Why push people to have a Durable Power of Attorney?

A durable power of attorney may save you the process of petitioning the court to have someone appointed as a guardian and conservator.

Why do I say sometimes that I push people — no matter what estate-planning they’re doing — that I push them to have a good durable power of attorney?

Let’s say Bob calls and says my wife Ava needs a durable power of attorney; she needs me to be able to act on her behalf for business, finance and health care. The first thing I’m going to ask Bob is how is Ava’s mental state. How is her capacity, does she know what she’s doing. CAN she sign a durable power of attorney?

And, if the answer is no, if Ava doesn’t have capacity anymore, they are, unfortunately, in a pretty bad spot. Now, lacking capacity, she cannot simply come in to sign a durable power of attorney. She can no longer sign the document that says, I authorize my husband Bob as my power of attorney.

That being the case, his option is now to hire an attorney; he will need to petition the court for a guardianship and conservatorship. He gets to file something saying “I, Bob, am Ava’s husband; she needs help with her affairs. I would like to nominate myself to be the person who takes care of her for business and for healthcare decisions.”

As a spouse, Bob doesn’t really have much special right to act for her. For even simple things like their utilities or to go to the bank or somewhere FOR HER in an official capacity, or to sign Ava’s name, Bob does not have authority.

He can’t qualify to do that just as a spouse. So, he is left to file a Petition with the court, asking that he be a guardian and conservator. Now, he has to send that petition out to close relatives. They have the opportunity to agree or object.

They get to chime in about whether Bob, her husband, is the right person for the job. Spouse or not, Bob’s appointment is subject to their opportunity to object. Moreover, they may even have to have a hearing before the court decides that the husband is the best person to care for his wife. 

If the court ultimately appoints Bob, he receives documents showing he has authority to act in this capacity. Hence, he doesn’t just get to take care of his wife now, but he has to show the documents to prove his authority. Also, he then has to annually file a report of the guardian and the annual report of the conservator.

This document provides basically “here is the business I conducted this year on her behalf and here is the status of her health for the year.” Then, the Court either approves or requires more in the report. Moreover, Bob gets to come back next year.

And certainly, this was easily avoided if some time earlier, Bob and Ava had only known to come to an attorney to talk about a durable power of attorney. Yes they could have each signed a single document appointing one another, and maybe one of their children as a backup. With that, they could have been done. No, they would not need a Court blessing. There is nothing to file, no one to object. It is easy to take care of your business that way.

Now, this is not meant to just be a scary story. I guess maybe it is all just to say everyone should have a durable power of attorney. Now, it is not something flashy that you hear a lot about, but it’s an important document. 

I hope this helps you out. I’m Dan Covington. You can always find me at Estate Plan Kansas.

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Testamentary Trusts: are they clever?

Testamentary Trusts: Using these are a pretty inefficient way to go about estate planning. 

A Testamentary what?

A Testamentary Trust is a trust written into your Will. It essentially says that when you pass away, your property goes into a trust. Then your Trustee may distribute assets in the ways you directed. Sounds clever, right? 

Well, clever is maybe not the right word for it. With a testamentary trust, you’re going to necessarily have to probate that Will. So, the court could say yes, now there’s officially a Trust and this and this and this property goes into the trust, so that the Trust may then be administered. Then, the Trustee can distribute the assets however they are supposed to go, according to what you directed in your trust. BUT, you have to go through probate for this and the Court is going to supervise the process. And then, you may also have to follow up and file annual accountings from year to year, so that the court can see and review “here is what the Trust did this year.”

In my view this is really the worst of both worlds. It is not the end of the world but it’s not an efficient way to go about your estate planning. It is maybe not the best way to get assets to those you care for. You have already written (someone drafted it for you) a trust anyway (within your Will). Then you also had to go through probate, which you wouldn’t have had to do if you just had a straight up Trust drafted. And again you also may have to have the distribution and all spending of that trust supervised by the court with an annual accounting that needs to be filed and approved by the court.

In my mind you waste a lot of time and money. The straightforward way through this is in the first place, when you thought you should write a trust within a Will. Why not write a trust NOT within a will. What does that Will do to add value for you? At its best, the Will dumps the assets it covers into your trust through the probate process. But I can’t imagine how that is more efficient than you simply conveying those assets into your trust when you first organize your trust. How did probate improve things for your family?

Testamentary trusts? I don’t like them. 

I’m Dan Covington. You can always find me at Estate Plan Kansas.

Contact me for a free consult.

Estate Planning Myths, Pt. 2

Let’s talk about more estate planning myths. There are a lot of silly things out there that you hear. I’d like to dispel some of those.

Another one is “estate planning is only for distributing assets after I’m gone.” Classically that’s how we think about it — that it’s what’s going to happen to our assets, our investments, real estate once we pass away. But this forgets one of the main purposes of trust right: maybe you’re a couple and one of you passes away; that trust is still available to manage and be administered during the life of the second of you. Also, it could be there for both of you during your life just just for any regular needs. This is not to mention a great benefit of a trust: if you should become incapacitated or somehow need the help of another, well, if you have set up a power of attorney, you’ve got someone who can take care of things for you, to take care of day to day business and health care for you, on your behalf. If you set up a trust, you have someone who has access to assets to support those things that you need.

Another estate planning myth: “I’m too young; I don’t need to take care of this yet.” The simple answer to this is that you DO need to take care of this some time. And let’s say you are very young, maybe you have children. Your estate plan is where you’re going to nominate those folks who would step in for you for being guardian and conservator for your children if something happens. It’s nothing we like to talk about but the estate plan is where you make this designation.

Another classic myth: “My Will’s going to take care of everything.” Fifteen to twenty years you signed a Will and you’re hopeful you are covered. That could be, but you should remember that things passing by title or by beneficiary designation are going to pass outside the reach of your Will. So your Will is not even going to have an effect on those assets at all. You may not be aware of that; likely are if your attorney apprised you well. Also insofar as “it will take care of everything,” what about the need for a Durable Power of Attorney? If you need help during your life (due to incapacity) you’ve got to have that power of attorney in place before that need arises. Your Will’s going to take care of everything? What if something happens to you and you don’t want to be maintained by life-sustaining machines? You can sign a living will — the appropriate document to express your wishes, if you have made a decision about that.

Finally, you may remember a commercial that I “just set it and forget it?” Ideally this is right. You do it once, and it’s taken care of. But the great thing about any of these and particularly with a trust, what if your family situation, your portfolio changes, you learn about a special needs member of your family, a grandchild, your ideas change about where or to whom your assets should be distributed. Or, maybe you have a different idea about who might make the better trustee in your later years. Or maybe your successor trustee moves a couple of states away and that just isn’t practical anymore. It’s not a bad idea to go back to take a look at your estate plan as you have time. So those were another four myths today about estate planning. What are you telling yourself to put off estate planning? I hope this helps you.

I’m Dan Covington, and you can always find me at Estate Plan Kansas.

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Myths about Estate Planning

I want to talk about myths surrounding estate planning because there are a lot of them out there.

The first, biggest one is “estate planning is only for the wealthy.” But if you think about this, without estate planning, how else are going to protect your family’s interest, their future income needs if something happens to you, if you want things to go where you say, if you want to avoid probate, or you want to name who manages and administers your assets in the event you’re gone. I hope it’s not a surprise, but you will pass away. Do you want to name who would care for your minor children or direct how to fund education for older children. All these require some estate planning, for everyone.

Another myth: “I’ve already told my family my wishes; they already know what I want.” I do not mean to be glib, Do you really want your family to go to the bank about accounts, CD’s, a safe deposit box and say “well he or she told me this this is what they would like.” That’s not going to fly. If they need to retitle or liquidate stocks and bonds, is it someone just going to take their word for it because those were wishes expressed to them. I don’t think so. And the Register of Deeds office: are they going to be able to go to the courthouse and say “we need to change the deed, we just need to change the deed real quick, on the family home.” None of that’s going to work. You need some estate planning.

Another fairly common myth is that I have to leave equal shares, portions to my children or they can challenge my will or trust. First of all, there’s nothing in Kansas law that says people need to be treated equally in Wills or Trusts or any sort of estate planning. This is really I think a misconception that maybe comes from movies? A challenge to an estate plan is very difficult. They’re not brought that often and when they are, it’s a pretty high bar. They will have to show that among other things that someone didn’t have capacity, that they weren’t lucid, they didn’t know what they were doing when they made their estate plan, or that they were somehow unduly pressured, coerced. These are very difficult cases to make. So, challenges to Wills or Trust estate plans are uncommon.

Finally, there is a myth that “estate planning is just too complicated; it’s too much to think about.” Well that’s why you hire a professional, right? You go talk to someone who can talk you through the process, walk through it with you and how simple it can be. It’s not a tricky thing. You see someone with expertise, they talk to you about options, you come up with ideas, they draft documents, you sign.

So, those are just maybe four common myths for today on estate planning. But, what are you telling yourself to put off estate-planning? It may be time to get it done.

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Who should get your assets?

Do you want to play stump the estate planning attorney? Just ask me who should inherit your assets.

If you ask me who should get your assets, I could tell you my answer: that choice belongs to the people who earned the assets in the first place, and that’s not me. Here’s kind of a common example: let’s say you own a small business or a farm, you have two kids in their 20’s, one of them is involved in this small business or day to day operations of the farm, the other lives a couple states away. So, you run by me the idea (you’re maybe a little embarrassed about it) that you’re going to give more of the business or the farm to the child who is involved. Then you ask me is it fair to do that? It’s the same answer, right?

It may be a little frustrating, but what I’m going to say is: “what’s fair is what you decide … these are YOUR assets. I may give you additional ideas on different ways you can reward a child’s involvement or ways you might get that child a First Option or first choice at a given asset, and then maybe with the others substantially equivalent value some other way. Or not. YOUR estate plan doesn’t have to be equal; that is your choice. Or we might even talk about business succession and how the child who is involved might begin vesting in or gaining ownership of the business during your lives.

I look at my position this way: I need to present you all kinds of options so that you aren’t restricted in how you think you can pass those assets to your children or grandchildren, or whomever you’ll leave things to. I tell people that if if we can think of it, I can write it. If it’s a legal method, we will get it in your trust. I’ll try to present to you all kinds of ideas so that you know it’s a broad-spectrum of what you can do.

Yes, if you or we can think of it, we can write it. It is as simple as that. Who should get your assets? They are your assets; you decide.