Five Common Misconceptions About Powers of Attorney

A Power of Attorney is a binding legal document, one that effectively allows someone you nominate to make certain kinds of decision and act on your behalf. Powers of Attorney are usually used if you either become unable to work for yourself, or you do not wish to act for yourself.

There are many reasons why you might choose to make one, including being out of the country or hospitalised for an extended period and you need someone to mind your assets while you are away; or to protect yourself and your assets should you lose mental capacity.

However, a lot of us put this job off due to, among other things, certain misconceptions.

This article aims to debunk some of the most commonly held misconceptions regarding a Power of Attorney.

Misconception One: Attorneys, once nominated, cannot do whatever they like

This is one of the main fears people have about giving someone else control over their assets. However, it is entirely unfounded as attorneys are heavily restricted in what they can and cannot do.

There are various checks and balances in place to make sure an attorney does not abuse their position, including a set of rules regarding getting the power registered so it can be used at all.

The first set of restrictions come from you. When creating a power, specifically a lasting power, there is an opportunity for you to put as many or as little restrictions on your attorneys. For example, if you are setting up a financial lasting power, to allow our relatives to look after your finances should you lose capacity, then you can state clearly on the paperwork that while your attorneys can do X, Y & Z they cannot sell your home, or they must all decide together before spending an amount over £X.

The second set of restrictions comes from the Office of the Public Guardian which lay down clear rules for how an attorney must behave, including preventing them acting outside the power given in the power and making sure they always act in the donor’s best interest.

Misconception Two: You must use the Power of Attorney the moment it is made, or You cannot make a Power of Attorney until you know you will need it soon.

A lot of us put this job off as we are not in the position where we need it now or (to our knowledge) in the imminent future.

Unfortunately, life doesn’t always give you warnings and powers of attorney are not just for the elderly who may have concerns about dementia. Anything can happen that could cause you to need an attorney immediately, including a sudden and unexpected hospital admittance, an unplanned trip out of the country, or, tragically, an accident which causes you to lose capacity.

It is wise to create a power long before it is needed, especially a lasting power of Attorney (expressly designed for a loss of capacity).

It is entirely possible to write and sign a lasting power but keep hold of it until you need it or want to use it. This is because for a Lasting power to be used it must be registered until it is registered it is just a piece of paper with no power or purpose, and it can sit in a drawer until needed.

You could easily create and sign a Lasting power when you are in your 30′s and not register it until you need it in your 70′s.

Misconception Three: You can wait until someone loses capacity before making a Lasting Power of Attorney

This ties in with the above misconception and is completely wrong. Making this mistake can cost you and your loved one’s thousands of pounds.

To make a lasting power or a general power the person making it must have capacity. There is no way around this. If you lose capacity, you cannot make a Power of Attorney and your loved ones must apply for what is called a Guardianship of you and your assets, which costs over a thousand pounds and takes several months to sort out.

Considering that you could put together a power yourself for free or use a solicitor for £200 (depending on the firm, shop around) it should be a no brainer that this is the superior document.

It is also worth noting that if you make a general power and then lose capacity your general power loses all its power. If you had made a lasting power when you had capacity then subsequently lose capacity your attorneys can register the Lasting Power of Attorney with the Office of the Public Guardian immediately and start helping you with your finances and care.

Misconception Four: A Power of Attorney is for Life

This simply is not true.

There are different types of Power of Attorney, Lasting and General. Lasting powers (you might have guessed from the name) are usually long term. However, a general power is not.

A general power is a document that you can set up to allow someone to look after an affair of yours while you are not able to, if, for example, you are out of the country, hospitalised for a few months or unable to leave the house for a while. A general power gives someone else authority to act on your behalf for a particular reason, to perform a specific task or for a specific length of time. As soon as you become able to manage your affairs again, you can destroy the general power.

Misconception Five: You can only have one attorney

The role of attorney is challenging at times, and there is a lot of responsibility.

So rather than put all of that responsibility onto one individual you can spread that about by having more than one attorney. This second person is called a joint attorney.

You can appoint any number of attorneys in the same power, and you can specify if they can act on their own separately or if they must cooperate and come together to decide. You can have them act jointly on some issues such as sale of property but have them work singly on all other matters there is a lot of flexibility, and it is entirely up to you.

Conclusion

In conclusion, there is a lot to consider when making a Power of Attorney, but it is not a decision that should be put off.

Estate Planning Issues for Married Couples

Among the more common estate plans for married couples is what is sometimes referred to as a sweetheart estate plan. Such a plan provides for the entirety of the deceased spouse’s estate to pass to the surviving spouse; on the death of the surviving spouse, whatever remains will pass to the couple’s children or other designated heirs. Mutual reciprocal wills can be used to accomplish this intent. Of course, on the death of the surviving spouse, his or her estate will need to pass through the probate process.

A more sophisticated version of a sweetheart plan incorporates the use of a joint revocable living trust. There are many variations to an estate plan utilizing a joint trust. Basically, though, all of the couple’s assets are held in the name of the trust with both spouses serving as co-trustees. Upon the death of the first spouse, all of the assets remain in the trust with the surviving spouse continuing to serve as the trust’s sole trustee. During the surviving trust’s lifetime, she or he is free to modify or even revoke the trust agreement, change beneficiaries and otherwise dispose of trust assets as he or she sees fit. Among the advantages to using a trust, instead of reciprocal wills, is probate avoidance. However, this model may not serve well in a blended family situation where each spouse may have different natural heirs because of the surviving spouse’s ability to favor his or her own children when disposing the trust’s remaining assets.

A variation on the above is a joint trust which incorporates a survivor’s trust which is created following the death of the first spouse. The survivor’s trust is funded with the surviving spouse’s separate property and his or her share of the couple’s community property. Meanwhile the assets in the joint trust which were owned by the deceased spouse are used to pay administrative expenses, debts and liabilities of the decedent and any specific bequests made by that spouse. So, for example, in the blended family situation, the first spouse to die can provide for his or her own children, while also providing for the surviving spouse by directing that the remainder of the decedent’s share passes to the survivor’s trust.

Another alternative for a married couple’s estate plan is the use of separate trusts. In this arrangement, each spouse places his or her separate property and an equal share of the couple’s community property in a separate trust. Each spouse is treated as the owner of the assets in that spouse’s trust. By naming both spouses as co-trustees of both trusts, both spouses can maintain control over the community assets in the respective trusts. On the death of a spouse, his or her trust becomes irrevocable and is distributed in accordance with his or her instructions in the trust instrument.

A couple considering the use of a trust in their sweetheart plan should weigh the advantages and disadvantages of separate, as opposed to joint, trusts. A joint trust is created by a single trust document which serves to reduce the initial costs of establishing the estate plan. A joint trust may better reflect how the married couple views their assets, i.e., as ours as opposed to his and hers. Separate trusts, however, offer better asset protection from creditor claims, particularly in cases in which only one spouse is vulnerable to such claims. The use of separate trusts can protect the assets of the other spouse and prevent those assets from being reached by creditors of the debtor spouse. Separate trusts also serve to avoid the problems of asset tracing which can arise with the use of joint trusts. When the couple has their assets in a joint trust, the surviving spouse will need to itemize and value trust assets following the death of his or her spouse, which can be a difficult process if assets have been commingled over the years.

Married couples have many alternatives insofar as creating an estate plan that meets their mutual needs and ensures that their respective estates will pass to their intended beneficiaries. Separate trusts may offer enhanced asset protection and ease of administration following the death of the first spouse. By contrast, the psychological benefits of a joint trust may outweigh the advantages of separate trusts for a married couple who are of one accord as to how they want their estate to pass.

What to Know Before You Plan Your Estate

What is Estate Planning?

In short, estate planning is the transfer of your estate and wealth in the most cost-effective and efficient way. The Living Trust becomes an integral tool in doing this since no other planning device offers the same level of flexibility, control and management while you’re alive and when you depart.

In 2015 $2.6 Billion Dollars was lost in Probate Courts nationwide. This because people failed to understand what they needed to do in order to avoid having them family members trapped in the system. It only takes about 4 Core™ documents to keep family safe and out of the courts.

Good Estate Planning must be

1). Cost effective &

2). Efficient.

Nationally 55% of Americans are not planning the inevitable and allowing their families to struggle in the Probate Court system as they lose money and time.

The 2 Biggest questions Americans are asking are:

1. Do I need a will or do I need a Trust?

2. Do I have enough to plan?

The Probate or court system is where our loved ones end up going to settle our estates if we haven’t planned. Whether we have a Will or don’t have a Will our estate must be probated in the court. If our gross estate (before deductions) is more than $150,000 of assets or more than $50,000 in real estate in some states and other states it is much lower like $20,000 and above then the estate must go through Probate. Probate comes from the Latin word “probare” or “probatus”to try, probe, test or to prove something and in this instance someone is trying to prove the validity of your Will or jockeying to get in position as the administrator of your estate so they can distribute your property. The average cost on this is $26,000 and up on a small gross estate of $500,000 and if you own more by virtue of your home the cost can easily swell over $50,0000. When You die intestate without a Will anyone who claims to be a creditor can file in Probate Court to become the administrator over your estate (even over family) and the court could appoint them up if they validate their debt until their debt is fully satisfied which puts a stranglehold on the assets that are supposed to be distributed to loved ones or a charity.

There really are 2 Probates.

Probate #1

The first encounter with Probate occurs while your alive and we refer to it as the “Living Probate.” This is when life throws you a curve ball like a stroke (800,000 people suffer one annually and 35% are 45 and under), heart attack, dementia or Alzheimer’s. You now have to enter the court for a procedure called conservatorship so people can sign off for you in legal capacity. The court procedure has an average cost of $20,000 with many exceeding that due to the need for the court to visually see the person (they will wheel you out to court in this condition), make sure the person seeking appointment is trustworthy (many are not and leads to elder abuse). There is a simple document that is a part of a simple estate plan that avoids this scenario completely and is easy to put in place while you select the person to act as your Agent today while you’re healthy and clear.

Probate #2

The second encounter with Probate is when you pass away either with a Will or without a Will; does not matter both end up in Probate court. This can be expensive, time consuming and open to the public with marketers using the Freedom of Information Act (FOIA) to access court documents so they can market services. The court will not allow full distribution of the estate for at least a year in many states so that creditors can have an opportunity to file in court. You have to sound the dinner bell in a publication which reads: “come and get it.” Then a credit could file in the Probate Court to become the Administrator of the estate (if no Will) or possible petition to become the Executor (where there is a Will) so that they can use leverage to satisfy their debt. Imagine this third party coming in to court and petitioning the court to become the controller over the estate of your deceased loved one; happens every day.

You can eliminate both of these hassles for your loved ones by having a Living Trust and a Durable Power of Attorney to cover any situation that might take place. It is also highly recommended that you put together an Advanced Health Care Directive (referred to as a Living Will in some states) which describes what you want if faced with a vegetative state or comma and doctors have not given much hope of recovery back to a meaningful way of life. If we don’t let others know what we want they will fumble to figure it out while we are incapacitated and we may linger unnecessarily as family members fight in court and medical bills climb draining the life out of your estate that belongs to our family; after all our lifetime work in accumulating it.

In conclusion, there are two plans you can choose:

A. The government’s Plan (Probate generates 2.6 Billion per year), or

B. Your plan which gets more of your wealth to your loved ones or charity of your choice.