One of the most important benefits of revocable living trusts for you during your lifetime is incapacity planning.  Incapacity (or disability) can occur at any time; and, it often arises unexpectedly.  A stroke, car accident, or head injury can leave you unable to manage your day to day business affairs and financials.

You Determine the Definition of Your Disability

Your revocable living trust will define your disability so that it’s clear when authority passes from you to your named disability trustee.  You, with legal counsel, create this definition of disability yourself.

You Choose the Disability Panel Participants

If you choose to have a disability panel determine whether the definition of your disability has been met, you also choose who is on this panel.  Often, the panel is composed of medical professionals and loved ones.

You Appoint Successor Disability Trustees

You choose who will succeed you as trustee.  You stay in control by choosing who has authority and when they have it.  You name contingent disability trustees as well, to serve in the event your primary disability trustee is unable or unwilling to serve.

Disability Instructions

You determine how your assets will be managed, your care, and who can use your assets during any period of disability.  Your disability trustee must follow these directions.  Think of your trust as an instruction book.

Your Disability Trustee’s Authority

Your disability trustee only has authority over assets that are funded into your trust.  It is imperative that you follow your estate planning attorney’s instructions and fund all applicable assets into your trust.

You Need a Power of Attorney Too

Because there are some assets (such as life insurance and retirement accounts) that are not funded into your trust, you need a financial power of attorney so that your power of attorney agent can manage these assets.  It is prudent to make sure that the applicable institutions will honor your power of attorney; if not, execute one of theirs as well.

Where to Get Help with Incapacity Planning

Consult with a qualified estate planning attorney for the design, drafting, execution, and funding of your revocable living trust.  It’s important to get the incapacity planning right so your estate plan works.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

Everyone age 18 or older needs a health care power of attorney.  While you are able, you’ll continue to make all your own health care decisions.  But, if there comes a time that you are unable to make your own health care decisions, then a trusted loved one will make those decisions for you.  If you want to control who makes those decisions, you need a power of attorney for health care.

Who should I name as my health care power of attorney agent?

You should appoint someone who loves you, is confident, and can communicate with medical personnel.  When you are in the hospital, you need an advocate who will ensure that you get the medical care you need and deserve.  Your agent should be someone who will ask your doctor for alternatives and not be afraid to seek a second or, even, third opinion.

When is my health care power of attorney effective?

Your health care power of attorney is effective when your doctor determines that you are not cable of making medical decisions.  You may be unconscious, highly medicated, or otherwise unable to comprehend the medical issues at hand and communicate about them.

Do I need a living will if I have a health care power of attorney?

Yes, if you don’t want medical heroics such as life support if you are in an irreversible coma, persistent vegetative state, or otherwise terminal and at the very end of life, you need a living will.  This removes a great burden from the shoulders of your health care agent.  No one wants to “pull the plug” on a loved one.

If you have a living will or if you’ve made other medical decisions in advance (and in writing), those decisions are made.  Your health care power of attorney agent cannot override them.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

Estate planning involves incapacity planning so if you can’t make your own financial decisions in the future, a loved one or professional will step in and take over that responsibility.

Incapacity planning will allow you to be properly prepared in case of an emergency.  You never know when you may become incapacitated through a car accident, illness, or reaction to medication.

Take the time to create a proper plan so that your financial affairs are always handled by someone you trust, even if you aren’t able to make decisions.  If you have any questions about your incapacity planning needs, meet with an estate planning attorney.

What happens if I can’t make my own financial decisions?

You need to appoint someone to help you pay your bills and make financial decisions if you are ever unable to do so yourself.  This can be done with a financial power of attorney.  You will name an agent who will be responsible for your affairs when you’re in need of help.

Without this document, the court will intervene and the wrong person may be handling your affairs!

What can my agent do?

Your financial power of attorney agent can do a number of things, if properly given the power to do them.  This includes paying your bills and purchasing items you need.  He will also be able to cash your checks and make important financial decisions.  Your agent is responsible for filing and paying appropriate taxes on your behalf.

Revocable living trust planning

Many people just like you use a revocable living trust for additional incapacity planning.  When you have a trust, your disability trustee can manage your financial affairs on your behalf should be become incapacitated.  This removes any concern about whether a financial institution will honor your financial power of attorney.

If you have additional questions, or if you’d like to begin your incapacity planning, consult with a qualified estate planning attorney.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

If you’re like most people, it hasn’t occurred to you that you need to update your financial power of attorney on a regular basis.  Updates are required for a couple of reasons, but the main reason to update is to better ensure that your financial power of attorney is accepted when needed.

“Old” powers of attorney are often refused.  Sure, your agent could sue the refusing institution, but who wants to deal with that?  It’s better to have an up-to-date power of attorney that will be accepted.

If your power of attorney was executed (i.e. signed) more than 5 years ago, get a new one.

It is also beneficial to update your financial power of attorney because life changes.  Your named agent or successor agent may have become incapacitated or died.

Or, perhaps, you are just ready to name someone else.  For example, you may have gotten remarried, or your children may now be adults and you want to name them.

In addition to life changes, there are always changes in the law.  A new power of attorney will catch all these changes.  Even though your old power of attorney is legally valid, your agent may have trouble getting it honored if it doesn’t have current legal requirements.

Your estate planning attorney also continues to learn how to help you in better ways.  There may be new terminology, language, or techniques that she will incorporate into your new power of attorney.

Be sure to update immediately if you’ve moved to a new state.  While moving doesn’t invalidate your old power of attorney, if it doesn’t meet the requirements of your new state, it is likely going to be more difficult to get it honored.

In addition to the financial power of attorney, be sure to update your health care power of attorney and your child care power of attorney as well.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

Many people think that a power of appointment is a power of attorney; but, they are different estate planning concepts.

In a power of attorney, the principal (i.e. you) authorizes an agent (i.e. trusted loved one) to act on your behalf when you are unable to act or it is inconvenient for you to act.  Common types of powers of attorney are for health care, child care, and finances.

On the other hand, a power of appointment allows a beneficiary to direct who receives the assets next.

A general power of appointment indicates that the beneficiary can appoint trust assets to anyone in the entire world, including his or her creditors.  The general power of appointment is typically used to ensure that trust assets are taxed in the beneficiary’s estate; thus, avoiding the generation skipping tax.

A limited power of appointment give the beneficiary the power to appoint trust assets, generally, to anyone in the entire world, excepting his or her creditors.

Often a limited power of appointment is even more limited, granting the beneficiary the power to appoint trust assets only to his or her blood line.

A beneficiary must exercise the power of appointment, whether general or limited, in his or her own trust or will.  If the power of appointment is not exercised, the original trust provisions will determine who receives the assets at the beneficiary’s death.

If you have questions about powers of appointment, consult with a qualified estate planning attorney.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

When your children turn 18 it is an exciting time for both them and you. This is when their lives as adults start; maybe they will be going off to college, starting a new job, or moving across country. Although a lot of parents feel a certain amount of sadness when children leave the nest, it is exciting to see the children you raised spread their wings and fly.

During this exciting time for your family, there are still some important issues to consider that you may not have thought of. Because your child is now of legal age, he or she will need a Power of Attorney and a Health Care agent.

There are several reasons why your children might need Durable Powers of Attorney. Unlike before your children turned 18, if they should run into any financial problems with their bank or credit card companies, you will not have access to their accounts to help fix the problem. The financial institutions they are dealing with cannot even discuss the account with you, unless you have been named under a Power of Attorney.

Suppose your child is abroad and has some trouble accessing money from his or her bank account. If you do not have Power of Attorney there is nothing you can do, but with this document in place, you can talk with the financial institution and get the situation worked out.

A Health Care Power of Attorney is just as important; this should be prepared and signed as soon after your child’s 18^th birthday as possible. This way you and your child can have some peace of mind knowing that if an unlikely accident or sickness does occur, you will be authorized to make health care decisions your child if he or she is unable to do so.

Keep in mind that although you may view your children as your babies, in reality once they turn 18 they are a legal adults with the rights to privacy that all citizens have. Without these documents in place, you may not be able to help if your son or daughter does run into problems.

Make an appointment with an estate-planning attorney so that your child can discuss the options that are available to him or her.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

If you’re like most people who have recently moved, you’re thinking about all the things you need to change and update. There are new bank accounts, new grocery store memberships, and, yes, new estate planning documents.

Intra-state move

If you’ve moved intra-state, meaning that you moved within the same state where your current estate planning documents were executed, it is prudent to update your estate plan if your current plan is more than three to five years old. This is also an excellent time to establish a relationship with a local estate planning attorney and update if there have been other significant changes in your life such as purchasing a new home, divorce, marriage, new children or step-children, adoption, or a major change in your finances or estate planning goals.

Inter-state move

If you’ve moved inter-state, meaning that you moved to a brand new state — one other than the state where your current estate planning documents were executed — meet with an estate planning attorney in your new state to determine whether changes need to be made and to establish a relationship.

While your estate plan may still be legal in your new state, it can sometimes be confusing, expensive, and time consuming to administer an estate or trust in your new state when it’s drafted to meet the requirements of your previous state. For instance, if your will or trust needs to be administered under the laws of your previous state, your executor/trustee will likely have to hire a lawyer in two states: the state where you died and the state where your documents were executed.

Powers of Attorney

Powers of attorney in particular vary greatly from state to state. Powers of attorney for finances and powers of attorney for health care may still be valid but may not be honored because the state-specific required language is not present and the financial institutions and medical professionals are worried that the power of attorney is not valid or has been revoked.

After a move, consult with a qualified estate planning attorney in your new state to determine whether your estate planning documents should be updated. You’ll sleep well at night knowing that your estate planning documents will work the way you want them to even after a move.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

One of the most important elements of a solid estate plan is having a Durable Power of Attorney; this is a legal document you use to appoint someone of your choice to handle your financial and legal affairs if you are unable to. But not all institutions will accept these documents as valid, and you may not know ahead of time which institutions will honor your Power of Attorney and which ones won’t.

The main reason that some banks and other types of institutions won’t honor a Power of Attorney is because they are concerned that they will be liable for any losses if the document is not authentic and legal, or if you have revoked the person’s power of attorney without informing them. It is also possible that you could incur losses if the person exceeds the power that the document gives them.

Although the institution may be liable for your losses if it improperly accepts a Power of Attorney, at the same time the institution can also be liable for any losses that you suffer as a result of its refusal to honor a valid Power of Attorney without reasonable cause.

Fortunately if you are working with an estate-planning attorney he or she can advise you on steps that you can take that will help to increase the likelihood that the institutions you deal with will accept your Power of Attorney. Some of the basic steps that will help reduce the risk of problems with your Power of Attorney include:

• Providing your appointed agent with a General Power of Attorney. This will help reduce the risk that the person will exceed the power that is granted to them by the document.
• If you prefer to grant your appointed agent only limited authority, make sure your Power of Attorney is very specific about what actions your agent can take.
• If your Power of Attorney appoints more than one person to act as your agent, you will want to specify that these people can act alone if you want your agents to have this power.
• Make sure that you keep an original signed document; many institutions want to see an original and not a copy.
• You will want to sign a new Power of Attorney document every few years; the institution will be more comfortable with a document that is only a couple years old instead of decades old.
• If you financial institution has its own Power of Attorney document, take the extra time to sign this as well.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.