California Probate - Law Offices of Janet Brewer Blog

What are Options for Powers of Attorney?

“Powers of attorney come in different forms, each suited for a specific purpose. They serve as useful tools in any estate-planning effort.”

Power of attorney (POA) documents are an important component of an estate plan. There are four types. You should review each carefully to see which one will work best for you in your situation. What is required for a power of attorney, depends upon what power you want to authorize, says Carmel’s Hamlet Hub in a recent article titled “4 Types of Power of Attorney.”

Limited Power of Attorney. If you need someone to act on your behalf for a limited purpose, use a limited power of attorney. This will specify the date/time after which the power no longer is in effect.

General Power of Attorney. This is an all-encompassing power of attorney, in which you assign every power and right you possess as an individual to a certain party. It’s typically used where the principal is incapacitated. It is also used with those who don’t have the time, skills, knowledge, or energy to handle all of their financial matters. The power you assign is in effect for your lifetime, or until you are incapacitated (unless it is also “durable”). However, you can elect to rescind it before then.

Durable Power of Attorney. The key distinction with a durable power of attorney is that it stays in effect, even after you’ve become incapacitated. Therefore, you want to sign a durable power of attorney if: (i) you want to give the designated agent authority ONLY if you’re unable to act for yourself; or (ii) you want to give the agent immediate authority that continues after you’re unable to act for yourself.

Note that a limited or general power of attorney ends when you become incapacitated. At that point, a court will appoint a guardian or conservator to handle your matters. You can rescind a durable power of attorney at any time prior to becoming incapacitated.

Springing Power of Attorney. This document serves the same purpose as a durable power of attorney, but it’s effective only upon your becoming incapacitated. When drafting this, your experienced estate planning attorney will help you make clear your definition of “incapacitated.”

Remember that you’ll need to state in your power of attorney document which powers and duties you are assigning to the attorney-in-fact.

Regardless of the type of power of attorney you implement, the attorney-in-fact has the power to do only what your POA indicates.

Reference: Carmel’s Hamlet Hub (Dec. 16, 2020) “4 Types of Power of Attorney”

Does My Business Need a Power of Attorney?

“As a business person you may have seen the term "durable power of attorney" in several situations. Power of attorney is a strange term because it's not immediately clear what powers an attorney for the business may have.”

Some business owners may need a power of attorney (POA). However, what type would be of benefit the most is the question. This article looks at the types of power of attorney and in what circumstances a business owner may need each of them.

Entrepreneur’s recent article entitled “Does Your Business Need a Power Of Attorney?” reports that the Consumer Financial Protection Bureau (CFPB) defines power of attorney as a legal document that permits a trusted agent the authority to act on your behalf. Accordingly, signing a power of attorney allows the business owner to authorize another person to conduct business in his stead. The person designated in the document is called the "agent" or sometimes the "attorney-in-fact." There are three main types of power of attorney:

Financial Power of Attorney. This document allows the agent to deal with the financial responsibilities and functions of the “principal” (the person who signs the document), if the principal is unable to do so themselves. Some functions for the agent of a financial power of attorney include the following:

• Delegation of the operation of your business
• Hiring an attorney and making decisions in lawsuits
• Filing and paying taxes
• Conducting transactions with banks and other financial institutions
• Making decisions on your investments and retirement plan
• Entering into a contract
• Purchasing of selling real estate or different types of property; and
• Using your assets to pay for your living expenses.

Special Power of Attorney (or Limited Power of Attorney). A business owner may need to accomplish a task for the company, but she’s unable to be there because of other responsibilities. This document permits a particular agent to conduct business on her behalf, concerning a specific and clearly outlined event, like opening a bank account, settling a lawsuit, or signing a contract.

Healthcare Power of Attorney. An individual who is incapacitated and can't communicate, can use this to permit an agent to make medical decisions on his behalf. Note that a healthcare power of attorney isn't the same as a living will. A living will focuses on a person’s preferences for healthcare treatment, such as do-not-resuscitate and other religious or philosophical beliefs that they want to be respected. A healthcare power of attorney is more flexible and leaves the decisions regarding healthcare to the agent. A living will concerns end-of-life decisions only, where healthcare power of attorney applies in all medical situations.

Durable Power of Attorney. A POA usually becomes effective when a person is incapacitated and stops once they’re able to make their own decisions. However, a durable power of attorney or enduring power of attorney may be applied to any of the types mentioned above. As a result, the agent can make decisions on behalf of a business owner when they aren't incapacitated.

A POA provides considerable protections that will help a business deal with regular operations, while the owner is unable to lead the company. If the business is an LLC or corporation, a power of attorney for the company may not be needed. However, it’s wise to have one for your own estate planning. Ask an experienced estate planning attorney about the types of power of attorney and how they might help your business.

Reference: Entrepreneur (Nov. 3, 2020) “Does Your Business Need a Power Of Attorney?”

Estate Planning During COVID: Smart Documents to Update

What are some documents you should update as part of your estate planning during Covid? You might be surprised. 

The COVID-19 pandemic has introduced uncertainty and anxiety into many peoples’ lives. For some, it has also brought into focus their mortality. While we hope that the pandemic is controlled quickly, current times are unpredictable. If you haven’t already, it’s a good time to think about ensuring that your financial affairs are in order and that you have an estate plan in place. 

Give the rapid spread of the virus, it’s important to update your estate plan as soon as possible. 

Documents to Update

There are several key documents that you should review to see if you need to make any changes in light of the current pandemic. These include:

Power of Attorney: A power of attorney provides the legal authority to assign an agent authorized to carry on your financial affairs in the event that you become incapacitated. These individuals have the authority to handle financial transactions – including paying bills, writing checks, making deposits, selling or purchasing assets, and completing tax returns – on your behalf. Without this document, there is no other person who could legally conduct these financial transactions; family members would have to request that the probate court identify someone to take over these duties. Since this process can be lengthy and emotionally-taxing, it’s always better to have a power of attorney in place before it becomes necessary. While any adult can serve as your designated power of attorney agent, you should ensure that you choose someone who is trustworthy and responsible.

Healthcare Proxy/Healthcare Durable Power of Attorney: A durable power of attorney for healthcare, or health care proxy, allows you to name someone to make healthcare decisions for you in the event you are incapacitated but still alive. This role can be incredibly difficult for loved ones to fill, so it’s crucial that you discuss your wishes with the individual beforehand, so that they have a good idea of what you are asking of them before they agree to it. 

Last Will and Testament:  In California, it is strongly encouraged that individuals develop a living trust to distribute asssets in order to avoid having to go through probated court. However, if you have minor children, you can also appoint guardians for them through the use of a last will and testament. If this document is necessary, you will also have to appoint an executor who can ensure that the terms of the will are met as you intended them to be. Without a will in place to name a legal guardian, your family may go through long and drawn out court proceedings . You can spare your loved ones from going through this process by updating your last will and testament to ensure that it reflects your current wishes for  minor children. 

Living Trust (aka Revocable Trust or Revocable Living Trust: A revocable trust or a revocable living trust is recommended to handle the transfer of one’s assets rather than a will. Having a living trust in place ensures that you will not need to go through probate court.  It is generally much less expensive and far less time consuming to administer. You can also make decisions about how and when you would like to terminate life-saving effors and discuss your wishes related to organ donation. 

HIPAA Authorization: The Health Insurance Affordability Portability and Accountability Act (HIPAA) put in place federal regulations related to privacy when obtaining healthcare. Authorization to release these records is required for you to name people that can have access to your medical records. Essentially, this document allows you to decide who the treating clinicians can discuss your medical treatment with in the event that you are hospitalized. 

Assets, Accounts, and Insurance Policies: When you are updating your other estate plan documents, it’s worth taking a little time to update your account information, insurance policy information, and your inventory of assets, including digital assets and their related passwords. This action will make it much easier for your executor to carry out their duties and your family members to access any accounts or assets they may need to.

In addition to updating all of your documents and information, it’s also a good time to convey information to other family members. These conversations can help them to better understand your final wishes for a funeral or burial arrangement, as well as address any other items, such as who may be available to care for any pets left behind.

While nobody wants to think of their own mortality, the COVID-19 pandemic is forcing many people to do just that. There are many things that are currently out of our control. However, you can control what happens in the event of an untimely death. The best way to ensure that things go as you wish is to make sure that you have the right legal documentation in place through an updated estate plan.  

Is My Estate Plan Set with a Power of Attorney?

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

A June 2020 Transamerica Center for Retirement Studies survey showed that a mere 28% of retirees have a financial power of attorney (POA)—and many people don’t understand that there are two types of these advance directives that serve different purposes.

MarketWatch recently published an article “Does your estate plan use the right type of Power of Attorney for you?” that says knowing how both types work is crucial in the pandemic, especially in the event that you get sick with coronavirus.

A Durable Power of Attorney for Finance can be either “springing” or “immediate.” “Durable” refers to the fact that this Power of Attorney will endure after you have lost mental or physical capacities, whether temporary or permanent. It lists when the powers would be granted to the person of your choosing and the powers end at your death.

An “immediate” Durable Power of Attorney for Finance is effective, as soon as you sign the document. In contrast, a “springing” POA for Finance means two physicians must first examine you and confirm in writing that you can no longer manage independently.

Therefore, to begin paying your bills, your agent must have those two physicians’ letters, and he or she doesn’t automatically have the authority to ask for them.

When issues, such as doctors’ letters, are required before the agent you chose can serve you, ask your estate planning attorney for guidance.

An obstacle for a Durable Power of Attorney for Finance can come upon you very fast and possibly include you and your spouse at the same time. For example, you both might get COVID-19.

The powers granted by a typical POA for Finance are often broad and permit selling and buying assets; managing your debt, car and Social Security payments; filing your tax returns; and caring for any assets not named in a trust you may have, such as your IRA.

If you recover your capacity, your agent must turn everything back over to you when you ask.

Remember that your advance directive documents are only as good as the people who implement them. You should also make certain anyone named knows that they’ll have the job if needed. They must know where to find your POA and all other important information.

If you have any questions about your current estate plan or power of attorney documents, please call or email us today.

Reference: MarketWatch (Oct. 9, 2020) “Does your estate plan use the right type of Power of Attorney for you?”

Do I Need More Than a Will?

“A will is just one of several legal documents that help your loved ones know your end-of-life wishes.”

If you die without a will (i.e., intestate), a court will determine who inherits your assets and who would care for any surviving children as a guardian.

CNBC’s recent article entitled “A will doesn’t cover all your bases when it comes to end-of-life decisions. Here’s what else you need” explains that some assets pass outside of the will, including retirement accounts and life insurance.

Start your estate planning with a will, which is just one piece of an “estate plan.” Creating a plan for your assets helps make certain that your wishes will be carried out upon your death and that family grumbling doesn’t escalate into destroyed relationships. Here are some additional things about estate planning you should know.

What passes via your will. A will is a document that allows you to say who gets what when you die. However, there are some assets that pass outside of the will, such as retirement accounts like 401(k) plans and individual retirement accounts (IRAs), and life insurance policies. As a result, the person named as a beneficiary on those accounts will get the money, no matter what your will says. Regular bank accounts also can have beneficiaries listed on a payable-on-death form, also known as a POD. If you own a home, check how it’s titled to ensure it ends up passing as you wish upon your death.

Executor. As part of the will-making process, you’ll need to name an executor of your will (sometimes called a personal representative). This entails making sure that assets are liquidated, the assets go to the proper beneficiaries, paying any debts not discharged and selling your home.

To prepare a will, you can hire an estate planning attorney in your local area, who knows state law. If use an online option, note that not all of the web-based alternatives will necessarily reflect the specifics of your state’s law. Online forms or software may not be compliant with your local law.

Living Will. An estate plan will typically include a few other legal documents, such as an advance health-care directive, also known as a living will. This document states your wishes, if you become incapacitated due to illness or injury, like whether you want to be kept on life support if there’s no hope of recovery.

Powers of Attorney. If you become incapacitated, your designated attorney-at-fact or agent will handle your medical and financial affairs. Similar to selecting an executor, be certain that he or she is trustworthy and smart, with the ability, skill set, time and desire to make such decisions and do these tasks.

Make a list of critical documents. Create an organized list of information your executor will need to settle your estate and include passwords, so your online accounts can be accessed.

Look at a trust. If you want your children or loved ones to receive money but don’t want to give a young adult or someone with poor money management free access to a lot of cash, you can create a trust for your beneficiaries. A trust holds assets on behalf of your beneficiaries, so they can only receive money according to how (or when) you’ve stated in the trust documents.

Reference: CNBC (July 27, 2020) “A will doesn’t cover all your bases when it comes to end-of-life decisions. Here’s what else you need”

Am I Worth More Dead than Alive?

“If you are like many moderately successful Americans, chances are you are worth more dead than alive. In many cases a lot more.”

A long-time federal worker or retiree may in fact be worth more dead than alive, especially if you own a house and are still married to your original spouse. If you have life insurance and a Thrift Savings Plan account, it’s also most likely true.

Federal News Network’s article entitled “Wonder if you’re worth more dead than alive?” says that in this pandemic, we’re all at risk and some a lot more than others. Therefore, if you have family you want to leave something to, if you leave unexpectedly, is everything in order?

Do you know the difference between having a last will and setting up an estate? Should you have one or both?

If you’re struggling with the answer, you need to sit down with an experienced estate planning attorney and figure out what you want to do.

Do you know the function of a power-of-attorney or of a medical directive? If you become gravely ill or injured—perhaps you fall into a vegetative state—do you want the healthcare staff to take heroic measures to keep you alive?

If you don’t make that decision beforehand, you may force a family member to make that decision.  It may not be what you had wanted. It can make a very stressful time even worse for them.

Let’s look at some things you need to consider.

A basic estate plan includes powers or attorney and some documents that instruct your executor how to distribute your assets at your death.

You should have an advance medical directive or health care power of attorney, which designates an individual that you select to make health care decisions for you, if you’re unable to make these decisions for yourself. This document will also include end of life instructions in the form of a living will that state the types of actions you want to have taken on your behalf if you’re terminally ill, in a vegetative state, and if you’re unlikely to recover. A primary concern of a living will is whether you want to be kept alive by artificial means, such as with a ventilator.

You also should have a durable financial power of attorney. This document allows your chosen agent to manage your financial affairs, if you’re incapable of managing your own affairs.

Estate planning is more than just a last will. A last will is essential but most people have many assets that won’t be impacted by their last wills like a jointly owned property, and life insurance or retirement plans with a designated beneficiary. You must specify how you want your assets to be distributed after your death.

Reference: Federal News Network (July 15, 2020) “Wonder if you’re worth more dead than alive?”

What Basic Estate Planning Documents Do I Need?

“At this stage of your life, preparing these must-have documents is one of the most profound acts of love that you can bestow. This paperwork can shield your family from needless heartache, hassle and expense.”

AARP’s recent article entitled “Sign These Papers” suggests that the following documents will give you and your family financial protection, as well as peace of mind.

Advance Directive. This document gives your family, loved ones and medical professionals your instructions for your health care. A living will, which is a kind of advance directive, details the treatment you’d like to have in the event you’re unable to speak. It covers things like when you would want doctors to stop treatment, pain relief and life support. Providing these instructions helps your family deal with these issues later.

Durable Power of Attorney for Health Care. This document, regularly included in an advance directive, lets you name a trusted person (plus a backup or two) to make medical decisions on your behalf, when you’re unable to do so.

Revocable Living Trust. Drawn up correctly by an experienced estate planning attorney, this makes it easy to keep track of your finances now, allow a trusted person step in, if necessary, and make certain that there are fewer problems for your heirs when you pass away. A revocable living trust is a powerful document that allows you to stay in control of all your finances as long as you want. You can also make changes to your trust as often as you like.

When you pass away, your family will have a much easiest task of distributing the assets in the trust to your beneficiaries. Without this, they’ll have to go through the probate process.  It can be a long and possibly costly process, if you die with only a will or intestate (i.e., without a will).

Will. Drafting a will with the guidance of an experienced estate planning attorney lets you avoid potential family fighting over what you’ve left behind. Your will can describe in succinct language whom you want to inherit items that might not be in your trust — your home or car, or specific keepsakes, such as your baseball card collection and your Hummel Figurines.

Durable Financial Power of Attorney. If you’re alive but incapacitated, the only way a trusted person, acting on your behalf, can access an IRA, pension or other financial account in your name is with a durable financial power of attorney. Many brokerages and other financial institutions have their own power of attorney forms, so make sure you ask about this.

These five documents (sometimes four, if your advance directive and health care power of attorney are combined) help you enjoy a happier, less stressful life.

In drafting these documents, you know that you’ve taken the steps to make navigating the future as smooth as possible. By making your intentions clear and easing the inheritance process as much as you possibly can, you’re taking care of your family. They will be grateful that you did.

Reference: AARP (August/September 2018) “Sign These Papers”

What Parts of Estate Plan Should Be Reviewed in the Pandemic?

“Many people are taking this time at home during the COVID-19 crisis to update their estate plan. Here are six critical estate plan components you should focus on, in light of the current pandemic.”

Forbes’ April article entitled “6 Parts Of Your Estate Plan You Should Review Now” discusses several items in your plan that should be examined, in light of the coronavirus pandemic.

In this pandemic, who will make important financial and medical decisions for you, if you’re unable to make them for yourself?

Make certain that you’ve designated a person who is trustworthy and reliable. Don’t forget to name a back-up for your power of attorney and health care proxy.

Look at your will. Make sure the person you’ve named as the executor of your estate is current. This is the individual who’ll attend to your affairs after you die and take care of probating your will, if necessary. She will also file income and tax returns on behalf of the estate. If you have minor children, name a guardian for them in the will.

Review your trust. Your revocable living trust usually benefits you while you’re alive. It can also be used to benefit others, such as a spouse and children. Name those who will receive the assets at your death. If your beneficiaries are minors or not mature enough to handle a sizeable sum, you might hold assets for them in trust, until they’re old enough to handle the money themselves. Review your decision regarding your trustee and see that this is the right person to administer the trust, based on your wishes.

Be sure to fund the trust. This will avoid probate of the assets on your death and lets the successor trustee control the assets for your benefit, if you’re incapacitated. If you fail to do so, it will create a host of problems after you’re gone. Your heirs will need court authority to access your assets, which can be an expensive and time-consuming endeavor.

Update your beneficiary designations. This includes the beneficiary designations on your life insurance policies, retirement accounts and any brokerage accounts that are payable on death to a beneficiary.

Ask your estate planning attorney about taking advantage of estate tax opportunities. It is important to have everything in order in this pandemic. If you have any questions about your current estate plan, please call or email us today.

Reference: Forbes (April 15, 2020) “6 Parts Of Your Estate Plan You Should Review Now”

What Should I Keep in My Safety Deposit Box?

A safe deposit box isn’t a smart choice for everything. Kiplinger’s recent article entitled “9 Things You'll Regret Keeping in a Safe Deposit Box” advises that there are some items you might not want to lock up in your bank, which isn’t open nights, holidays, or weekends, especially considering that in this pandemic, hours of operation for many businesses are reduced. In fact, some financial institutions, like Bank of America, have temporarily closed some locations. There are other banks that require an appointment for in-branch services, like accessing your safe deposit box. This would create a headache for you in your attempt to retrieve important documents or items when you need them.

Here are some important items you should store elsewhere, because you’ll need to access more often or on short notice. Maybe they should be in a fireproof safe that’s secured to the floor in your home.

Cash. Keeping a wad of cash in a safe deposit box, isn’t a good idea because if you need it in a pinch and the bank is closed, you’re out of luck. In addition, that cash will lose its buying power over time because of inflation and some banks don’t allow cash in a safe deposit box. Finally, cash in a safe deposit box isn’t protected by the FDIC. To have FDIC insurance (covering up to $250,000 per depositor per insured bank), your cash needs to be deposited in a qualifying deposit account, such as a checking account, savings account, or CD.

Your Passport. OK, most of us don’t need your passport in hand at a moment’s notice. However, you may need to take an emergency trip, which will happen during non-banking hours. Without your passport handy, there’s not much you can do about those calls in the middle of the night requiring you to dash.

The Original Copy of Your Will. You may want to keep a copy of your own will, your spouse’s and any in which you’re named the executor in a safe deposit box. However, don’t store the original copy of your will there, particularly if you’re the only owner of the safe deposit box. That’s because after your death, the bank will seal the safe deposit box, until your executor can prove she has the legal right to access it. This could mean a long and potentially expensive delay before your will is executed and your assets can be disbursed to the intended heirs. Keep the original copy of your will with your estate planning attorney or in a location where your executor can get to it without any legal hassles.

Letters of Instruction. Many people write a letter of instruction to accompany their will. This letter can describe whether you want to be buried or cremated and the type of service you want. This letter can include details on specific bequests of sentimental items, but it’s no help if its’ locked in your safe deposit box.

Durable Power of Attorney (POA). This document gives a trusted friend, family member, or professional adviser the authority to financial make decisions on your behalf. However, if your POA is in a safe deposit box that no one can access, the person you’re depending on to protect you at your time of need could find her hands tied. Keep the original POA with the original copy of your will and give copies to those who may need it one day.

Advance Directives. A living will and a health care proxy are sometimes collectively known as advance directives, but each has a unique purpose. A living will states your wishes for end-of-life care, and a health care proxy (also known as a health care power of attorney) names a person to make medical decisions for you, if you can’t make them yourself. Neither is any good locked away in an inaccessible safe deposit box.

Uninsured Jewelry and Collectibles. Heirloom jewelry and your valuable stamp collection and rare coins are good candidates for a safe deposit box, but they must be properly insured. The FDIC doesn’t insure safe deposit box contents, and neither does the bank unless it’s stated in your agreement.

Any Illegal or Dangerous Items. Your bank should provide you with a list of items that are not permissible to keep in a safe deposit box. This will include things like firearms, illegal drugs, and hazardous materials.

Reference: Kiplinger (June 1, 2020) “9 Things You'll Regret Keeping in a Safe Deposit Box”

How Do I Start My Estate Plan?

“Estate planning design and implementation is not only complex but can be highly emotional. Therefore, it’s important to have a basic understanding of the estate planning process, before approaching a professional.”

The decision to start an estate plan is critical for all families, but it can also be a challenge. In many cases, the greatest impediment families face initially is discussing death, especially the deaths of family members. Forbes’ recent article entitled “Estate Planning 101: Tackling Your Estate Plan” suggests several life events that will trigger the need to create an estate plan for your family or business.

The article also reminds us that it’s important to think about what might happen to you or someone in your family, in the event of a substantial life change. Here are some life events that can necessitate the need for an estate plan and a visit with your attorney:

• A marriage;
• The birth or adoption of a child or grandchild
• The start of a new business
• A significant increase in net worth
• Changes in the tax laws
• The death of a spouse or family member
• Receiving an inheritance
• A divorce
• The sale of a business or property

There is no exact standard for when you should start creating your estate plan, but if any of these events happen to you or your family, it would be wise to start the conversation. While planning your estate may feel overwhelming, laborious, or expensive, not having a plan can be financially devastating, and can add stress to the situation.

Estate planning is a continuous process that should be tracked and reviewed annually. Let’s look at the steps for creating an estate plan:

Understand the Basics. First, learn the basics of estate planning and understand how the gift and estate tax laws may have an effect on your assets.

Identify Your Objectives. Map out your objectives and select possible guardians, executors, trustees, heirs and other details with your attorney. You should also draft a personal financial statement, detailing a breakdown of your assets and liabilities.

Look at Your Insurance. Third, you should review what you have for life insurance to be certain that it’s aligned with and structured appropriately for your objectives. You may need to look into life insurance as a way to protect your family and income, if you haven’t done so already.

Finalize the Design Of Your Estate Plan. Finalize your estate planning design with the help of your estate planning attorney. Review your fiduciaries and your will, powers of attorney, trusts, healthcare proxy and a living will.

Sign your Documents. Next, you need to sign the documents.

Visit Your Plan Periodically. Finally, review your plan every few years or when there is a life event in your family.

Now that you have the basics under your belt, it should feel easier to address this important task.

Reference: Forbes (March 11, 2020) “Estate Planning 101: Tackling Your Estate Plan”