News & Resources: Blog

Power of Attorney: Empower Someone You Trust

Published: August 3, 2021

When it comes to estate planning, most people first think of creating a will and/or trust to ensure their assets are protected and passed on to their descendants after their death. One step that is often overlooked but equally important is assigning Power of Attorney (POA). While you may like to think that while alive you always will be able to handle your finances and make informed decisions regarding your health, the reality is we never know when we may be faced with a crisis situation. Choosing someone trustworthy and with your best interests at heart to be your Power of Attorney, allows you peace of mind that if you are ever incapacitated, your needs and desires will be spoken for. Below we discuss what Power of Attorney means and the different ways it can be utilized.

What is Power of Attorney?

A POA is a legal document that allows someone, known as the principal, to identify and authorize another person, known as the agent, to take care of legal, medical, and financial matters on their behalf should they be unable to do so themselves. If you were to suffer from physical or mental incapacities, making it impossible to take care of important financial matters or make medical decisions, the agent of your choosing can speak and make decisions on your behalf. Generally, people choose their spouse or a trusted family member or friend. You may also choose a successor if your first agent in the case your first choice is unavailable.

After creating a POA with a trusted agent to handle your affairs, the next step is to determine the scope of authority that the agent will have. There are different types of POA to be considered:

General Power of Attorney: The general POA gives the agent the same authority as the principal, including actions such as signing documents, paying bills, and managing finances. The principal can terminate a general power of attorney at any time. The document is also terminated if the principal becomes incapacitated or dies.

Durable Power of Attorney: A durable POA can be general or limited in the authority it grants to the agent. The difference is that it includes a clause that keeps it in effect after the principal becomes incapacitated, and it does not terminate until the principal’s death.

Limited Power of Attorney: A limited POA gives an agent the authority to act on someone’s behalf for a very limited purpose, such as a real estate transaction, and for a limited time period specified in the document.

Springing Power of Attorney: Unlike a durable power of attorney, a springing POA only goes into effect when the principal becomes incapacitated. For that reason, it is important that the document clearly spells out the circumstances under which the power of attorney will take effect.

Seniors should review their power of attorney documents (as well as their last will and testament) periodically to be sure they still accurately reflect their wishes. At Scott Bloom Law, we recommend retaining an experienced and empathetic lawyer to help you through the process. By preparing POA documents before you need them, you can save your loved ones (and yourself) a lot of potential heartache and stress.

At Scott Bloom Law, we are a team of advocates who care, always fighting for what is best for our clients and their families. With knowledge, experience, and compassion, we strive to find solutions that make the aging process as emotionally and financially painless as possible. Visit us at scottbloomlaw.com or call 215-364-1111, to talk to find out more.

CLIENT Testimonial

It is important to plan your estate to ensure that your assets, interests, and those you love will be protected after your death. However, without proper guidance and advice from a qualified estate planning attorney, many individuals make costly mistakes. Beyond undermining your intent and diminishing your financial legacy, poor planning can create additional stress to your heirs in their time of grief.

Six common errors frequently happen during the estate planning process. These mistakes often occur because the complete financial picture was not fully considered. It is easiest to avoid estate planning mishaps by knowing what they are before you begin or looking for these errors when reviewing and updating your plan.

Financial procrastination causes problems. While examining your mortality and making end-of-life preparations is not a particularly fun activity, try viewing it as helping and enhancing your loved ones' future lives while creating a sense of peace during your own. 

The need to protect your finances using wills, trusts, and power of attorney (POA) documents is not solely the domain of the elderly. Putting off the drafting of legal documents necessary to protect yourself and your inheritors can lead to disastrous outcomes.

By far, failing to create an estate plan is the most common mistake. Even if you do not have a lot of money, you need a will to protect any minor children you have by naming their guardians. Your will also ensures your asset distribution to heirs is carried out according to your intentions when you die and names a representative to handle debt obligations, final taxes, and other estate administrative duties. Dying without a will or "intestate" can lead to dire consequences.

Outdated wills, forms, and POAs create problems. If you made a will twenty years ago and have not reviewed and updated its contents, chances are many of the details no longer reflect current assets or beneficiaries. Estate planning is not a "set it and forget it" proposition. Reviewing estate planning documents and beneficiary forms every two years is generally adequate, barring a major life change such as divorce, birth, death, remarriage, or relocation to another state.

Beneficiaries without coordination can create expensive oversight. Beneficiary forms for retirement accounts like 401(k)s and IRAs, annuities, and life insurance policies may constitute a significant portion of your estate's assets. These beneficiary forms are legally binding and will supersede the contents of your will. Failure to update beneficiary forms can lead to an ex-spouse receiving assets that preferably would go to your heirs. Routine checks of all beneficiary designations are best practices for estate planning.

Failing to title trust assets properly can lead to probate. While not everyone requires a trust, those who do must carefully retitle their assets into the name of the trust. Forgetting to add more recently purchased property or opening a new account requires you to title them into the trust to receive trust benefits. Whether real estate, cash, mutual funds, or stocks, if you fail to move the asset into the trust, they become subject to the probate court, possible tax consequences (depending on the trust type), and a public record of these assets.

Life insurance can trigger estate tax. Life insurance can provide heirs with liquidity without the sale of assets and tax consequences when handled correctly. However, if a wealthy individual dies while maintaining ownership of their life insurance policy, they may inadvertently create a tax event for their heirs. Although life insurance death benefits are not subject to state or federal income taxes, any "incident" of ownership by the decedent can create an inheritance tax.

An estate planning attorney can help shelter life insurance proceeds from high-value estates by gifting the policy to an Irrevocable Life Insurance Trust (ILIT) or draft a new trust to purchase a new policy where the trust is the owner and beneficiary. A policy owned by the trust does not create a taxable situation to death benefits. Your attorney's careful structuring of this trust type is complex but can provide proper protection.

Joint ownership of assets with your children can lead to disastrous consequences. Naming your children as co-owners of assets, even digital, permits their creditors to access your money. The better way to address the situation is to give your adult child power of attorney and assign them as a beneficiary to a payable on death bank or brokerage account. This tactic permits them to access your funds if required during your lifetime. However, it keeps your assets from your child's estate and away from their potential creditors.

Ultimately the biggest error you can make is not finding the right estate planning attorney to guide you. This specialized attorney receives training on avoiding probate, tax implications, and asset protection if you require long-term care. Proper planning with the right guidance will help you avoid costly estate planning mistakes and protect your family's future financial well-being.

If you have questions or would like to discuss your legal matters, please do not hesitate to contact our office at 215-364-1111 to schedule a consultation.

- Estate Planning Mistakes to Avoid

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CLIENT Testimonial

This question is asked all the time: “Wouldn't it be easier to get a will off the internet, transfer my land when I die, and put my children on my bank account?” It’s just not a good idea. For the plan to work as you would want it to, it should account for plenty of complications. A good plan should protect your spouse and your children from the loss of valuable government benefits if anybody is or becomes disabled. The plan should avoid the delay and expense of probate court. The plan should protect money from children’s creditors or divorce or remarriage. It should be crafted to serve family harmony and to avoid disputes between children as joint owners. Even a relatively simple situation is made up of many moving parts. Internet documents and joint-ownership devices just won’t do the job.

Also, assembling the moving parts so they work smoothly is just the first step. Your estate plan needs maintenance too, just like your car has a “check engine” light. Major family events like serious illness or death, marriage, birth, or financial reversals are alerts that you should tune up your plan to reflect those changes. Your plan shouldn’t be “one and done.”

It takes expertise to coordinate the various strategies available. Don’t risk a result that will cause your family problems and unnecessary expense. Call us to create a plan that harmonizes the moving parts, so the gears will work together and you will leave the legacy you intended. We hope you found this article helpful. If you have questions or would like to discuss your legal matters, please do not hesitate to contact our office at 215-364-1111 to schedule a consultation.

- Creating an Estate Plan On Your Own: Think Twice

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