According to a study conducted by Caring.com, the percentage of people aged fifty-five and older who have created a will has fallen from 60 percent to 44 percent since 2019. Although creating or updating your estate planning may seem like a daunting task, a proper estate plan can help address the concerns you may face as a senior citizen. We are here to help you.
Who can help me if I am unable to manage my own affairs?
According to a survey conducted by the US Census Bureau, approximately 69 percent of survey respondents who were age eighty-five and older had at least one type of disability. As you get older, it is more likely that you may need assistance in handling your financial and medical affairs.
A financial power of attorney allows you to choose a trusted person (an agent or attorney-in-fact) to handle your financial matters (sign checks, pay bills, file taxes, etc.). Without a financial power of attorney, a court will need to appoint someone if you need someone to handle financial matters on your behalf. This can take time and money that may not be optimal in the midst of a crisis.
A medical power of attorney allows you to appoint a trusted person as your decision maker to communicate or make healthcare decisions on your behalf if you cannot do so. If you do not have a medical power of attorney, the court may be required to name someone to make these decisions for you, costing your loved ones time and money and infringing on your privacy.
Can someone help me if I am out of town?
A recent New York Times article explored the trend of individuals over age sixty-five traveling more now that a COVID-19 vaccine is available. Whether you are visiting loved ones in another state or crossing countries off your bucket list, you, too, may be traveling more now than you did before. However, the world does not stop just because you leave home for a period of time. A financial power of attorney can allow your agent to handle financial matters on your behalf while you are out of town. Although it may seem scary to allow another person to manage your financial affairs, take comfort in the fact that you can still act on your own behalf if you are able, and if your agent makes a decision you do not like, you can remove them as your agent. This means that you can go out of town and feel assured that your agent can handle your financial affairs, if necessary, while you are gone.
How do I protect my loved ones after I am gone?
Unfortunately, no one is immortal. At some point in time, you will pass away. Although you will no longer be with your family, you can still have a direct impact on your loved one’s financial future. A trust is a great tool to hold the money and property you want to give to your loved ones. Whether the trust is a revocable living trust or a part of your last will and testament, it allows you to set aside a portion of your accounts and property for the benefit of a loved one. You can name someone to oversee the money and property and instruct that person on when and how the money and property must be used. When establishing a trust, there are a few different options for how your loved one can receive the money and property:
We want you to enjoy your golden years to the fullest. One way to make sure that you live a full and happy life is to address your concerns with a proper estate plan. To learn more about the ways in which we can help you and your loved ones, contact us at your earliest convenience.
As a single individual, you may feel overwhelmed when you think about who will step in and make decisions for you if you cannot make decisions for yourself and who will receive your money and property when you die. You may consider your parents or siblings, but depending on whether they are living and the nature of your relationship, they may not be an option. Having an estate plan is important to ensure that your wishes are carried out during your life and after your death. If such worries are preventing you from completing your estate plan, we are here to help you.
Choosing the Right Decision Makers
A time may come when you will need someone to handle financial transactions or make or communicate medical decisions on your behalf. If you have not already chosen someone in a properly executed document, the court will step in and, using state law, choose the person who will make the important decisions for you. Below are a couple of the important roles that, to properly protect yourself, you should name someone to fill.
Agent under a Financial Power of Attorney
The agent in a financial power of attorney is the individual who carries out financial transactions (such as signing checks or opening a bank account) on your behalf. The duration and scope of the agent’s authority are spelled out in the financial power of attorney. No matter whom you choose, it is important that your agent be responsible, keep detailed records regarding the financial transactions they undertake on your behalf, and have the time to dedicate to the role. If you have no family member or friend whom you trust to manage your financial transactions, you can hire professionals to assist you.
Agent under a Medical Power of Attorney
If you cannot communicate or make medical decisions, someone else will have to do it for you. By properly naming this person in a medical power of attorney, you retain control over who will make medical decisions on your behalf instead of allowing a judge to select someone to make such decisions. When choosing this person, you must make sure that they will follow your wishes regarding your medical decisions and are available to make or communicate them. If you have no trusted family member to be your medical agent, consider a close friend or a trusted professional. However, state law may prevent certain professionals, such as doctors, from acting as an agent, unless an exception exists.
Choosing the Right Recipients
If you do not have an estate plan prepared, your state’s intestacy statute will determine who receives your money and property (owned solely by you and not controlled by a beneficiary designation) and the amount each legal heir will receive. Intestacy laws vary by state, but generally speaking, money and property go first to a surviving spouse, then to descendants (children or grandchildren), parents, siblings, and siblings’ children, in that order, depending on who survives you.
If you have a life insurance policy and fail to designate a beneficiary, the proceeds from the policy may be paid to your estate, necessitating the costly and time-consuming probate process, or may go to individuals according to the order outlined in the policy agreement. Similarly, if your retirement account does not have a named beneficiary, that account may also end up going through probate, which may cause unintended income tax consequences or distributed according to the default rules of the account agreement.
Proper Tax Planning
The federal tax system gives preferential treatment to married people. Married couples can take advantage of the estate tax marital deduction and transfer an unlimited amount of money and property, tax free, to the surviving spouse when one spouse dies. In addition, married individuals are allowed to add any remaining part of their deceased spouse’s exemption amount to their own exemption amount. As a single person, you have only your lifetime exemption ($11,700,000 in 2021).
Similar to a married individual, you can give away up to the annual exclusion amount ($15,000 in 2021) without having to file a gift tax return and pay gift tax. However, married individuals can make larger gifts and split the amount between them. For example, Spouse 1 and Spouse 2 can give $30,000 to their child without having to pay gift tax. In this case, a return may still be necessary, but if Spouse 1 and Spouse 2 agree to split the gift, each is technically giving only $15,000 to their child.
Because you can use only your lifetime exclusion amount and the annual exclusion amount, if you are very wealthy, you may need to engage in tax planning earlier and it may be more complex.
We Are Here to Help You
Completing your estate plan allows you to take control by providing instructions about what is to happen during your life and at your death. Estate plans can be drafted in a number of different ways to ensure that your unique wishes are carried out. Call us today to learn more about how we can help ensure that your legacy is protected and that the people and causes you care about are provided for.
Besides directing what happens to your finances when you pass away, a comprehensive estate plan also addresses the possibility that you could become unable to handle your financial affairs while you are still alive.
You may have signed a financial power of attorney (POA) that allows one or more people to act on your behalf if and when you become unable to act for yourself. However, a financial POA is not valid in certain situations. Knowing when your POA will not be recognized is an often-overlooked aspect of estate planning. To ensure that you have anticipated every contingency, you should discuss with your estate planning attorney the POA exceptions noted in this article.
When you sign a financial POA, you grant the person you designate, known as an “agent” or “attorney-in-fact,” the legal authority to manage your financial matters, including banking transactions, real estate transactions, investments, gift giving, and paying bills.
You can name more than one person as your agent under a financial POA, though joint agents might not be advisable in some circumstances. You can also appoint alternates in case your first choice cannot fulfill their responsibilities. Before naming anyone in a POA, it is a good idea to consult the person you wish to appoint as agent to make sure they are willing and able to handle the role.
In most states, a financial POA can be immediate or springing. An immediate POA takes effect the moment it is signed whereas a springing POA is conditional, taking effect when you become incapacitated or when another predetermined condition is present. Both types of financial POA are effective only while you are living. When you die, your designated agent loses their authority.
Financial POAs can be broad, but they are not recognized in all situations. If you want to authorize your agent to work with the Internal Revenue Service (IRS), the Social Security Administration (SSA), the Department of Veterans Affairs (VA), and some financial institutions, you may have to complete additional documentation.
The IRS has its own means for designating an agent. Before an agent can represent you in front of the IRS, you must complete Form 2848, Power of Attorney and Declaration of Representative. Form 2848 authorizes an agent (typically an enrolled agent, an accountant, or an attorney) to represent you in IRS audits and negotiations. But Form 2848 is also required if you just want an agent to handle basic tax matters such as filing your tax forms or paying your taxes.
According to the Form 2848 instructions, the IRS might accept a POA that meets the requirements for being a substitute and is submitted to the IRS along with Form 2848. Although your signature is not required, your agent must sign the form. Form 2848 also requires you to specify the tax matters and years for which you are authorizing the agent to act. For more information, see IRS Publication 947.
The SSA does not recognize financial POAs. To designate someone to manage your Social Security benefits (including SSI payments), you must appoint a “representative payee.” You can appoint a representative payee in advance. If you do not appoint a representative payee and the need for one arises, the SSA may appoint one for you.
A potential representative payee must complete form SSA-11 and, usually, an in-person application at their local Social Security office. Representative payees are expected to fulfill a range of required duties and be actively involved in the beneficiary’s life. They may occasionally be asked to submit a report to the SSA accounting for how they used the beneficiary’s benefits.
Veterans who are not physically present or who want help with their claim may authorize another person to represent them when pursuing a claim for compensation or special monthly pension benefits. The veteran does not have to be incapacitated.
However, the VA states that an “individual with POA under State law is not authorized, based on the State appointment, to engage in VA representation.” The VA allows only certain types of representatives, and they must apply for accreditation using different forms. Individual representatives must use VA Form 21-22a. Accredited representatives must use VA Form 21-22.
More information about the VA and POA is available in this document.
Banks and other financial institutions sometimes refuse to honor financial POAs. In some cases, they may simply be exercising caution to protect themselves from authorizing an illegal transaction. In other cases, the institution may have their own standard POA form for accounts under their management.
In some states, including Florida, financial institutions may be legally required to accept or reject a POA within a certain time frame and could face penalties for unreasonable denials. However, for the sake of expediency, check with your financial institutions and find out whether they have their own power of attorney forms. If they do, bring the form to our office to be reviewed and executed alongside your financial POA. We will also need to ensure that the two documents do not conflict.
We Are Here to Help
Though a financial POA is crucial for ensuring that your financial affairs will be handled according to your wishes, it may not cover all possible needs. By planning proactively, we can help ensure that you are properly protected regardless of the situation. Call us today to review your current estate planning documents or put your own personalized plan in place.