Will?

Everyone, age 18 and older, needs at least some basic estate planning documents. That’s true even if you own very little. You still need an advance health care directive and a power of attorney. These estate planning documents designate agents to make decisions for you, in the event you become incapacitated.

The Los Angeles Daily News’ recent article entitled “Estate planning, often overwhelming, starts with the basics” reminds us that incapacity doesn’t just happen to the elderly. It can happen from an accident, a health crisis, or an injury. To have these documents in place, you just need to state the person you want to make decisions for you and generally what those decisions should be.

An experienced estate planning attorney will help you draft your will by using a questionnaire you complete before your initial meeting. This helps you to organize and list the information required. It also helps the attorney spot issues, such as taxes, blended families and special needs. You will list your assets — real property, business entities, bank accounts, investment accounts, retirement accounts, stocks, bonds, cars, life insurance and anything else you may own. The estimated or actual value of each item should also be included. If you have life insurance or retirement plans, attach a copy of the beneficiary designation form.

An experienced estate planning attorney will discuss your financial and family situation and offer options for a plan that will fit your needs.

The attorney may have many different solutions for the issues that concern you and those you may not have considered. These might include a child with poor money habits, a blended family where you need to balance the needs of a surviving spouse with the expectations of the children from a prior marriage, a pet needing ongoing care, or your thoughts about who to choose as your trustee or power of attorney.

There are many possible solutions, and you aren’t required to know them before you move ahead with your estate planning.

If you are an adult, you know generally what you own, your name and address and the names of your spouse and children or any other beneficiaries you’d like to include in your plan. So, you’re ready to move ahead with your estate planning documents.

The key is to do this now and not procrastinate.

Reference: Los Angeles Daily News (July 24, 2022) “Estate planning, often overwhelming, starts with the basics”

Did COVID Spark More Estate Planning?

Those who have had a serious bout with the coronavirus (COVID-19) are 66% more likely to have created a will than those who did not get as sick, according to Caring.com’s 2022 Wills and Estate Planning Study.

COVID has accounted for more than one million deaths in the United States thus far.

MSN’s recent article entitled “More Young Adults Are Making This Surprising and Smart Money Move” says that it may be even more surprising that the number of adults in the 18-to-34 age range who now have estate planning documents has jumped 50% in the pandemic era.

Nonetheless, many people of all ages continue to put off the process of creating this key estate planning document.

Two-thirds of Americans still don’t have a will.

Caring.com found that among those who don’t have a will, a third say they think they don’t have enough wealth to warrant one.

However, even if you don’t have an expensive home, a large IRA and other valuable assets to pass on, you can still benefit from creating a will.

There’s no minimum level of wealth needed to have an estate plan, and every adult should have a basic plan in place to care for their own needs and the needs of their family.

The Caring.com survey of more than 2,600 adults found that—you guessed it—good old-fashioned procrastination is the primary reason people don’t create a will. About 40% admit to this factor.

Not surprisingly, the survey also found that those with higher incomes are more likely to put off getting a will due to procrastination.

Those people with lower incomes don’t prioritize a will because they don’t feel they have the assets to justify this important legal document.

Reference: MSN (July 24, 2022) “More Young Adults Are Making This Surprising and Smart Money Move”

What If Your Spouse Refuses Estate Planning?

Blended families are quite common in the U.S.

A married couple may have a small child—but one spouse may also have children from a first marriage. The spouse may be concerned about assets and protecting those older children in estate planning.

A spouse on a second or third marriage may insist on a prenup with the other spouse relinquishing any rights. As compensation, many spouses will purchase life insurance with the other spouse as beneficiary. However, what if this plan never comes to fruition?

Nj.com’s recent article entitled “My husband won’t make an estate plan. What can I do?” says that many spouses want to provide for children from a first marriage. However, second marriages can get messy when it comes to estate plans.

Even if the spouse doesn’t help, there are steps a recently married individual can take. One thing is having estate documents prepared by an experienced wills, trusts and estate attorney.

Another is to secure life insurance policies that designate the child or children of the second marriage as beneficiary and naming their mother or father as trustee.

A life insurance policy is a non-probate asset; as such, a beneficiary can receive the proceeds from the policy more quickly than if they had to wait for your estate to be settled through a probate court.

A person in this situation should speak with an experienced estate planning attorney about a will and the life insurance.

A will provides direction for what happens after a person dies and can distribute his or her property to their loved ones, name an executor to handle their affairs, name a guardian for any minor children and specifically state a person’s wishes for family and friends.

It may also be beneficial to look into a trust or other estate planning tools with an attorney to distribute the assets. Exploring these options early in the child’s life in the above example may make a parent feel more prepared for the future, and more secure with the circumstances of the second marriage.

If the spouse tells the other that he or she has an appointment with an estate planning attorney, they just might decide to attend.

Reference: nj.com (March 10, 2022) “My husband won’t make an estate plan. What can I do?”

Should I Use a Special Needs Trust?

A special needs trust is a legal arrangement and fiduciary relationship that lets a physically or mentally disabled or chronically ill person get income without reducing their eligibility for the public assistance disability benefits provided by Social Security, Supplemental Security Income (SSI), or Medicaid.

Investopedia’s recent article entitled “What Is a Special Needs Trust?” says that a grantor creates a trust, and a trustee oversees the disbursement of assets from the trust. The beneficiary is a person for whose benefit the trust is created. The trust will supplement the beneficiary’s government benefits but won’t replace them.

This trust helps cover a disabled individual’s financial needs that aren’t covered by public assistance payments. The assets held in the trust don’t count toward public assistance eligibility.

The proceeds from this type of trust are typically used for medical expenses, caretaker expenses and transportation costs. The person who creates the trust (the grantor) names a trustee who will have control over the trust. The trustee will also oversee its management and the disbursement of funds.

The trust is funded with assets belonging to a person other than the beneficiary, and funds belonging to the beneficiary can’t be used to fund the trust. Funding may come from gifts, an inheritance and proceeds of life insurance policies.

Assets originally belonging to the disabled individual placed into the trust may be subject to Medicaid’s repayment rules, but assets provided by third parties such as parents aren’t.

Special needs trusts are irrevocable and can’t be tapped by creditors via a lawsuit.

A special needs trust can have benefits for both parties. The beneficiary gets financial support without putting their eligibility for income-restricted programs or services in jeopardy.

The person or party that contributes to the trust is assured that the proceeds will go to expenses they stipulate.

The grantor or their legal representative must define the terms of the trust documents very carefully to ensure their validity and to confirm that the directives and purpose of the document are explicitly clear.

If you want to explore creating a special needs or supplemental benefits trust, speak with an experienced elder law attorney.

Reference: Investopedia (July 12, 2022) “What Is a Special Needs Trust?”

Can Beneficiary Designations Be Challenged?

The demise of traditional pension plans in the U.S. has been followed by a surge in assets held in participant directed retirement accounts, like IRAs and 401(k)s. The responsibility for investment decisions now belongs to the owners, says a recent article “Did you really intend for your ex to get your IRA?” from Chattanooga Times Free Press. The owner is also responsible for beneficiary distributions after death, which doesn’t always go well.

Retirement accounts are outside of the probate estate. Therefore, assets pass to heirs directly. When people first enroll in a retirement plan or open an IRA account, it’s up to the account owner to stipulate who will receive the asset upon their death, known as the beneficiary. This sounds easy enough. The heirs don’t need to worry about probate and if the ownership transfer is done correctly, they can get some tax advantages from the accounts.

When the owner doesn’t pay attention to beneficiary designations, expensive problems occur.

Failing to name a beneficiary. This is the simplest and most commonly made mistake when enrolling in a company’s retirement plan or rolling assets into an IRA. More than a third of all IRA death claims submitted for processing are lacking a named beneficiary, according to a national retirement plan administrator company. Instead of assets passing directly to heirs, the IRA account flows into the estate and becomes subject to probate and estate taxes.

Once included in the estate, the assets are subject to the will. While IRA assets have up to ten years to be withdrawn, the time limit for distributions in an estate can be as short as five years, and the resulting taxes will be much higher. Even worse, the assets in the IRA are now available to creditors of the estate. Until the estate is fully distributed, it must pay tax returns. Even a modest IRA is going to generate more estate taxes than if it were outside of the estate.

If there is no will, the state decides where the assets go.

Failing to name contingent beneficiaries. If the account owner and primary beneficiary are both dead, there should be at least one contingent beneficiary named on the account. Lacking contingent beneficiaries, the account flows to the estate as if no beneficiary had been named.

Neglecting to update beneficiaries after major life events. Divorce and death happen. Account owners often forget to update beneficiary designations, leading to unintended recipients. In some states, but not all, a divorce decree nullifies the prior designation. However, don’t count on it. If the state does nullify the prior designation, the asset will flow into the probate estate.

Naming a minor as a beneficiary. Most state laws do not permit minors to inherit significant assets without the oversight of a conservator. If a conservator is named by the court, the inheritance will be reduced substantially by court fees and the conservator’s salary. This may not be the worst part, if the asset is big. Here’s what’s worse: at age 18 or 21, a young adult will inherit the entire amount, with no restrictions.

After you’ve updated your beneficiaries, consult with an experienced estate planning attorney to learn how to protect assets, including retirement accounts and pensions.

Reference: Chattanooga Times Free Press (July 9, 2022) “Did you really intend for your ex to get your IRA?”

Why Do I Need a Will?

Perhaps getting hit by a cement truck is too blunt for some, but unexpected things happen all the time. An estate plan, including a will and other important documents, is good preparation, especially for caregivers of people with special needs. A recent article from Forbes titled “Where There is a Will, There is a Way” explains the steps everyone, especially caregivers, need to follow.

Creating a last will and testament

This is the foundation of an estate plan. Without a will, the court will distribute assets to children equally. If a disabled person receiving government benefits receives an inheritance, they will become ineligible and lose access to services. The court will also assign guardianship to minors or disabled individuals, if there is no will. A will, in tandem with proper estate planning, ensures protection for an individual with special needs, including naming a guardian of your choice.

Having a General Durable Power of Attorney for Finances

A POA allows you to name a person you trust to manage finances, real estate property, investments, or any aspect of your life, if you become incapacitated. A POA should be created for your needs, so you may decide in advance what you do and do not want your agent to be able to do for you.

Creating a Durable Power of Attorney for Healthcare

This important legal document, paired with a HIPAA release form, allows someone of your choice to take charge of your healthcare, talk with healthcare providers and make decisions based on your expressed wishes. You may name more than one person for this role but doing so could make it harder if the two people don’t agree on your care.

Naming a Guardian

This is a critical step if you are a caretaker for a person who will likely be unable to manage their own affairs, even after attaining legal age. By naming a guardian in your will, you can select the people who will be in charge of your special needs family member or minor children. Without a guardian named in your will, the courts will make this decision.

Drafting a “Letter of Intent”

A letter of intent is a guide with important information only you know. It is especially important for caretakers. Explaining in detail your disabled individual’s preferences can make a huge difference in the quality of their lives when you are no longer available. What are their likes and likes, what people do they enjoy spending time with and what foods do they prefer, etc. If your children are minors, this letter is an opportunity to describe your preferences for how they should be raised, including religious preferences, vocational choices and even nighttime rituals.

Providing Financial Security

If your family includes a loved one with Special Needs, you can protect their ability to have funds for things not covered by government benefits through a Special Needs Trust. Your estate planning attorney will create an SNT with a trustee and a secondary trustee to oversee the funds and ensure that they are used for qualified expenses.

Reference: Forbes (July 6, 2022) “Where There is a Will, There is a Way,”

Why Is Valerie Bertinelli’s Ex Challenging Their Pre-Nup?

On Wednesday, Food Network host Valerie Bertinelli filed a 13-page petition to bifurcate her marital status from financial issues in her divorce from Tom Vitale, according to court records obtained by PEOPLE. The court documents note that Bertinelli is looking for “an early and separate trial on the issue of validity of Premarital Agreement,” says MSN’s recent article entitled “Valerie Bertinelli Requests Separate Trial to Validate Prenup in Divorce from Tom Vitale.”

If the petition is granted by the judge, it would mean the former couple can’t move forward with divorce proceedings until the court determines the validity of the premarital agreement. Bertinelli’s request argues that granting this bifurcation could “assist the parties to achieve settlement of remaining issues.”

The former “One Day at a Time” actress is requesting a separate trial from any other outstanding issues regarding the divorce — a move she’s made after Vitale asked to be awarded $50,000 per month in spousal support and $200,000 in legal fees in early July, according to the records.

Bertinelli’s request claims that their 2010 premarital agreement contains a “waiver of temporary and permanent spousal support.”

Valerie’s husband of more than 10 years tried to block her from requesting spousal support and also challenged the validity of their prenuptial agreement itself.

Six months after legally separating in November, Bertinelli filed for divorce from Vitale in May.

She cited “irreconcilable differences” as the reason for the dissolution of their marriage.

In June, the actress appeared on the Today show with Hoda Kotb and got emotional when asked if she ever wanted to look for love again. She said, “Oh, God no.”

“Because of the challenges that I’m going through right now, because divorce sucks. I can’t imagine ever trusting anyone again to let into my life. So, I have some trust issues that I’m sure I’m going to have to get past,” Bertinelli added.

The Hot in Cleveland star has also posted TikTok videos in which she mentions divorce. In May, she posted a video with the caption, “Divorce sucks.” In another May video, she shared a video of herself giving what appeared to be relationship advice to fans.

“When someone shows you who they are, believe them the very first time. Don’t try to fix anything. Don’t try to change them. It’s not your job,” she said.

Reference: MSN (July 18, 2022) “Valerie Bertinelli Requests Separate Trial to Validate Prenup in Divorce from Tom Vitale”