All posts by Britney Martin

Making the Most Out of Your Power of Attorney

Present and Future Protections Against the Unknown

A Power of Attorney is a legal document in which you grant a selected person or persons the ability to act on your behalf in financial matters. This can include, but is not limited to: signing on your behalf during a sale, accessing your bank account to pay your bills, adjusting your investments, etc. As such, it is an integral part of any estate plan.

Unfortunately, with this important document come some inevitable risks. The selected person or persons will have access to and control over some of your most valuable assets. More importantly, once the access and control is given, they will be able to take actions without obtaining permission or approval; unless and until the document is revoked.

For many this is cause for concern. They worry that they are sacrificing the safety of their present assets for the sake of future protections against incapacity. And, to some extent they are correct. To protect yourself in the future, there is a certain amount of control that must be given up in the present. But, there are several ways to mitigate these risks.

Here are some of the main ways that this can be accomplished:

Select a Power of Attorney that you trust.

It is very important to think long and hard prior to selecting a person or persons as your Power of Attorney (also known as your POA). But, this choice is more than just finding someone that you can trust not to steal your hard earned money. (Though that is important.)

You should be looking for someone that you trust to make financial decisions in the same manner that you would. To do this, you must first carefully consider your beliefs/opinions/values regarding money. Then, attempt to select someone that mirrors those same beliefs/opinions/values in their own life.

It is also important to consider whether or not the POA you select can handle the responsibility of being your Power of Attorney. Handling the finances of another person can be a difficult responsibility that not everyone is capable of taking on. Carefully consider how the POA will balance their own responsibilities with your own. And, whether the POA will know when to seek assistance if the responsibility becomes too great.

Finally, it is important to make changes to your Power of Attorney Document if circumstances change. As time passes, life events may occur that give you reason to change your POA. Do not hesitate to make such changes, as you never know when you will need your Power of Attorney Document

Carefully Crafted Provisions within the Document.

Even when a POA has been carefully selected, your assets may still be vulnerable. The future is unpredictable and the person you once trusted may disappoint you. Therefore, it is important to have your Power of Attorney Document drafted to restrict the actions your POA can take.

One such provision could be a Restriction on Gift Giving. This provision would not allow your POA to make a gift of your assets to themselves. For example, should the POA wish to acquire your property, they would be forced to pay fair market value for it. Another provision could be to restriction the POA from making amendments to your Estate Plan. This could protect your Will and Trust from being amended in a way you would not have wanted.

Not all protective provisions will work in every situation. Carefully discuss your individual circumstances with your Attorney. They will be able to suggest specific provisions that will fit your needs.

Keep the Signed Power of Attorney Locked Away.

If you are still concerned regarding the safety of your assets, it may be an option to sign your Power of Attorney Document but keep it in your possession. As the signed original is required for the POA to act, without it they are powerless. You could then choose when you wish your POA to have access by simply delivering the signed document to them.

It is important to note that this course of action does not come without risk. If need arises for the POA to act, but they do not have access to the signed original, they will be powerless. If the Power of Attorney Document cannot be located or the POA does not know the document exists, it could then become necessary to petition the court for the authority to act on your behalf. A court petition could be a lengthy and costly procedure. And, it could ultimately result in a POA being selected that you would not have appointed.

Consider a Limited Power of Attorney.

This may be a good option for you if you have a specific task that you need done that you either cannot or do not want to do on your own. Often, this document is used during real estate transactions. For example, an attorney will be requested to attend a closing on behalf of a buyer or seller. In this case, the Limited Power of Attorney Document will allow the POA the ability to sign documents at the closing. Once the closing is complete, the powers granted to the POA by the Limited Power of Attorney Document cease.

Though this type of document may assist with protecting present interests by limiting the POA powers, it leaves much to be desired. A Limited Power of Attorney Document does not and cannot anticipate every need you may have in the future. Therefore, when the unexpected occurs, your POA may be left seeking court approval to handle the matter.

Consider a Springing Power of Attorney.

A Springing Power of Attorney is as all encompassing as a general Power of Attorney but it includes a specific provision that requires a certain event to occur before it becomes active. Normally, this event is incapacity.

Theoretically, this document offers the best of both worlds. You maintain sole control over your assets while you are capable then your POA can take over as soon as the activating event occurs. However, there can be significant downsides.

The significant downside and a reason why this type of Power of Attorney Document is not always recommended is the trigger event. If a need arises prior to the triggering event, a court order will be necessary. And, if the triggering event is incapacity, there can be several steps necessary to activate the Power of Attorney Document. These can include providing incapacity to a Doctor or court, which can take time that the POA may not have.

Do I need a Healthcare Proxy and/or Power of Attorney?

The short answer is… YES.

The Basics: A Health Care Proxy is a legal document that allows another person to make medical decisions on your behalf. A Power of Attorney, on the other hand, is a legal document that allows another person to make and/or execute financial decisions on your behalf.

Why a Health Care Proxy is Important: Medical emergencies can occur at any age. If or when that day comes, someone must make medical decisions on your behalf.

Every person has different beliefs/opinions regarding medical decisions. These decisions range from long term care facility preferences to medical procedures you would and would not like performed. These are intensely personal decisions that have taken you a lifetime to develop. By selecting a Health Care Proxy (HCP for short) in advance of a medical emergency, you have the ability to choose someone that shares in these beliefs/opinions. Without such a document, family members or a court appointed individual may make decisions on your behalf without this knowledge. And, in some cases, this results in actions being taken or not taken that you do not agree with.

Therefore, a HCP is an essential document, in order to make sure that your wishes are carried out, when you are no longer able to make the decisions yourself.

Why a Power of Attorney is Important: Again, medical emergencies can occur at any age. If or when that day comes, someone must make and execute financial decisions on your behalf.

One of the biggest reason to select a Power of Attorney (POA for short) prior to a medical emergency is TRUST. As with health decisions, financial matters are intensely personal. By creating a POA, you can select someone that you know has similar beliefs/opinions regarding money as you do.

A second major reason to select a POA is that the future is UNPREDICTABLE. For years you have planned for your future. You have been putting away money for a house, children’s college tuition, retirement, etc. But then the unexpected happens. That money you have been saving now needs to be used for a different and unforeseen purpose; such as a child with disabilities, the unexpected loss of a job or medical bills. When you are in charge of your finances, you can make these alterations and move forward. However, if you are unable to make financial decisions on your own, a POA will be able to continually monitor your finances and make the necessary changes to protect you into the future. Without such an individual, you may be stuck with the plan that you created prior to your incapacitation that is no longer in your best interest.

As with the HCP, if you do not have a POA the court can appoint someone to act on your behalf. However, this person may not share your beliefs/opinions, may be appointed too late to correct financial errors or may be unwilling/unable to make the decisions/changes you would have. Therefore, it is important to select your own POA, and understand how your finances will be handled when you are no longer capable of handling them on your own.

Conclusion: The future is unpredictable. Put together a Healthcare Proxy and Power of Attorney now so that your future is a little more protected from the unpredictably negative turns life can take.

Should I Put My Child On My Deed?

There are many options when it comes to estate planning. These options can often seem overwhelming and unnecessary. This can feel especially true when dealing with relatively small estates.

In an attempt to avoid the estate planning process, many consider placing their children on the deed of their home. The thought is this: The home is the only asset they have of great value and this will allow the property to go to their children upon their death without dealing with the courts. It is also seen as a relatively cheap alternative to estate planning; making it even more appealing. However, under most circumstances, this is ill advised and can have disastrous consequences.

The main problems with adding a child to your deed are:

  1. Creditors
  2. Control; and
  3. Spouses

Creditors:

As the largest asset that most people own, a home is very valuable. It is often more than just a place to live but is used as collateral to pay for college, weddings, and/or retirement. The home is also one of the first assets creditors go after when a debt is owed. Once a child is placed on a deed, that property becomes open to that child’s creditors. Even if the child has little to no interaction with the property (i.e. does not live there or contribute to mortgage payments) creditors will still have rights over the property.

Though many believe their children to be financially stable, the future can be unpredictable. Unforeseen events, including sickness, can lead to financial instability. This instability can jeopardize your property and leave you with little choice or control. Your children’s creditors may then end up with rights to the equity you have developed, putting you into financial situations you are ill equipped to handle or recover from.

Control:

Once placed on the deed, a child will have an interest in the property. This means that they will need to sign off on any decision made by their parents; whether that is refinancing, selling or otherwise. Though for most this will only be a slight inconvenience, for some it can become more.

If a child decides they do not wish to cooperate, wish to have more control in what happens to the property or wish to gain something financially from the property, a child may have rights to do so. Though the problems may be fixable, it could cost an incredible amount of time and money in court.

Spouses

We all hope that we love, or at least like, our child’s spouse and that their love lasts forever. Unfortunately, for many that is not the case. And, as a child has a degree of control over the property once they are on the deed, so will their spouse.

This control can come in the form of influence over the child or through divorce. If it does turn out that the parents do not care for the spouse, this could lead to animosity that is taken out on the property. Also, in the event of divorce, the property may be up for debate when assets are split.

Conclusion

It is only natural to want to find the quickest and cheapest way to accomplish your goals. However, it is important to understand the risks involved in those decisions. For most, their home is the most valuable asset they own and decisions regarding title should not be taken lightly. Always consult an Attorney prior to making decisions regarding title, to fully understand your options and the consequences of any action.

Homestead Protection for Trusts

Revocable Trusts can be a good way to protect your assets from the probate process. Properly drafted and executed, assets will automatically transfer to your loved ones upon your passing. It also allows you to retain control over your assets while you are alive and gives you the ability to alter the trust as you see fit.

A common misconception regarding a Revocable Trust, however, is that they have some ability to protect your assets from creditors. It is important to know that this is not the case. Because you retain primary control of your assets, with the ability to alter the trust at any time, creditors are still able to access the assets to satisfy debts.

Fortunately for Massachusetts Residence, there is a way to protect your home from most creditors while having it in a Revocable Trust. This protection is known as the Homestead Protection Act.

The Homestead Protection Act, protects your primary residency from unsecured creditors. These creditors are, for example:

  • Someone that slips and falls on your property
  • Medical Bills
  • Credit Card Bills
  • Someone that sues you for something that happens while you are on the job
  • Someone you get into a car accident with; and
  • Many more

The Homestead automatically protects the equity in your home for up to $125,000.00. But, many Massachusetts residence own homes that are worth more than $125,000.00. For these individuals, a Homestead can be filed with the Registry of Deeds and the protection will be increased to $500,000.00. For many this is the difference between a completely protected home and a home that is vulnerable to creditors.

Before March of 2011, this protection was only available to individuals that owned their homes in their own name. Once the property was placed into trust, the protection was lost. However, in March of 2011 the Homestead Act was extended to properties held in revocable trusts if proper requirements were met. A homestead must be filed with the registry of deeds and it must state that the property is owned in trust and that the primary beneficiaries currently or intend to live in the property as their primary residency. Once this is done, your home will have the best of both worlds; the future protections of a trust and the present protections of the Homestead Protection Act.

By putting your property in trust, you are saying that you are concerned about the loved ones that you will leave behind. You are allowing your loved ones the ability to avoid the probate process and the time and money that goes along with it. It only makes sense that you would want to take this simple step to protect one of your most valuable assets while you are alive. By putting your property into a trust with a Homestead Protection, you are protecting it from both the probate process and most creditors.

Click here to read the homestead law.

Please contact Topkins & Bevans to learn more about this important protection and how to obtain it today. firm@topbev.com or bmartin@topbev.com