Powers of Attorney – What they Are and What you Need to Know By: Martin M. Shenkman, CPA, MBA, PFS, AEP, JD

CaveatsCaveats Nothing in these slides or any accompanying presentation is to be considered tax, legal, investment or other professional advice. The information is merely provided for educational purposes and no action should be taken without the individual consulting his or her own tax, estate, legal, financial, investment, insurance and other advisers. The hosts and sponsors of this program are NOT responsible for its content or accuracy

Overview of Powers of Attorney Definitions and basic planning Definitions and basic planning

What is a Power of Attorney? A core of everyones plan is a document that is often viewed as a simple boilerplate or standard document, a power of attorney A core of everyones plan is a document that is often viewed as a simple boilerplate or standard document, a power of attorney No document should ever be viewed as standard No document should ever be viewed as standard What is a power of attorney? What is a power of attorney? A power of attorney designates a person, called your agent, to make financial, legal, tax and perhaps other (but not health care) decisions for you A power of attorney designates a person, called your agent, to make financial, legal, tax and perhaps other (but not health care) decisions for you Why does every adult 18+ needs one? Why does every adult 18+ needs one?

Designating a Person to Handle Financial, Tax and Legal Issues Agent (Successors) Agent (Successors) Compensation Compensation Begin date (Trigger) Begin date (Trigger) Powers (Authority) Powers (Authority) Durability (Disability) Durability (Disability)

Who Should you Name Agent? Agent is the person you designate to handle tax, legal, and financial matters Agent is the person you designate to handle tax, legal, and financial matters Do they have sufficient financial or legal acumen? (They can hire professionals to help) Do they have sufficient financial or legal acumen? (They can hire professionals to help) Are they really trustworthy? Are they really trustworthy? Do they have a conflict? (Will a child be fair to his/her siblings) Do they have a conflict? (Will a child be fair to his/her siblings) Do they have the time? Do they have the time?

What Authority Should You Give this Person? Routine banking authority is key – paying bills and making deposits Routine banking authority is key – paying bills and making deposits Filing tax returns if you cant Filing tax returns if you cant Dealing with your insurance agents Dealing with your insurance agents Pursuing a lawsuit on your behalf Pursuing a lawsuit on your behalf Paying expenses for health care decisions made by your health care agent Paying expenses for health care decisions made by your health care agent

What Authority Might You NOT Give This Person? Gifts if not necessary to save taxes or as part of a Medicaid elder law plan Gifts if not necessary to save taxes or as part of a Medicaid elder law plan Change beneficiary designations unless you believe it will be advantageous and the agent will act impartially Change beneficiary designations unless you believe it will be advantageous and the agent will act impartially Selling your house unless you trust the agents decision making Selling your house unless you trust the agents decision making

Merely Signing a Legal Form Alone is Never Enough ? Your agent must know what is expected Your agent must know what is expected Key information must be accessible Key information must be accessible Banks and other third parties may not accept the power of attorney – plan in advance to sign their forms or get yours approved Banks and other third parties may not accept the power of attorney – plan in advance to sign their forms or get yours approved

Why Powers of Attorney can be the Most Important Estate and Financial Planning Step If your agent has unlimited power to give away your assets (you can specify to whom) you power can supersede your will --- there may be nothing left If your agent has unlimited power to give away your assets (you can specify to whom) you power can supersede your will --- there may be nothing left The statistical likelihood of cognitive issues or other disability is significant – protecting yourself to minimize the risk of elder financial abuse, court involvement, etc. is vital The statistical likelihood of cognitive issues or other disability is significant – protecting yourself to minimize the risk of elder financial abuse, court involvement, etc. is vital

Why Powers of Attorney can be the Most Dangerous Estate and Financial Planning Step If your agent has unlimited power to give away your assets your agent can give away everything --- there may be nothing left but the right to sue the agent which may be costly and difficult If your agent has unlimited power to give away your assets your agent can give away everything --- there may be nothing left but the right to sue the agent which may be costly and difficult Most powers permit the agent to change beneficiary designations – if your agent changes your IRA and insurance beneficiaries and re-titles your house – you intended heirs might get nothing Most powers permit the agent to change beneficiary designations – if your agent changes your IRA and insurance beneficiaries and re-titles your house – you intended heirs might get nothing

Special Considerations if Youre Living with Chronic Illness Should you use a springing power or have it effective immediately? Should you use a springing power or have it effective immediately? Should you have a limited power effective immediately and a broad general power spring? Should you have a limited power effective immediately and a broad general power spring? Should you authorize or direct your agent to pay for experimental treatments directed by your health proxy? Should you authorize or direct your agent to pay for experimental treatments directed by your health proxy? How should compensation be handled? How should compensation be handled?

RVer Tips for Powers of Attorney Rvers, or anyone who facing tax uncertainty as to which state they reside in (or in which they are domiciled) should consider the residence of the agent they name (and where the assets are the agent will manage in an emergency) when making a selection Rvers, or anyone who facing tax uncertainty as to which state they reside in (or in which they are domiciled) should consider the residence of the agent they name (and where the assets are the agent will manage in an emergency) when making a selection Which state law should apply to your power Which state law should apply to your power Where should you sign your power Where should you sign your power Can you use a broad power that is more likely to be accepted in other states (e.g., 2 witnesses and a notary) Can you use a broad power that is more likely to be accepted in other states (e.g., 2 witnesses and a notary)

Powers of Attorney and Your Other Legal Documents Keeping the confusing names of legal documents clear Keeping the confusing names of legal documents clear

Overview of Estate Planning Documents and How they Relate to Your Power of Attorney Powers of Attorney Powers of Attorney Springing vs. not Springing vs. not General vs. Special General vs. Special Why standard forms arent suffice Why standard forms arent suffice Special provisions to include Special provisions to include Living Wills Living Wills What they are and why they are important What they are and why they are important Address specific health issues Address specific health issues Religious issues Religious issues Health Proxies selecting agent What powers to include Revocable Living Trusts Unique importance Boilerplate forms rarely address nuances needed What can and should you have

Powers of Attorney – Making it Practical For Your Agent to Act You need more than just a legal form You need more than just a legal form

Organize Information So Your Agent Can Act Contact People (names, numbers) Contact People (names, numbers) Financial Information (account information) Financial Information (account information) Passwords and Security Codes Passwords and Security Codes Documents (Estate planning documents, legal documents, and more) Documents (Estate planning documents, legal documents, and more) Budget and Plan Budget and Plan

Investment and Financial Information is Critical to Organize and Communicate Bank Accounts Bank Accounts Account numbers Account numbers Bank name and contact info Bank name and contact info Beneficiary designations Beneficiary designations Should agent be permitted to change? Should agent be permitted to change? Account Management Account Management Consolidation and simplification Consolidation and simplification Are there excess accounts? Are there excess accounts? Should agent get duplicate statements? Should agent get duplicate statements? Automation Automation Communicate what youve set up to your agent Communicate what youve set up to your agent On line payments On line payments Set up on computer to facilitate planning Set up on computer to facilitate planning

Organizing Emergency Info #1 People forget and panic. Dont put off creating an emergency list People forget and panic. Dont put off creating an emergency list Type up a list on your computer so you can update it Type up a list on your computer so you can update it Disseminate the list to key people, ask for their help and tell them what they might need to do to help Disseminate the list to key people, ask for their help and tell them what they might need to do to help Each professional adviser should have the list in their file Each professional adviser should have the list in their file

Organizing Emergency Info #2 Organize the list by category (e.g., banking, religious adviser, professional advisers, family, neighbors) Organize the list by category (e.g., banking, religious adviser, professional advisers, family, neighbors) Give only the key facts someone will need to act in an emergency (person name, institution, insurance, office/home and cell number, , etc.) Give only the key facts someone will need to act in an emergency (person name, institution, insurance, office/home and cell number, , etc.) List info needed for emergency action (e.g., account number, policy number, etc.) List info needed for emergency action (e.g., account number, policy number, etc.)

RV TIP: Organize Emergency, Financial, Information and Advisors Information Rvers, or anyone who travels extensively, should take extra precautions to make sure information is available when needed Rvers, or anyone who travels extensively, should take extra precautions to make sure information is available when needed Consider a web based personal information locker and give a trusted person the info Consider a web based personal information locker and give a trusted person the info updated emergency info list to key people whenever there are major changes updated emergency info list to key people whenever there are major changes When determining where to keep accounts consider tax issues of residency/domicile When determining where to keep accounts consider tax issues of residency/domicile

Powers of Attorney – Communication is Key You need to discuss your plan You need to discuss your plan

Communicate with Your Agent Educate and inform your agent your wishes, what they may need to do to help, where theyll find info they need Educate and inform your agent your wishes, what they may need to do to help, where theyll find info they need

Communication Tips Explain your finances, family issues, personal goals, and so forth to your agents – tell all so they can help properly Explain your finances, family issues, personal goals, and so forth to your agents – tell all so they can help properly Discuss with family, friends or others involved in your life what your wishes are Discuss with family, friends or others involved in your life what your wishes are Can those you expect to rely on really help? Have alternatives Can those you expect to rely on really help? Have alternatives Express your wishes in face to face meetings and then confirm key points in writing Express your wishes in face to face meetings and then confirm key points in writing

Powers of Attorney – A Process not a Single Act Dont sign it and forget it! Dont sign it and forget it!

Review, Revisit, Revise Nothing remains static Nothing remains static –Tax and property laws –Family situations –Assets and net worth –Health –Comfort with Agent –Where you live

Powers of Attorney – Whats Next? Understanding powers is not enough – Take action Understanding powers is not enough – Take action

Action Steps: Your Action Plan Write it down or it wont happen Write it down or it wont happen Set small goals – make decisions, hire a lawyer, gather information – even devoting an hour a week or month will get you there Set small goals – make decisions, hire a lawyer, gather information – even devoting an hour a week or month will get you there Tell others – including advisers Tell others – including advisers Get help and guidance to get started – an initial consultation with a CPA or other adviser can jump start the entire process Get help and guidance to get started – an initial consultation with a CPA or other adviser can jump start the entire process

Summary: Powers of Attorney Choose a trusted agent and several successors Choose a trusted agent and several successors Hire a lawyer to draft powers that work for your personal and financial situation Hire a lawyer to draft powers that work for your personal and financial situation Discuss modifications to standard forms: Discuss modifications to standard forms: –Gift powers –Who can/should be supported Sign then distribute originals and/or copies, organize finances so your agent can act easily and safely Sign then distribute originals and/or copies, organize finances so your agent can act easily and safely Evaluate pros/cons of joint accounts versus power Evaluate pros/cons of joint accounts versus power