Heard in the Office: “I Want to Name My Son Executor under My Power of Attorney.”
August 2, 2012
I hear this a lot. This post is about vocabulary.
A Durable Power of Attorney is the document where you name someone to help you while you are living – you name someone (usually a spouse, child, sibling, or best friend) to help you in case you are unable to manage your finances yourself, for example if you are in the hospital, develop dementia, or – gasp – go on vacation. When you name someone in your Durable Power of Attorney, we call her an “Agent.” You Agent can help you, while you are living, with banking and personal business, like paying bills, applying for a reverse mortgage, changing the amount of your IRA distributions, etc.
After you die, the Agent’s power ceases. Now your Will comes into play, and whomever you have named as your “Personal Representative” takes over managing your finances. (Wait! What happened to the word “Executor”? See this post.) Your Personal Representative will pay your last bills, cash out your life insurance, probably consolidate multiple bank accounts into one account, sell your house, etc., and then, once all the dust has settled, divide the proceeds up among your heirs.
The “Agent” under the Durable Power of Attorney and the “Personal Representative” under your Will have essentially the same jobs. And quite likely, you have named the same person in both documents. (Usually, whomever a client wants handling her money while she is living is the same person she wants handling it after she dies.) But to avoid confusion when your Agent is dealing with the bank or other financial institution, make sure the Agent refers to herself as the “Agent” and not the “Executor.” If she introduces herself as the “Executor,” people will think that means that you have died – and most of us would rather not have others thinking that until the time actually comes.
Trusts
December 21, 2011
Most Americans don’t realize that they have an estate. Most people think that an “estate” includes a mansion in the hills, a private jet, or millions of dollars in investment accounts. But the true definition of “estate” is a person’s possessions or property—regardless of the size or amount. Everybody has an estate; and if you own a home, have a retirement account, or have any personal property of value you should consider creating a trust for your “estate.”
Trusts come in lots of flavors. They can accomplish all sorts of fancy tax planning, can include certain family members but not others, can run scholarships or foundations – the things you can do with a trust are endless. But most clients in my office need what I call the “plain vanilla” trust. That’s a straight-forward revocable family trust. Mind you, it’s still twenty pages long and takes hours to put together, but within the world of trusts, this is the simple one. The one that most of us should have, the one that I have set up for my family.
A revocable family trust serves two main purposes. The first goal – the one everyone thinks about – is that it will distribute your stuff after you die. It substitutes for the will. Within your trust, you do what you typically think of as the will’s job – you say how your want your estate distributed after you die. Usually people split their assets equally among their children, but that’s not always the case. We can designate whomever you want and in whatever portions you want under your trust (we can do that under a will, too, but right now we are talking about trusts).
So why would we use a trust instead of a will? Simple answer: it will save your family lots of headaches. If you don’t direct your assets to a trust, and instead just leave all your assets in your own name, then when you die those assets will be governed by your will. So far so good. But after you die, there has to be a legal process of changing title on your assets from your name to the people you’ve named in your will. That legal process is called the “probate process.” It requires that your children work with an attorney, go through the court’s system (which can take at least a year, quite often longer), complete lots of paperwork, and spend plenty of money on court fees and attorney’s fees. If you instead set up a trust now and take the time to transfer your assets to your trust now, then after your death, your children have precious little to do. The trust will already own the assets. Now the trustee (probably one of your children) just has to review bank statements, sell the home, and cut checks to all your beneficiaries. The trustee will have some work to do, but an awful lot less work compared to taking all of your assets through the probate process.
Another reason to have a trust – and this is the reason that no one thinks about except us lawyers who think of all the “what if’s” – is to protect you while you are living. If you transfer your assets to your trust now, and you go on vacation or are in the hospital or develop dementia, then your successor trustee (usually a child, sometimes a sibling or best friend) can take over managing your assets. Bills will be paid, that CD will be renewed when the maturity notice comes in the mail, etc. Your successor trustee steps into your shoes and manages your money, so things continue seamlessly, even though you are unable to manage your own affairs. What a relief.
I should clarify what it means to “transfer your assets to your trust.” That’s really a fancy way of saying that you are “changing the name” on your accounts. For example, if you have a money market at the bank in your name, then after you sign the trust, I would tell you to call the bank and have them change the owner of the money market from you individually to the revocable family trust that you just signed. They will probably have you complete a new signature card.
Since you will be the trustee of your trust, nothing will feel any different on a day to day basis – you are still the one accessing your accounts, reviewing statements, paying bills, etc. The difference is that you have a Plan. If you need help managing your assets during your lifetime, you have empowered your successor trustee to step in and take care of you. And you have lined up your assets so that your family will not have to deal with the hassle and cost of probate after you pass away. A plan. Feels good, doesn’t it?
Who Will Make Your End-Of-Life Decisions When You Are Incapacitated?
December 28, 2010
As we get older, the threat of illness or injury increases, and many of us wonder what will happen if we fall or get injured. Who will make important healthcare decisions if we become incapacitated? How will medical personnel know how to treat us if we cannot communicate with them? The answer to all of these questions is: Healthcare Agents.
A healthcare agent is the person you name in your Health Care Proxy to make medical decisions for you when you cannot make them for yourself. This person will talk to doctors, manage your medical care, authorize treatment, and possibly even make life and death decisions. Knowing all this, it is important to choose someone who thinks clearly under pressure, is not intimidated with medical problems, and who will keep the medical staff in check. But beyond choosing the right person, it is essential to discuss your wishes with your agent ahead of time.
Executing a healthcare directive and nominating a healthcare agent is not just about choosing the right person to make the big life-and-death decisions for you, it’s also about taking care of the loved ones you leave behind. Most people have strong wishes about life-support and end-of-life care, but rarely do they want those wishes carried out at the expense of their loved ones. Creating a healthcare directive which outlines those wishes—and discussing those wishes with your agent and your family—is important not only for your own peace of mind, but also to ensure the peace of mind of your loved ones, those who will be left to mourn your absence after you’re gone. As a health care directive, I give each client the “Your Way” workbook.
And if you don’t name an agent in a Health Care Proxy? Your family will be forced to go to court and spend thousands of dollars pursuing a guardianship.
Can A Trust Benefit Your Family?
December 15, 2010
Most Americans don’t realize that they have an estate. Most people think that an “estate” includes a mansion in the hills, a private jet, or millions of dollars in investment accounts. But the true definition of “estate” is a person’s possessions or property—regardless of the size or amount. Everybody has an estate; and if you own a home, have a retirement account, or have any personal property of value you should consider creating a trust for your “estate.”
Before you scoff that you aren’t wealthy enough to need a trust, consider that there are many different kinds of trusts, each of which may be used for specific situations. Some trusts are complicated and extensive, created by wealthy families to preserve assets through generations. Other trusts are simple and to the point, created by young parents to ensure that their minor children will be provided for. What kind you will need will depend on a number of factors, including the size of your estate, your goals for that estate, the age of your children, your marital status, whether you have a special needs child or grandchild, and many, many more.
Most trusts created for estate planning purposes are revocable living trusts (or RLTs). An RLT is a document created not simply to distribute your property, but to own your property during your lifetime, to be invested and spent for your benefit or the benefit of your named beneficiaries. As such, a trust takes effect as soon as you sign it, and your property is protected by it, as soon as you place your assets in the name of your trust. There is a lot of flexibility available with a revocable living trust, and yours can be created to fit your unique situation. Most RLTs name the trust creator (you) as the initial trustee, nominating individuals or banks to take over as trustee when you become incapacitated or pass away.
One of the primary benefits of a trust is that when you pass away, property is not merely distributed and that’s the end of it; you can instruct the trustee to distribute the money slowly and in any number of ways, for example, keeping it out of the hands of a spendthrift child or protecting it for the benefit of a special needs child.
You may not have a Back Bay penthouse or an Italian villa, but you do have a family to protect. We’d like to help. Contact our office to find out if your family needs a trust.
4 Essential Qualities Your Executor Should Have
December 1, 2010
If you have a Will, you have an executor. You are placing a lot of trust in your executor. After all, this is the person who will be serving in your stead when you pass away—helping your loved ones, overseeing your finances, paying your final bills and distributing your property. Serving as someone’s executor can be a tough job, and choosing the right person for that job can be just as difficult.
Although it is commonly considered an honor, serving as an executor is a lot of work, and often requires a great capacity for organization, attention to detail, meeting deadlines, and more. You may be tempted to name your favorite sibling or eldest child just to keep from hurting any feelings, but your family and heirs will not be well served if you choose your executor based on emotion rather than ability.
Keeping this in mind, here are four qualities to consider when choosing who will serve as your executor:
1. Is the person trustworthy? Your executor will be privy to all of your financial secrets: reviewing estate assets, determining your liabilities and paying off creditors, settling outstanding debts, and making distributions to heirs. Chances are you don’t want all that information spread throughout the family or community.
2. Is this person organized? The person you choose will be in charge of a number of detailed tasks, both large and small. He or she will be making lists of assets, meeting court deadlines, making timely distributions for estate taxes, and more. Missing or being late for one of these many steps can draw out the entire process, costing your heirs both time and money.
3. Is this person financially savvy? One of the responsibilities of executor is to keep the estate viable (making sure the mortgage and fees continue to be paid) during the probate process. If you have investment accounts you’ll want to ensure they won’t languish and lose their value before they can be distributed to your heirs.
4. Is this person compassionate? Although probate can be a difficult and detailed process, it is at its core about the people you love. Your executor should have the ability to be caring and compassionate during this emotional time.
Part of the estate planning attorneys’ job is to help you think through who among your family or friends would be best suited for the job. If you have any questions at all about who to name, make sure to bring it up with your attorney.
Sometimes the Best Thing is to Do Nothing at All
March 15, 2010
Clients came in a few months ago explaining that several years back, the mother had deeded her house into a trust and now she wanted to make a change to the trust. I said that I would review the trust to be sure that such a change would be permitted and would advise them on how to proceed.
As I dug into the trust, it turned out to be quite a doozy. It was poorly drafted. It was clearly put together by someone who didn’t understand the intersection of estate tax planning, Medicaid planning, property law, and fulfilling a mother’s wishes. It took me weeks of research, several pages of notes, and a lot of head-scratching to finally put together a 5-page letter to the client explaining her options for moving forward.
I often say that elder law and special needs planning involve juggling a lot of different balls and that we will never be able to get them all to land in a perfect line. It’s a matter of choosing which of the many issues are most important to you and letting the other ones slide into second place.
In this case, the clients and I reviewed the pros and cons of all of her options. Because of the poor drafting of the original trust, we were very limited in what we could do. If we did A, she would achieve B, but she would lose C. If we did B, we would achieve C, but lose A, and so on. The client weighed all the different things that she had hoped to accomplish and chose the one that was most important to her. And to accomplish that particular goal, the required action was to do nothing.
In the end, she walked out of my office with the same trust document she had when she came in – we didn’t change a thing. But she now has something else – knowledge. She now understands, much better than she did from the attorney who drafted the trust years ago – what will happen to her home if she wants to sell the house and move, what happens if she ever needs nursing home, and who in her family will inherit it after she passes away.
Sometimes, after examining all the angles, you realize that the best thing to do is to do nothing.
Howard Gleckman’s Caring for Our Parents
October 23, 2009
Howard Gleckman’s New Book: Caring for Our Parents
August 25, 2009
Driving to work on Friday, I had the treat of listening to NPR’s Robin Young interview Howard Gleckman on his new book, Caring for Our Parents: Inspiring Stories of Families Seeking New Solutions to America’s Most Urgent Health Crisis. I only caught the end of the interview, but it was so reassuring to hear him close with this message: we should all have our health care proxies and end of life wishes in order.
This is what I talk about when I give presentations and when I meet with clients. I’ve blogged about it – read about health care proxies here and about end of life wishes here. This is such an important message to get across to people. A health care proxy lets someone else make health care decisions for you when you cannot make or communicate them yourself – anesthetic fog? dementia? shock from an accident? Without a health care proxy in place, your family could very well be forced to go to court and waste a lot of money, time, and emotion.
And making your end of life wishes clear will save your family a tremendous amount of anxiety, guilt, grief, and arguments. Give your family the gift of peace by taking the burden off of their collective shoulders – tell them ahead of time what you would want in a difficult situation.
It gives me hope to hear Mr. Gleckman advising a national audience to get their health care proxies and end of life statements in order. So many families would have such an easier time caring for their loved ones with these documents in place.
End of Life Wishes & Living Wills
Clients are always asking about living wills. Massachusetts law does not recognize a living will, and it’s also impossible to write a thorough, well balanced statement of your end of life wishes in just a few paragraphs.
I provide clients with a solution to their goal, but in a much better form. I give my clients a workbook called Your Way. It is published by a nonprofit in California, H.E.L.P.: Helping People Meet Aging-Related Legal & Care Challenges.
This workbook is twelve pages long and very thoughtfully walks the reader through various scenarios you could confront in an end of life situation and what kind of comfort and care you would like to receive. For example, what matters to you the most – being with friends and family? Listening to music? Being able to help dress yourself? Under various scenarios, would you want curative care or to be kept comfortable? Who do you want with you as you are dying? Where would you want to be? A twelve-page work book written by heath care professionals does a much better job elucidating your wishes than an attorney can do in a one-page living will.
If you are not a client of this office, then log onto the Your Way website and order a workbook. If you are my client, then you already have a copy. Complete the exercises and give your family the gift of knowing exactly what you would want them to do in a crisis situation.
My Spouse Died – What Do I Need to Do to Protect Myself?
July 24, 2009
After a spouse dies and the family gets through the funeral, the immediate concern is to square away the couple’s assets and make sure the surviving spouse has enough to live on. After that, there is one more step to take: protecting yourself.
One area where you need to be proactive is to consider who will be able to assist you with financial and health matters if you become ill or incapacitated. Before, you and your spouse relied on each other to serve in these roles. Now you need to legally appoint someone to be able to step in and help you. At this point, you definitely need to execute a Durable Power of Attorney and Health Care Proxy. And many people like to add a child to their bank account so she can easily help with paying bills. See my blog post on how to do this appropriately (don’t add her as a joint owner!).
If you go to see your elder law attorney after your spouse has passed away, in addition to helping you transfer your spouse’s assets to your name, she will also help you put in place these fundamental documents that will serve to protect you, should you ever become unable to handle your affairs or medical decisions yourself.