A comprehensive estate plan consists of several documents that accomplish three important things. First, they lay out your wishes for the handling of your money and property during life and at death. Second, they explain your medical wishes if you are no longer able to make them yourself or communicate them to others. Third, they list the trusted individuals you want to carry out your financial and medical wishes.
For some people, choosing trusted decision makers is easy; for others, it may be more difficult due to tense family circumstances, geography, or the lack of living family members. While most advisors and attorneys counsel clients to choose family members or close friends, this may not always be an option. But have no fear. You can consider hiring someone if you do not have a family member or close friend to appoint to one of these important positions.
Below are some of the important decision makers you may need to select, options for whom to consider if you do not have a family member or friend who can fill the role, and questions to ask the prospective decision maker.
Executor or personal representative. This trusted individual, appointed in your last will and testament, is responsible for collecting all of your accounts and property, paying your outstanding debts, and distributing your money and property to your named heirs or trustee. This person’s task is to wind up your affairs at your death, which can be time-consuming.
Successor trustee of a revocable living trust. Serving after you, this trusted person or entity is charged with managing, investing, and distributing the money and property from your revocable living trust to you during your lifetime and to your chosen beneficiaries after your death.
Agent under a financial power of attorney. Your agent is an individual you choose to carry out financial transactions on your behalf (such as signing a check or opening a bank account). Subject to your state law, the type of authority and when the agent may act on your behalf can be specified in the financial power of attorney.
When it comes to selecting an agent to handle your financial transactions—whether at your death or during a time when you are unable to manage them yourself—there are several options available to you beyond family and friends.
When interviewing potential candidates, consider asking the following questions:
These may be the most difficult roles to fill because you are asking someone to look after your safety and welfare, as well as that of your beloved pet. Accordingly, each has unique considerations.
Agent under a medical power of attorney. This trusted individual is in charge of making or communicating your medical wishes in the event you are no longer able to make or communicate them yourself. In addition to naming someone, make sure you have completed an advance directive or living will to make your medical wishes known to the healthcare staff that could be treating you. It may also be helpful to draft a letter of instruction to your agent explaining, in your own words, the types of medical decisions you would and would not want made on your behalf. Such instructions can be extremely helpful to guide your agent when difficult decisions must be made.
If you have no trusted family member to be your medical agent, your decision may be more difficult. Because of the sensitive nature of making medical decisions for another person,
consider naming a close friend or trusted professional. It’s worth noting that state law may prevent certain professionals, such as doctors, from acting as an agent, unless an exception exists.
Caretaker for your pet. You will need to select someone to take possession of and continue caring for your beloved pet if you are no longer able to care for it due to your incapacity or death. Although the law may treat these members of your family as just personal property, if you want to ensure that your pet is taken care of, you need to thoughtfully consider who will be able to care for it.
If there is not a suitable owner among your family or friends, there are many organizations that may be willing to either take your pet or help your loved ones find a suitable forever home for it.
When interviewing potential candidates for your personal care decision makers, consider asking the following questions. Some of these questions are the same as those offered above for choosing financial care decision makers, but you will want to dig deeper when discussing them with these candidates because you are entrusting these individuals with caring for you and your pet.
Not knowing whom to appoint to these crucial roles can easily derail your estate planning process. Do not let this initial uncertainty prevent you from taking the necessary next steps to protect yourself and those you care about. Call us today so we can discuss your options to ensure that you have trusted decision makers in place to help you when needed.
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.
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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.