Tuesday, March 12, 2013

Should I sign a Power of Attorney?

If you are doing planning for what should happen if you became incapacitated, one of your options is to sign a document called a Power of Attorney.  If you sign a Power of Attorney, you give power to someone to act on your behalf.  You are called the “Principal.”  The person that you authorize to act on your behalf is called the “Attorney in Fact.”   In Minnesota, there is now a form that can be used called the Statutory Short Form Power of Attorney..

A Power of Attorney is a very powerful document.  This makes it both useful and dangerous.  You really must trust the person to who you are giving it. 

You read about the abuse of the Power of Attorney in the newspaper on a depressingly regular basis. People execute a Power of Attorney naming one or more of their children as Attorney in Fact, intending that the child will help them as they age.  The child then abuses the trust the parent placed in him or her and uses the parent’s money for the child’s own bills or pleasure.  Usually, this abuse is discovered after the fact and by then the money is usually irretrievably gone.  For this reason, police have started calling a Power of Attorney a “license to steal.”

You should not give a Power of Attorney to anyone you do not completely trust.  However, there are some actions you can take to try to protect yourself if you decide to give someone a Power of Attorney. 

First, in the Statutory Short Form Power of Attorney, you can name two people who have to act together.  If you do this, abuse of the Power of Attorney requires both named persons consent to the abuse. 

Second, you can require from the Attorney in Fact periodic explanations of the actions  the Attorney in Fact taken under the Power of Attorney (called an “Accounting”).  In the Statutory Short Form accountings can be required on a monthly, quarterly or annual basis. 

Third, you can provide that the accounting must be provided to persons in addition to yourself.  So, if all the children get accountings, the chance of one child inappropriately taking the money is lessened.  Providing that a neutral professional like your accountant be given the accounting can be even more effective, although the neutral will need to be compensated for their oversight.

Fourth, you can provide that the Attorney in Fact cannot transfer assets directly to themselves.  This restriction, however, is easy to circumvent by appearing to pay bills or using a straw payee.

None of these options are mutually exclusive.  You could use all of them.  However, it cannot be stressed too much that you really must trust anyone that you name as your Attorney in Fact.  There is no substitute for picking an honest Attorney in Fact.


Visit us at: www.tl-attorneys.com

Friday, March 1, 2013

Advanced Planning

Why Plan Ahead?

It is easy to put off doing death and disability planning.  First, there are so many other demands on your time, energy and money that are much more immediate.  Second, there is psychological resistance.  Thinking about death and disability is not pleasant.  Furthermore, it may not seem rational but planning for death or disability on some level almost seems like it might make the worst happen.  So, do you have to do death and disability planning?  The honest answer is no.  The problem is that you might not like the consequences. 

We get phone calls all the time from people who have waited until their loved one is very ill to try to arrange affairs.  This means that the requested documents have to be done on an emergency basis.  Time and energy that could be used to care for the ill or dying person is diverted into locating an attorney and getting tasks done.  Often, it is too late because the loved one really does not have capacity to execute the documents.  Doing things at the last moment also increases the chances of a challenge to what was done if someone in the family is unhappy with the decisions.  It also increases the likelihood that the challenge will be successful.

                                    Disability Consequences

So, what happens if you have not done advance planning for disability?  This means that you have not appointed anyone to make health care decisions and living arrangements for you under a Health Care Directive.  If you cannot speak for yourself, there is no one legally appointed to speak for you.  If there is a difference of opinion in your immediate family, if the health care professionals are not comfortable with the decision, or if you do not have a family or a legally recognized family, a petition must be brought before the probate court for the appointment of a guardian.  This will cost $1,500 to $2,000 even if there is no dispute as to who should be appointed.  It will also take 4 to 6 weeks.  Since you have not expressed a preference, the likelihood of a dispute is greater.  Nor have you given directions about your preferences for care or treatment.

If you have not done any disability advanced planning you also have not considered granting a power of attorney to, at least, your spouse so that your money can be accessed to pay bills. This means that a petition will have to be brought before the probate court for the appointment of a conservator.   The cost and delay is the same as for the petition for a guardian, even if there is no dispute as to who should be appointed.  Nor have you expressed a preference for who should be appointed.
                                    Death Consequences

If you die without a will, the legislature has written a statute that tells us what will happen to your probate assets (called the intestate succession statute).  The legislature has guessed that, unless there are step children, you want everything to go to your spouse.  If your family includes step children the probate assets will be split between your spouse and your children.  If you have no spouse or children, grandchildren etc., the probate assets will go your parents, if alive, your brothers and sisters or biological nieces and nephews and so on.  If this is what you want, fine.  If this is not what you want, you have to do a will, a trust or make other arrangements to change the distribution.  If you have not done advance planning, you also have thrown away the possibility of arranging things so that no probate will be needed.

If you are the parents of minor children it is very important that you do advance planning.  If you have not legally expressed a preference for who should raise your children if you and your spouse have died, the court has to make a decision without input from you. Very ugly litigation between relatives has been known to ensue.  It may be more difficult and expensive to get access to money that is needed to raise the children and the children will also get complete access to any money that is left when they turn eighteen (18).  Most parents prefer that their children be older than that before they get unfettered access to the money.

If you decide that you do want to do advance planning, we would be happy to assist you.  We are open to payment plans and our estate planning rates already contain a discount from our normal rate.  On the estate planning page of our website are two questionnaires that you can use to think through decisions that you need to make.  This allows you to be efficient in using our services.



For more information visit us at: www.tl-attorneys.com