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THE LEGAL PLAN-IT

Volume 7, Issue 3
Top Reasons Everyone Needs a Comprehensive Power of Attorney

The benefits of a highly detailed, comprehensive power of attorney are numerous. Unfortunately, many powers of attorney are more general in nature and can actually cause more problems than they solve, especially for our senior population. This issue of the Legal Plan-It highlights the benefits of a comprehensive, detailed power of attorney, including some of the provisions that should be included. A proper starting point is to emphasize that the proper use of a power of attorney as an estate planning and elder law document depends on the reliability and honesty of the appointed agent.

The agent under a power of attorney has traditionally been called an "attorney-in-fact" or sometimes just "attorney." However, confusion over these terms has encouraged the terminology to change so more recent state statutes tend to use the label "agent" for the person receiving power by the document.

The "law of agency" governs the agent under a power of attorney. The law of agency is the body of statutes and common law court decisions built up over centuries that dictate how and to what degree an agent is authorized to act on behalf of the "principal"—in other words, the individual who has appointed the agent to represent him or her. Powers of attorney are a species of agency-creating document. In most states, powers of attorney can be and most often are unilateral contracts – that is, signed only by the principal, but accepted by the agent by the act of performance.


Much has been written about financial exploitation of individuals, particularly seniors and other vulnerable people, by people who take advantage of them through undue influence, hidden transactions, identity theft and the like. Prior issues of the Legal Plan-It have addressed guardianships and conservatorships and discussed the benefits of court supervision of care of vulnerable people in such contexts. Even though exploitation risks exist, there are great benefits to one individual (the principal) privately empowering another person (the agent) to act on the principal's behalf to perform certain financial functions.

A comprehensive power of attorney may include a grant of power for the agent to represent and advocate for the principal in regard to health care decisions. Such health care powers are more commonly addressed in a separate "health care power of attorney," which may be a distinct document or combined with other health topics in an "advance health care directive."

Another important preliminary consideration about powers of attorney is "durability." Powers of attorney are voluntary delegations of authority by the principal to the agent. The principal has not given up his or her own power to do these same functions but has granted legal authority to the agent to perform various tasks on the principal's behalf. All states have adopted a "durability" statute that allows principals to include in their powers of attorney a simple declaration that no power granted by the principal in this document will become invalid upon the subsequent mental incapacity of the principal. The result is a "durable power of attorney" – a document that continues to be valid until a stated termination date or event occurs, or the principal dies. Absent durability provisions, the power of attorney terminates upon the principal’s death or incapacity.

Having covered the explanation of what a durable power of attorney is, let us look at the top benefits of having a comprehensive durable power of attorney.

1. Provides the ability to choose who will make decisions for you (rather than a court).

If someone has signed a power of attorney and later becomes incapacitated and unable to make decisions, the agent named can step into the shoes of the incapacitated person and make important financial decisions. Without a power of attorney, a guardianship or conservatorship may need to be established, and can be very expensive.

2. Avoids the necessity of a guardianship or conservatorship.
Someone who does not have a comprehensive power of attorney at the time they become incapacitated would have no alternative than to have someone else petition the court to appoint a guardian or conservator. The court will choose who is appointed to manage the financial and/or health affairs of the incapacitated person, and the court will continue to monitor the situation as long as the incapacitated person is alive. While not only a costly process, another detriment is the fact that the incapacitated person has no input on who will be appointed to serve.



3. Provides family members a good opportunity to discuss wishes and desires.

There is much thought and consideration that goes into the creation of a comprehensive power of attorney. One of the most important decisions is who will serve as the agent. When a parent or loved one makes the decision to sign a power of attorney, it is a good opportunity for the parent to discuss wishes and expectations with the family and, in particular, the person named as agent in the power of attorney.

4. The more comprehensive the power of attorney, the better.

As people age, their needs change and their power of attorney should reflect that. Seniors have concerns about long-term care, applying for government benefits to pay for care, as well as choosing the proper care providers. Without allowing, the agent to perform these tasks and more, precious time and money may be wasted.
5. Prevents questions about principal's intent.

Many of us have read about court battles over a person's intent once that person has become incapacitated. A well-drafted power of attorney, along with other health care directives, can eliminate the need for family members to argue or disagree over a loved one's wishes. Once written down, this document is excellent evidence of their intent and is difficult to dispute.

6. Prevents delays in asset protection planning.

A comprehensive power of attorney should include all of the powers required to do effective asset protection planning. If the power of attorney does not include a specific power, it can greatly dampen the agent's ability to complete the planning and could result in thousands of dollars lost. While some powers of attorney seem long, it is necessary to include all of the powers necessary to carry out proper planning.

7. Protects the agent from claims of financial abuse.

Comprehensive powers of attorney often allow the agent to make substantial gifts to self or others in order to carry out asset protection planning objectives. Without the power of attorney authorizing this, the agent (often a family member) could be at risk for financial abuse allegations.

8. Allows agents to talk to other agencies.

An agent under a power of attorney is often in the position of trying to reconcile bank charges, make arrangements for health care, engage professionals for services to be provided to the principal, and much more. Without a comprehensive power of attorney giving authority to the agent, many companies will refuse to disclose any information or provide services to the incapacitated person. This can result in a great deal of frustration on the part of the family, as well as lost time and money.



9. Allows an agent to perform planning and transactions to make the principal eligible for public benefits.

One could argue that transferring assets from the principal to others in order to make the principal eligible for public benefits--Medicaid and/or non-service-connected Veterans Administration benefits--is not in the best interests of the principal, but rather in the best interests of the transferees. In fact, one reason that a comprehensive durable power of attorney is essential in elder law is that a Judge may not be willing to authorize a conservator to protect assets for others while enhancing the ward/protected person's eligibility for public benefits. However, that may have been the wish of the incapacitated person and one that would remain unfulfilled if a power of attorney were not in place.

10. Provides immediate access to critical assets.
A well-crafted power of attorney includes provisions that allow the agent to access critical assets, such as the principal’s digital assets or safety deposit box, to continue to pay bills, access funds, etc. in a timely manner. Absent these provisions, court approval will be required before anyone can access these assets. Digital assets are also important because older powers of attorney did not address digital assets, yet more and more individuals have digital accounts.
11. Provides peace of mind for everyone involved.

Taking the time to sign a power of attorney lessens the burden on family members who would otherwise have to go to court to get authority for performing basic tasks, like writing a check or arranging for home health services. Knowing this has been taken care of in advance is of great comfort to families and loved ones.

Conclusion
This discussion of the Reasons Why Everyone Needs a Comprehensive Power of Attorney could be expanded by many more. Which benefits are most important depends on the situation of the principal and their loved ones. This is why a comprehensive power of attorney is so essential: Nobody can predict exactly which powers will be needed in the future. The planning goal is to have a power of attorney in place that empowers a succession of trustworthy agents to do whatever needs to be done in the future. Please call us if we can be of assistance in any way or if you have any questions about durable powers of attorney.


To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.


www.stocktonlaw.com

Rock legend and superstar Prince was a worldwide celebrity, and his untimely death is truly tragic. Yet for all his wealth and fame, it appears he may not have had an estate plan in place, dictating how he wanted his millions passed on after he died. And he is not alone. Many individuals in Kansas City, young and old, do not have an estate plan. Prince's death, however tragic, highlights the need to create an estate plan, no matter what your wealth.

It is never too late to create an estate plan. Let's examine some documents individuals may want to include in their estate plan.

When a person thinks of an estate plan, the first thing that may come to mind is a will. A will is basically a legal statement of who you want to take care of your estate after you die and how you want your assets passed down. If a person has minor children, a will can name who will take care of the children should both parents die.

Instead of a will, many people choose a trust as their primary estate planning tool. Trusts are typically more complex than wills, but they have a number of advantages, including avoidance of probate.

Some financial assets have beneficiaries named in the account documents. This includes certain types of retirement accounts and life insurance policies. Such beneficiary designations operate independently of what an individual may include in their will.

Finally, an estate plan should include a health care directive and a durable power of attorney. A health care directive can outline your wishes about what you want done medically if you can no longer communicate your wishes. A durable power of attorney appoints a trusted person to manage your affairs should you become incapacitated.

Creating an estate plan is not just for your own benefit, it is for the benefit of your loved ones, who will not be left second-guessing what you would have wanted. If you have more questions about how to create an estate plan, there are legal professionals available to assist you.

Source: money.usnews.com, "A Purple Rain Estate Plan," Brian Preston and Bo Hanson, May 6, 2016

#estateplanning #trusts #prince

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Sometimes, a person in Kansas City with special needs receives government benefits such as Medicaid benefits or Supplemental Security Income. However, did you know that if a person receiving benefits comes into an inheritance, his or her ability to continue receiving benefits could be affected?

There are certain income and asset requirements that an individual must meet in order to receive Medicaid or Supplemental Security Income. If an individual's net worth is too high, he or she may not qualify for such benefits. An inheritance could push a person over these net-worth restrictions. When this happens, an individual may then need to use his or her inheritance to pay for his or her care needs that were formerly covered by his or her government benefits. Obviously, this is not a desirable result for those in Kansas City who plan to leave an inheritance to a loved one with special needs.

However, such a result may be avoided in some circumstances through the creation of various special needs trusts. Such trusts include pooled trusts, third-party trusts and self-settled trusts. In essence, these trusts hold assets that exceed the Medicaid or Supplemental Security Income net-worth requirements. The trust, not the individual, retains ownership of the assets, and then distributions can be made to the trust beneficiary to pay for what is not covered by Medicaid or Supplemental Security Income.

Special needs trusts can be complicated to complete and should not be handled alone. Instead, an estate planning attorney can be consulted to determine what type of trust one should create to best suit his or her needs and the needs of his or her loved one. The webpage concerning special needs trusts on our website may prove to be of use to learn more.

#medicaid  
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After you create a will, you may think that everything is squared away-your intended heirs will inherit per the terms of the will and ensure your wishes are met. Unfortunately, things do not always run that smoothly. Sometimes an individual in Kansas City will challenge a will, leading to litigation and possibly voiding all or part of the will altogether.

What are some common grounds upon which a will could be challenged? One ground for challenging a will is lack of testamentary capacity. While in general individuals over age 18 are presumed to be mentally capable of creating a will, sometimes individuals suffer from mental illnesses that prevent them from having the necessary mental ability when it comes to the formation of a will. In general, to have testamentary capacity, the individual must be aware of the types of property they have, how much the property is worth, who his or her beneficiaries are and what it means to create a will.

Other grounds for challenging a will include undue influence or fraud. In general, this means that someone employed manipulation to convince another individual to leave him or her a substantial inheritance. If the individual was denied the necessary free will to create a will due to manipulation, this may be considered undue influence.

Challenging a will can be difficult, particularly when one is grieving the loss of a loved one. Since there is no guarantee of any specific outcome when it comes to challenging a will, individuals in Kansas City who believe their loved one was the victim of undue influence or lacked testamentary capacity may need to seek the help of an estate planning attorney to determine if they can challenge the will.

Source: FindLaw, "Reasons to Challenge a Will," accessed Feb. 29, 2016

#estateplanning   #wills  
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As we age, it is the unfortunate fact that sometimes we become so physically or mentally incapacitated that we can no longer make our own medical care decisions. This is why it's important to appoint someone -- be it an adult child, a friend or a professional -- to the role of health care agent. This individual is vested with the ability per the law to make choices regarding your medical care. However, when adult children in Kansas City or other relatives disagree with the health care agent's decisions, this can cause tensions to rise.

For this reason, it is important that you let your loved ones know what your medical care wishes are ahead of time, so they know what to expect. In addition, you may want to put these decisions in writing, letting your family members know not only who you've chosen as your health care agent, but also why. Finally, if you do not want certain relatives being a part of your health care decisions, put it in writing and share this information both with your relatives and your health care agent.

There are a number topics that are important for you to discuss with your loved ones when it comes to your end-of-life medical care decisions. For example, you may want to discuss how it is important for your loved ones to honor your wishes, even if they disagree with them. This includes advocating for you to ensure your wishes are honored, even if those are not the decisions the loved one would make for themselves. In addition, it is important to discuss the extent to which your relatives will seek out information about your health should you become incapacitated, along with any advance directives that may be in place.

While talking about end-of-life care may not be the most pleasant conversation, it is an important one. Knowing what to expect can sometimes ease the grief that comes with a loved one's last days. Through proper care planning, you can make sure your loved ones are informed of your decisions.

Source: TheTandD.com, "Advance care planning: What if family members disagree?," Jan. 26, 2016

#careplanning  
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A revocable trust can be a valuable part of an estate plan for many residents of Kansas City. In a revocable trust, a person known as a trustee (which can be the individual who created the trust or another person) manages the property placed in the trust and can revise the trust if necessary up until the creator's death. In some cases, assets in a trust can be passed onto the trust beneficiaries quicker than if the individual had created a will that would have to go through probate first.

The above information is just the basics about revocable trusts. In actuality, there are many nuances to trusts that a person should familiarize themselves with before creating one. For this reason, it is often helpful to retain an attorney when creating a trust, who can educate you on how the trust will operate and can draft sound estate planning documents.

For example, certain types of assets such as life insurance policies or certain types of bank or retirement accounts do not go through probate, but instead are paid out to the account holder's beneficiaries upon the account holder's death. However, it can be beneficial in some cases to name not an individual, but the trust, as the beneficiary to the account. This is because when the trust is the beneficiary, it allows the creator of the trust to dictate how they want the account or policy benefits to be passed on to their heirs.

Another complicated issue when it comes to living trusts is that of privacy. In general, unlike a will that will become part of the public record once it is probated, trusts do not go through probate and therefore will not become public record. However, if an heir files a lawsuit contesting the provisions of the trust, then the trust may become part of the public record.

As you can see, creating a revocable trust can be a complex endeavor. Individuals interested in doing so should make sure they understand all the ins-and-outs of living trusts in their state before proceeding.

Source: Bankrate, "6 surprising facts about a living revocable trust," Judy Martel, accessed Feb. 15, 2016
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state planning and property ownership go hand-in-hand for many individuals in Kansas City. After all, a major component of estate planning is determining how to pass your property on after you die. However, did you know that how you own property can affect what you can do with it through estate planning?

For example, lets look at property held in trust. In fact, a revocable trust is a popular estate planning vehicle for many in Kansas City. In a revocable trust, the individual transfers property to the trust, meaning that ownership of the property changes from a person owning it as an individual to that person owning it as the trustee. Therefore, when the creator of the trust passes away, the designated successor trustee will be considered the owner of the property in the trust and will make distributions to the creator's beneficiaries per the terms of the trust.

That being said, some people do not want to create a trust, but prefer to retain ownership of their property as an individual. There are plusses and minuses to this. One thing to keep in mind is that if you are the sole owner of the property and there is no trust, your property may need to go through probate after you die in order to transfer title. In addition, it is important to understand that if property is held by a sole owner (or two co-owners) it could be subject to creditors' claims. However, one plus of sole ownership is that the individual retains the right to sell the property if he or she wishes to do so.

This is only a brief overview of how property ownership affects estate planning and vice-versa. In fact, estate planning is highly complex, with many alternatives that can be considered. Therefore, individuals in Kansas City interested in estate planning should seek the help they need to create an estate plan that meets all of their needs.

Source: heraldextra.com, "How you own property affects estate planning," Feb. 4, 2016

#trust #probate

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What Happens if a Family Member Becomes Incapacitated?
The Unpopular Topic of Discussion Every Family Needs to Have

Just bringing up the possibility of someone in your family becoming mentally or physically incapacitated is often difficult. We tend to think of only the very elderly needing long-term, hands-on care, but a recent report by the Alzheimer’s Association found that one in nine Americans age 65 or older currently have Alzheimer’s. With the baby boom generation aging and people living longer, that number may nearly triple by 2050. Dementia isn’t the only reason for long-term care, of course, but almost everyone knows someone already affected by it.

Waiting too late to plan can throw a family into confusion about what Mom or Dad would want, what options are available, and what resources can help pay for care. Rushed decisions are often the most costly. Having the courage to discuss the possibility of incapacity now can go a long way toward being prepared should that time come. By the way, because anyone can become incapacitated at any time due to illness or accident, the entire family would benefit from planning for every family member.
Planning/Discussion Considerations

Care Options: Depending on the type and expected duration of care needed, options range from in-home care to adult daycare to assisted living facilities to nursing homes. Assistance with activities of daily living (ADL), which include eating, bathing and dressing, are generally not covered by health insurance. Professional care can be expensive; the national average for basic assisted living services is now about $42,000 per year. Care for those with dementia can last longer and cost considerably more. Family caregivers, who provide the bulk of in-home care, are often unpaid, and the emotional and financial tolls can be considerable. When planning or sitting down for a family discussion, you should be realistic about finances and family circumstances. 
Finances: Where will the money come from to pay these expenses? What resources will be available? Health insurance does not cover assisted living/nursing home facilities or help with ADLs. Medicare covers some in-home health care and a limited number of days of skilled nursing home care, but not long-term care. Medicaid, which does cover long-term care, does not begin providing benefits until the applicant has spent down their own non-exempt assets to $2,000 or less!  VA benefits for Aid & Attendance may be available for wartime-veterans and their spouses. If there are significant assets, you can self-insure and pay the costs as you go. Home equity and retirement savings can also be a source of funds. If you want to protect these assets for your family, long-term health insurance may be an option. (Premiums are much lower when you are younger.)
Documents: Everyone over the age of 18 needs basic legal documents. These include an advance health directive or healthcare power of attorney (legally appointing another person to make healthcare decisions for you if you cannot make them yourself); a durable financial power of attorney (legally appointing another person to make financial decisions for you if you cannot make them yourself); and a trust and/or will.

Having the Discussion: Your parents may be harboring secret fears about what will happen to them if they need long-term care. Talking about this honestly, listening to their fears and desires, and putting a plan in place before it is needed can help reassure them (and you). If you want to talk to your children, reassure them that you are just being realistic. Starting with a story about someone you know or an article you read can be a good way to break the ice. 

How to Get Help: At Stockton & Stern, LLC we specialize in Elder Law and have helped many families in these same situations. We can facilitate the necessary discussion and are able to make recommendations that will save you considerable time, money, and stress. We can also work with other personal or family advisors (financial/investment, insurance, CPA, etc.) to help put together the best plan for you and your family’s circumstances. 

If you do not already have a proper estate plan in place that properly addresses incapacity and long-term care planning, or if your plan has not been reviewed by an attorney within the past 3 years, we would encourage you to contact our office to schedule a free consultation with one of our attorneys to discuss your or your loved ones’ needs and concerns.  To schedule a free consultation call us at 913-856-2828 or email.

 
www.stocktonlaw.com

It is a fact these days that although people are living longer than ever, nursing home care and other types of long-term care can be prohibitively expensive. Have you given much thought about how you will afford such care when the time comes? One option you may want to consider is applying for Medicaid.

Medicaid can be an important component of care planning for many individuals in Kansas City. However, there are certain requirements that must be met in order to qualify for Medicaid, in particular, income and asset requirements known as the Individual Resource Allowance. While certain types of property may be exempt from this amount, if the individual seeking Medicaid is married, determining whether he or she is eligible for Medicaid becomes more complex. This is because in situations like this, the Medicaid applicant will have to go through the division of assets in order to lower his or her spouse's Maximum Community Spouse Resource Allowance.

That being said, there are options if the amount of an individual's "non-exempt" property is higher than the Community Resource Allowance limit. However, one may want to seek legal help to learn more about these options. For example, one may think that simply giving away the extra property will take care of the issue. Unfortunately, doing so could be considered a violation of the Medicaid Transfer Penalty, which could affect an individual's ability to receive Medicaid benefits.

The legal team at Stockton & Stern, LLC, understands that qualifying for Medicaid can be a major part of an individual's care plan. They have helped many past clients create asset protection plans. Such plans may include creating an irrevocable trust or making certain types of gifts. Keep in mind, however, that such plans have many legal complexities. Instead of trying to handle the issue on your own, it may be wise to seek help. The following information on Medicaid in the Kansas City area may be useful to those who want to learn more about Medicaid planning and asset protection plans.

#medicaid  

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