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Why You May Need a Trust in Addition to Your Power of Attorney
Dec 08, 2021

While everyone should have a durable power of attorney that appoints someone to act for them if they become incapacitated, in some circumstances it is not enough.  In these cases, a revocable trust may help. 


A durable power of attorney allows you to empower someone you trust to step in to handle financial and legal matters on your behalf if you become incapacitated.  We all are at risk of incapacity from illness or injury, whether temporary or permanent.  Of course, this risk increases as we age.  Without someone in place to handle legal and financial matters, bills can go unpaid, contracts can't be signed, homes can't be refinanced, leases can't be terminated, investments can go unmonitored and unadjusted, and families often fight over who should be in charge.  The remedy of seeking court-appointed conservatorship is expensive, cumbersome, and time-consuming.  It is best that you pick your own person or people for this role.


Nevertheless, however important taking this step can be, it's not always enough.  There are two reasons for this: sometimes financial institutions refuse to honor older powers of attorney and agents sometimes don't step in until it is too late.  Both problems can be remedied through the use of a revocable trust.


Powers of Attorney Can Be Rejected
Financial institutions often reject older powers of attorney, claiming that they cannot know whether the document has been revoked since first signed.  Sometimes the institution will require the drafting attorney to attest to the fact that the document has not been revoked, even though the attorney may not have met with the client for many years and, of course, cannot know everything the client did during that time.

Financial institutions are uncomfortable honoring powers of attorney because they do not want to be held liable for any malfeasance by the agent appointed under the document.  In the opinion of most estate planning attorneys, such institutional rejection is contrary to law, but there is no good remedy when this occurs since any lawsuit against a large financial institution will be expensive and time consuming.

Fortunately, there are three ways to avoid this institutional intransigence:

  • Refresh your documents periodically.  Financial institutions are more accepting of newer documents than older ones, so it's a good idea to execute new durable powers of attorney every five years or so.  Of course, this is perverse.  If the power of attorney is being used because of your incapacity due to dementia, you are more likely to have been experiencing cognitive challenges a year prior to its use than ten years earlier.


  • Use the financial institution's forms.  Most banks and investment companies have developed their own durable power of attorney forms that they are more comfortable accepting than general ones your attorney prepared.  Contact each financial institution where you have an account and ask whether it has a durable power of attorney form.  You'll still need a general durable power of attorney, since the financial institution's form only governs accounts held at that institution, but using the institution’s form should prevent any problems with its acceptance.


  • Create a revocable trust.  Financial institutions seem to accept revocable trusts more readily than durable powers of attorney.  Revocable trusts have the added advantage that you can appoint a co-trustee to serve with you, so that if you become incapacitated, the co-trustee can continue to act.


A Trust Provides Financial Protection
As we age, we all become increasingly susceptible to making financial mistakes and falling victim to scammers.  Having a financial advocate in place can help avoid both.  An important step is to name an agent under a durable power of attorney.  However, such agents often don't step in until it is too late and the senior has already lost a significant amount of money.

A co-trustee on a revocable trust, however, is already authorized to control the accounts in trust.  Even if the co-trustee does not take an active role, he or she can monitor the accounts to make sure nothing untoward is occurring.  Further, when it becomes necessary to step in, the co-trustee can do so immediately and seamlessly.  In contrast, an agent under a durable power of attorney must present credentials to the financial institutions and go through the institution’s vetting procedure, delaying access to accounts and prohibiting the agent from protecting the accounts or being able to pay bills on behalf of the grantor.


Conclusion
For these reasons, revocable trusts often work better than durable powers of attorney.  However, two caveats are in order: First, trusts only control the accounts actually held by them.  So, for the trust to work, you must properly fund your trust.

Second, even if you have a revocable trust, you still need a durable power of attorney. This is for two reasons: First, you may not have transferred all your accounts into the trust and will need to give your agent control over those accounts and the ability to transfer them into the trust.  Second, the trust only governs financial matters.  Your agent under your durable power of attorney can also handle legal ones on your behalf, including signing your income tax returns.


Contact Jayde Law PLLC to discuss your planning goals and  if a revocable trust is right for you.

Estate Planning: An Overview

15 Feb, 2023
Estate planning entails preparing your affairs for the future, including death and other life events. While older adults might give more thought to estate planning, it is an essential tool at any age. WHY IT’S IMPORTANT With estate planning, individuals and families can protect their interests during incapacity or after death. You can provide for a spouse, children, and dependent family members when you pass away. You can arrange your care and financial affairs should you suffer a severe accident or illness that renders you incapacitated. If you are a parent, you can appoint a guardian to care for and manage the inheritance of your minor children. If you own a business, you can prepare to transfer it to family members, colleagues, or other trusted individuals. You can make arrangements for your long-term care when you can no longer live on your own. You can also make funeral preparations, determine what happens to your body when you pass, and prepay for your funeral, all of which can help lessen the burden on your family members. WHAT IS AN ESTATE? Legacy planning entails passing on your estate. Your estate is everything you own, including: Savings and checking accounts Retirement accounts Investments Life insurance Annuities Houses and other real estate Cars Personal possessions, such as jewelry, furniture, and sentimental items When you die, your estate encompasses all your property upon death. If you sold or gave away property before death, it is no longer part of your estate, and you cannot transfer it upon death. Items you own with another person are also part of your estate. Depending on the type of asset, it might automatically pass to the other owner. For instance, if you own a home with your spouse as tenants by the entirety, it will pass to your spouse upon your death. WHAT IS AN ESTATE PLAN? An estate plan consists of legal documents and arrangements that determine the distribution of your assets when you die or outline your care if you become incapacitated. While a will can be a central component of an estate plan, a solid plan encompasses more than a will. It can also include legal tools that allow assets to pass outside of a will and probate (the process by which a court oversees the distribution of assets in a will). ESTATE PLANNING TOOLS In addition to your will, your estate plan could include the following: Purchasing jointly owned property or adding a joint owner to your property Designating a beneficiary on a pay-on-death bank account, retirement account, or annuity Buying life insurance to benefit your family should you pass away Creating a trust for a child Obtaining long-term care insurance to cover future nursing home or assisted living fees Executing power of attorney documents, naming health care and financial agents Making a living will, providing instructions for care should you become incapacitated Preparing a transfer on death instrument to pass ownership of your property to a beneficiary upon death WHAT IS AN ESTATE PLANNER? As professionals helping people make future arrangements, estate planners are attorneys who focus on end-of-life preparations. Estate planning attorneys assist people with drafting legal documents and understanding laws and taxes that could affect them and the loved ones they will leave behind. When creating estate plans, individuals may need to consult attorneys as well as other experts, including financial planners, accountants, life insurance advisors, bankers, and real estate brokers. WHAT DOES THE FINAL DISTRIBUTION OF ASSETS INVOLVE? The final distribution of assets is a conclusory step in the probate process before the court closes probate. When an estate goes through probate, the personal representative or executor must satisfy all debts, and the court must resolve all disputes before allowing the beneficiaries to receive the assets. At the end of the probate process, ownership of the assets of the estate is transferred to the beneficiaries. DO I NEED A LAWYER FOR ESTATE PLANNING? Although the law does not require that individuals secure legal representation to make estate plans, many find the support and guidance of estate planning attorneys invaluable. An estate planning attorney can help you identify the legal tools and strategies that suit your needs, as well as draft the necessary documents, such as wills, trusts, and powers of attorney. In addition to addressing tax concerns and drafting documents, these attorneys can help you avoid probate. Probate, the process by which the court oversees the distribution of assets in a will, can be expensive and time-consuming for surviving family members. It also opens the door for disgruntled people to challenge the validity of the testamentary document, further complicating asset distribution. An estate planning attorney could help you organize your assets to transfer outside of probate to make the transfers simpler, easier, and less vulnerable to challenges. When you are ready to create an estate plan, contact Jayde Law PLLC.

Three Things to Know About Being an Executor

01 Feb, 2023
An executor (or personal representative) is a person or entity you choose to carry out your last wishes outlined in your will. Your executor should be someone you trust is responsible enough to manage your estate after you pass away. Choosing an executor is a big decision when it comes to estate planning. So, what should you know about an executor? What should you consider before naming an executor? Here are answers to three common questions about executors. Can an Executor Decide Who Gets What? No. In most circumstances, an executor cannot decide who gets what property. Executors are responsible for carrying out the decedent’s wishes as outlined in the will. However, if the decedent did not distribute all their assets in their will, in some circumstances, the executor may be able to decide how to distribute the unassigned property. Can an Executor of a Will Be a Beneficiary? Yes. An executor can also be a beneficiary of the will. It is common for people to have their surviving spouse or children act as the executor of their estate. This choice can be cost-effective if you have a small or simple estate. Another benefit of having a family member act as the executor of your estate is they are familiar with your wishes. They know you, and they understand how you want your assets divided. If you forget to state where property goes in your will, an executor that knows you well is more likely to give those assets to the correct beneficiaries. How Long Does the Executor Have to Pay the Beneficiaries? The short answer is: It depends. The executor should work diligently to get each beneficiary paid as soon as possible. While the executor is responsible for ensuring beneficiaries receive the money or property they were left in the will, the probate process may delay beneficiaries from receiving a payout. Depending on the size of the estate and the debts and taxes the estate owes, it may take anywhere from six months to more than one year for a beneficiary to receive an inheritance. The probate process varies depending on the state, but the typical process goes like this: Submit the Will for Probate — Part of the executor’s responsibility to the estate is to file the will with the probate court. Filing the will begins the probate process. Once completed, the beneficiaries are one step closer to receiving their inheritance. The time executors have to file a will with the probate court varies by state. File an Inventory — An inventory of estate assets is required. As part of an inventory, the executor determines the total value of all estate property, money, and other assets. A completed inventory can then be used by the executor to determine whether federal or state taxes apply, or whether assets will be used to settle debts. Pay Taxes and Debts — Before the executor can distribute any assets to beneficiaries, estate debts and taxes must be paid. The executor is responsible for ensuring these payments are made. Creating a complete estate plan can be overwhelming. With the help of an experienced estate planning attorney, you can ease some of the anxieties you may be facing in thinking about estate planning. If you are ready to start the estate planning process give Jayde Law PLLC a call..
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