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

Powers of Attorney – What Powers of Attorney – What they Are and What you Need they Are and What you Need

to Knowto KnowBy: Martin M. Shenkman, CPA, MBA, PFS, AEP, JD

CaveatsCaveatsCaveatsCaveats

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 Overview of Powers of AttorneyAttorney Definitions and basic planningDefinitions and basic planning

What is a Power of What is a Power of Attorney?Attorney?

A core of everyone’s plan is a document that is A core of everyone’s plan is a document that is often viewed as a simple “boilerplate” or often viewed as a simple “boilerplate” or standard document, a power of attorneystandard document, a power of attorney

No document should ever be viewed as No document should ever be viewed as “standard”“standard”

What is a power of attorney? What is a power of attorney? A power of attorney designates a person, called A power of attorney designates a person, called

your agent, to make financial, legal, tax and your agent, to make financial, legal, tax and perhaps other (but not health care) decisions for perhaps other (but not health care) decisions for youyou

Why does every adult 18+ needs one?Why does every adult 18+ needs one?

Designating a Person to Designating a Person to Handle Financial, Tax and Handle Financial, Tax and Legal IssuesLegal Issues

AgentAgent (Successors)(Successors)

CompensationCompensation Begin dateBegin date (Trigger)(Trigger)

PowersPowers (Authority)(Authority)

DurabilityDurability (Disability)(Disability)

Who Should you Name Who Should you Name Agent?Agent? ““Agent” is the person you designate to Agent” is the person you designate to

handle tax, legal, and financial mattershandle tax, legal, and financial matters Do they have sufficient financial or Do they have sufficient financial or

legal acumen? (They can hire legal acumen? (They can hire professionals to help)professionals to help)

Are they really trustworthy?Are they really trustworthy? Do they have a conflict? (Will a child Do they have a conflict? (Will a child

be fair to his/her siblings)be fair to his/her siblings) Do they have the time?Do they have the time?

What Authority Should What Authority Should You Give this Person?You Give this Person? Routine banking authority is key – Routine banking authority is key –

paying bills and making depositspaying bills and making deposits Filing tax returns if you can’t Filing tax returns if you can’t Dealing with your insurance agentsDealing with your insurance agents Pursuing a lawsuit on your behalfPursuing a lawsuit on your behalf Paying expenses for health care Paying expenses for health care

decisions made by your health care decisions made by your health care agentagent

What Authority Might What Authority Might You NOT Give This You NOT Give This Person?Person? Gifts if not necessary to save Gifts if not necessary to save

taxes or as part of a Medicaid taxes or as part of a Medicaid elder law planelder law plan

Change beneficiary designations Change beneficiary designations unless you believe it will be unless you believe it will be advantageous and the agent will advantageous and the agent will act impartiallyact impartially

Selling your house unless you Selling your house unless you trust the agent’s decision makingtrust the agent’s decision making

Merely Signing a Legal Merely Signing a Legal Form Alone is Never Form Alone is Never Enough ?Enough ? Your agent must know what is Your agent must know what is

expectedexpected Key information must be Key information must be

accessibleaccessible Banks and other third parties may Banks and other third parties may

not accept the power of attorney not accept the power of attorney – plan in advance to sign their – plan in advance to sign their forms or get yours approvedforms or get yours approved

Why Powers of Attorney can be Why Powers of Attorney can be the Most Important Estate and the Most Important Estate and Financial Planning StepFinancial Planning Step

If your agent has unlimited power to If your agent has unlimited power to give away your assets (you can specify give away your assets (you can specify to whom) you power can supersede to whom) you power can supersede your will --- there may be nothing leftyour will --- there may be nothing left

The statistical likelihood of cognitive The statistical likelihood of cognitive issues or other disability is significant – issues or other disability is significant – protecting yourself to minimize the risk protecting yourself to minimize the risk of elder financial abuse, court of elder financial abuse, court involvement, etc. is vitalinvolvement, etc. is vital

Why Powers of Attorney can be Why Powers of Attorney can be the Most Dangerous Estate and the Most Dangerous Estate and Financial Planning StepFinancial Planning Step If your agent has unlimited power to If your agent has unlimited power to

give away your assets your agent can give away your assets your agent can give away everything --- there may be give away everything --- there may be nothing left but the right to sue the nothing left but the right to sue the agent which may be costly and difficultagent which may be costly and difficult

Most powers permit the agent to change Most powers permit the agent to change beneficiary designations – if your agent beneficiary designations – if your agent changes your IRA and insurance changes your IRA and insurance beneficiaries and re-titles your house – beneficiaries and re-titles your house – you intended heirs might get nothingyou intended heirs might get nothing

Special Considerations if Special Considerations if You’re Living with You’re Living with Chronic IllnessChronic Illness Should you use a springing power or Should you use a springing power or

have it effective immediately?have it effective immediately? Should you have a limited power Should you have a limited power

effective immediately and a broad effective immediately and a broad general power spring?general power spring?

Should you authorize or direct your Should you authorize or direct your agent to pay for experimental agent to pay for experimental treatments directed by your health treatments directed by your health proxy?proxy?

How should compensation be handled?How should compensation be handled?

RV’er Tips for Powers of RV’er Tips for Powers of AttorneyAttorney

Rv’ers, or anyone who facing tax uncertainty as to Rv’ers, or anyone who facing tax uncertainty as to which state they reside in (or in which they are which state they reside in (or in which they are domiciled) should consider the residence of the agent domiciled) should consider the residence of the agent they name (and where the assets are the agent will they name (and where the assets are the agent will manage in an emergency) when making a selectionmanage in an emergency) when making a selection

Which state law should apply to your powerWhich state law should apply to your power Where should you sign your powerWhere should you sign your power Can you use a broad power that is more likely to be Can you use a broad power that is more likely to be

accepted in other states (e.g., 2 witnesses and a accepted in other states (e.g., 2 witnesses and a notary)notary)

Powers of Attorney and Powers of Attorney and Your Other Legal Your Other Legal DocumentsDocuments Keeping the confusing names of Keeping the confusing names of

legal documents clearlegal documents clear

Overview of Estate Planning Overview of Estate Planning Documents and How they Relate to Documents and How they Relate to Your Power of AYour Power of Attorneyttorney

Overview of Estate Planning Overview of Estate Planning Documents and How they Relate to Documents and How they Relate to Your Power of AYour Power of Attorneyttorney

Powers of AttorneyPowers of Attorney• Springing vs. notSpringing vs. not

• General vs. SpecialGeneral vs. Special

• Why standard forms aren’t Why standard forms aren’t sufficesuffice

• Special provisions to includeSpecial provisions to include

Living WillsLiving Wills• What they are and why they are What they are and why they are

importantimportant

• Address specific health issuesAddress specific health issues

• Religious issuesReligious 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 – Powers of Attorney – Making it Practical For Making it Practical For Your Agent to ActYour Agent to Act You need more than just a legal You need more than just a legal

formform

Organize Information So Organize Information So Your Agent Can ActYour Agent Can Act

Contact People Contact People (names, (names, numbers)numbers)

Financial Information Financial Information (account information)(account information)

Passwords and Security Passwords and Security CodesCodes

Documents Documents (Estate planning (Estate planning documents, legal documents, and more)documents, legal documents, and more)

Budget and PlanBudget and Plan

Investment and FinancialInvestment and Financial Information is Critical to Information is Critical to Organize and CommunicateOrganize and Communicate

Bank AccountsBank Accounts• Account numbersAccount numbers• Bank name and Bank name and

contact infocontact info

Beneficiary designations Beneficiary designations • Should agent be Should agent be

permitted to change?permitted to change?

Account ManagementAccount Management• Consolidation and Consolidation and

simplificationsimplification• Are there excess accounts?Are there excess accounts?• Should agent get duplicate Should agent get duplicate

statements?statements?

AutomationAutomation• Communicate what you’ve Communicate what you’ve

set up to your agentset up to your agent• On line paymentsOn line payments• Set up on computer to Set up on computer to

facilitate planningfacilitate planning

Organizing Emergency Info Organizing Emergency Info #1#1

People forget and panic. Don’t put off People forget and panic. Don’t put off creating an emergency listcreating an emergency list

Type up a list on your computer so you Type up a list on your computer so you can update itcan update it

Disseminate the list to key people, ask Disseminate the list to key people, ask for their help and tell them what they for their help and tell them what they might need to do to helpmight need to do to help

Each professional adviser should have Each professional adviser should have the list in their filethe list in their file

Organizing Emergency Info Organizing Emergency Info #2#2

Organize the list by category Organize the list by category (e.g., (e.g., banking, religious adviser, professional banking, religious adviser, professional advisers, family, neighbors)advisers, family, neighbors)

Give only the key facts someone will Give only the key facts someone will need to act in an emergency need to act in an emergency (person (person name, institution, insurance, office/home name, institution, insurance, office/home and cell number, email, etc.)and cell number, email, etc.)

List info needed for emergency List info needed for emergency action action (e.g., account number, policy (e.g., account number, policy number, etc.)number, etc.)

RV TIP: Organize Emergency, RV TIP: Organize Emergency, Financial, Information and Financial, Information and Advisors InformationAdvisors Information

Rv’ers, or anyone who travels extensively, should take Rv’ers, or anyone who travels extensively, should take extra precautions to make sure information is extra precautions to make sure information is available when neededavailable when needed

Consider a web based personal information “locker” Consider a web based personal information “locker” and give a trusted person the infoand give a trusted person the info

Email updated emergency info list to key people Email updated emergency info list to key people whenever there are major changeswhenever there are major changes

When determining where to keep accounts consider When determining where to keep accounts consider tax issues of residency/domiciletax issues of residency/domicile

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

Communicate with Communicate with Your AgentYour Agent Educate and inform your agent your wishes, Educate and inform your agent your wishes,

what they may need to do to help, where what they may need to do to help, where they’ll find info they needthey’ll find info they need

Communication TipsCommunication Tips

Explain your finances, family issues, Explain your finances, family issues, personal goals, and so forth to your personal goals, and so forth to your agents – tell all so they can help agents – tell all so they can help properlyproperly

Discuss with family, friends or others Discuss with family, friends or others involved in your life what your wishes involved in your life what your wishes areare

Can those you expect to rely on really Can those you expect to rely on really help? Have alternativeshelp? Have alternatives

Express your wishes in face to face Express your wishes in face to face meetings and then confirm key points in meetings and then confirm key points in writingwriting

Powers of Attorney – A Powers of Attorney – A Process not a Single Process not a Single ActAct Don’t sign it and forget it!Don’t sign it and forget it!

Review, Revisit, ReviseReview, Revisit, Revise

Nothing remains staticNothing remains static– Tax and property lawsTax and property laws– Family situationsFamily situations– Assets and net worthAssets and net worth– Health Health – Comfort with AgentComfort with Agent– Where you liveWhere you live

Powers of Attorney – Powers of Attorney – What’s Next?What’s Next? Understanding powers is not Understanding powers is not

enough – Take actionenough – Take action

Action Steps: Your Action Steps: Your Action PlanAction Plan√ √ Write it down or it won’t happenWrite it down or it won’t happen

√ √ Set small goals – make decisions, hire a Set small goals – make decisions, hire a lawyer, gather information – even lawyer, gather information – even devoting an hour a week or month will devoting an hour a week or month will get you thereget you there

√ √ Tell others – including advisersTell others – including advisers

√ √ Get help and guidance to get started – Get help and guidance to get started – an initial consultation with a CPA or other an initial consultation with a CPA or other adviser can jump start the entire processadviser can jump start the entire process

Summary: Powers of Summary: Powers of AttorneyAttorney

Choose a trusted agent and several successorsChoose a trusted agent and several successors Hire a lawyer to draft powers that work for Hire a lawyer to draft powers that work for

your personal and financial situationyour personal and financial situation Discuss modifications to standard forms: Discuss modifications to standard forms:

– Gift powersGift powers– Who can/should be supportedWho can/should be supported

Sign then distribute originals and/or copies, Sign then distribute originals and/or copies, organize finances so your agent can act easily organize finances so your agent can act easily and safelyand safely

Evaluate pros/cons of joint accounts versus Evaluate pros/cons of joint accounts versus powerpower