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QUESTIONS ABOUT AGENTS, ATTORNEYS-IN-FACT AND EXECUTORS

Davidov Law Group

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When you’re devising an estate plan, you may come across several terms used in relation to people who will play an important part role in your plan. The title for these people, or organizations differ, and each has its own specific meaning and importance. It’s important to understand these terms before you begin the estate planning process.

Q: Is an agent the same as an attorney-in-fact?

A: Essentially, yes. Whenever you grant power of attorney, the person who receives the power becomes your attorney-in-fact, also known as your agent. An attorney-in-fact is not the same as a lawyer, though you can appoint your lawyer to act as your attorney-in-fact.

Q: If I appoint someone as my attorney-in-fact, does that person continue to act on my behalf after I die?

A: No. All powers of attorney end automatically when you die. Even if you appoint a durable power of attorney, allowing your agent to act after you lose capacity, this power does not continue after your death. Further, if you don’t grant a durable power of attorney, these powers terminate as soon as you lose capacity.

Q: Can my attorney-in-fact act as my executor?

A: Yes. However, appointing an attorney-in-fact does not automatically give that person the right to be your executor. If you want your attorney-in-fact to act as your executor, the only way to do this is to name this person as your executor in your last will and testament. If you don’t nominate an executor in your will, the court will have to appoint someone.

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If you’re not careful, life insurance (and other beneficiary designation assets) can become a probate asset. And, that’s not good.

Beneficiary designation assets are contracts wherein you have the opportunity to name an individual(s) or trust(s) to receive your assets when you die. Beneficiary designations assets include life insurance, retirement accounts, and annuities. Some bank accounts have beneficiaries, as well.

Beneficiary designation assets usually avoid probate. And, that’s a good thing.

Probate is a big hassle and everyone and anyone can know your business with a trip to the courthouse or a click online. This means that predators and nosey neighbors, friends, and relatives can look up what assets you owned at your death, what debts you owed at your death, who your beneficiaries were, and who your executor was.

Why is publicity a bad thing? Most folks like to keep their financial and family business private. In addition, predators such as greedy relatives and friends and conmen such as unscrupulous clergy, financial advisors, and charities may inundate your beneficiaries with requests.

In addition, probate is expensive, time consuming, and a hassle. It is to be avoided. You can easily keep your life insurance (and other beneficiary designation assets) from going through probate.

The key is to name an individual(s) or trust(s) as the beneficiary of your life insurance. If you name your estate as the beneficiary or fail to name a beneficiary at all, the assets will flow into your estate. If the assets are in your estate, probate is triggered.

Be sure to review your beneficiary designations now and each time you have your estate plan professionally reviewed. Reviews are necessary every three to five years.

If you have questions about how to fill out your beneficiary designation form for your life insurance, consult with a qualified estate planning attorney.

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You may be worried that if you have and use a living will that your life insurance won’t pay; no worries. Honoring a living will does NOT affect life insurance payouts in any way, but it’s a good question to ask. Here are the answers to several other common living will related questions.

What is a Living Will?

A living will is an advanced medical directive, meaning that you make a medical decision in advance, to take affect later, in a particular situation. Living wills are effective if the person who signed the living will is in an irreversible coma or persistent vegetative state. Bottom line is that the person is “dead” and would only be kept alive with life support machines or the artificial feeding of food and water.

What is Not Covered by a Living Will?

No living will or other health care document authorize mercy killing, euthanasia, or assisted suicide.

Do I Really Need to Put it in Writing?

Thinking about a living will and its application is uncomfortable for everyone. No one likes to think about death, dying, and disability. But, it’s a necessary thought process and conversation. Your living will serves as clear and convincing evidence of your intent.

If you’re not convinced, consider the case of Terri Schiavo, the Florida woman, who was kept alive, artificially, for 15 years because, while she told her husband she didn’t want to be hooked up to machines, she never put it in writing. When her husband tried to have life support measures discontinued, Terri’s parents intervened and went to court.

Both life insurance and living wills are found in most estate plans. The payout of your life insurance is in no way affected by the application of a living will. If you don’t have a living will in place, consult with a qualified estate planning attorney.

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The term “portability” is an odd word to associate with the federal estate tax. However, the use of the term is in tax law is similar to our everyday usage; it means that you can move something from one place to another. In the federal estate tax law context, “portability” refers to the ability of the second spouse to die to use the deceased spouse’s unused exemption amount. The deceased spouse’s unused exemption amount is abbreviated, “DSUEA.”

The goal federal estate tax portability law is to give full federal estate tax exemption to all married couples, even those who didn’t engage in comprehensive estate planning and whose estate plan didn’t include tax planning or proper asset allocation. This is a great concept; however, the law itself has many issues that doom it to failure, in most cases.

  • Portability law ends January 1, 2013; so, unless you and your spouse are both set to die in the next year or so, you will not benefit from portability.
  • Portability benefits require the executor of the first estate to both file a federal estate tax return and indicate on the return that the surviving spouse is permitted to use the DSUEA. What if the executor doesn’t comply as may be the case in a blended family?
  • What if the surviving spouse gets remarried and that second spouse dies before her? When measuring DSUEA, only the “last” spouse to die counts.

Portability law and benefits are uncertain; there is likely to be much confusion and litigation. To avoid the potential portability quagmire, consult with a qualified estate planning attorney and include comprehensive federal tax planning and proper asset ownership in your estate plan. It is likely in your best interests to act as if portability doesn’t exist.

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On average, it takes about 2 to 4 weeks to get the revocable living trust in place; then, it takes another few weeks to 6 months to get the trust fully funded. This is a relaxed pace; if there is an emergency, such as a terminally ill client, the entire process can be sped up.

You and your family are protected the moment that you sign your living trust document. It is effective immediately. Funding takes longer.

Funding refers to the transfer of assets into your living trust or changing the beneficiary designation on life insurance, retirement accounts, and annuities. This can take awhile because you need to send out letters of instruction and fill out forms.

It’s important that you don’t take it for granted that an asset is funded, unless you receive written confirmation that the change in title and/or beneficiary designation has been made. Sometimes paperwork disappears.

Keep a list of all your assets, designating which assets have been funded. Keep proof of your funding in the same file with all your important documents.

Proof would include a change of beneficiary statement listing current beneficiaries or a quarterly financial statement from an investment, showing the name of your trust, not your name and not joint names with a spouse. You can likely look online to confirm funding of accounts.

Just keep a copy of your most recent statements. It’s important that your loved ones know of all of your assets because there are $32.9 billion in unclaimed assets; don’t let yours be among those.

In addition, funding is essential to an estate plan that works. Your trustee and trust only control those assets funded into your trust. This is extremely important if you become incapacitated and when you die.

If you have questions about setting up and funding a revocable living trust, consult with a qualified estate planning attorney.

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Revocable living trusts are widely used and are now part on the everyday vernacular; however, if you don’t fully understand the advantages and disadvantages of setting up a revocable living trust, you are not alone.

In a nutshell, living trust advantages include:

  • Control: Using a trust permits you to stay in control during any period of disability and even after your death. Otherwise, without a trust, the courts and state law take over and you lose control.
  • Probate Avoidance: A fully funded trust avoids probate, saving your family money, time, and hassle, and keeps everything private.
  • Lower Overall Cost: A fully funded trust lowers over-all costs by avoiding living probate (i.e. guardianship) and death probate. A trust is often used to minimize or totally avoid the state and federal estate tax as well (for married couples.)
  • Convenience: Your loved ones avoid court interference, with increased convenience and reduced hassle.
  • Confidentiality: When probate is avoided, nothing is filed at the courthouse or in any other public forum. Your business stays your business.

In a nutshell, the disadvantages of setting up a revocable living trust:

  • Upfront Legal Fees: The costs of setting up a living trust are more than the costs of a simple will; however, the overall lifetime and death settlement costs are much lower.
  • Funding: A perceived disadvantage to a living trust is that your assets have to be funded into your trust. This takes filling out change in beneficiary forms, change in title forms, and filing real estate deeds. However, funding only has to be done once and it’s a lot easier for you to do it than your loved ones. who don’t really know what you own. They may miss assets or probate may take months or even years if you don’t have a fully funded trust.

If you’d like to discuss the advantages and disadvantages of a revocable living trust in your individual situation, consult with a qualified estate planning attorney.

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Yes, but no. When you have a fully funded revocable living trust, your final asset distribution is in your trust; and, technically, if you have all of your assets funded and no minor children, you don’t need a will. In this case, your trust is called a “will substitute.”

However, it is prudent to execute a pour-over-will, which is used to distribute any assets intentionally or inadvertently left outside your trust or any assets flowing into your estate at the time of your death, such as the repayment of debts or monies from a car accident or malpractice claim.

In addition, if you have minor children, the will, or the pour-over-will, is used to appoint guardians to raise and care for your minor children if you die.

If you die without a will, any assets not controlled by your trust or by beneficiary designation will be distributed pursuant to state intestacy laws and heirs, not of your choosing, may receive an inheritance.

In addition, if you die without a will and you have minor children, the court will decide who raises your children, not you.

The only beneficiary of your pour-over-will is your revocable living trust. If needed, it picks up any assets not funded into your trust, and pours them into the trust. This is done through the probate process.

It’s generally recommended that you fully fund your trust; this means that all of your assets are either titled in the name of your trust or their beneficiary designation has been changed to the name of your trust.

Because we discuss “trust funding” so often and stress titling all of your assets into the name of your trust, it’s easy assume that your trust owns the assets. In truth, the trustee of your trust owns the assets. While you are alive and well, the trustee is likely you so you maintain full control over your assets.

If you become incapacitated or die, your successor trustees own the trust assets and manage and distribute them for the benefit of your beneficiaries.

While, technically, some folks can go without a will if they have a fully funded revocable living trust and no minor children, it is not recommended. Execute a new pour-over-will anytime you update your trust.

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As you likely have experienced, getting married brings lots of changes to your estate plan, so updates are needed. As life changes, your estate plan must also change to reflect your current personal and financial situation as well as current law. As a benefit of updating, you also will benefit from newly established planning techniques as well.

If you’ve recently gotten married or are preparing to do so:

  • Consult with a Qualified Estate Planning Attorney

No doubt about it, you and your new spouse will need to totally revamp your estate plans when you get married, or, in preparation of marriage. This is not a path to go alone.

  • Health Care Documents

You likely want to name your new spouse as your agent under your health care proxy. Your agent can make health care decisions on your behalf if you cannot. In addition, discuss your wishes for a living will and organ donation with your spouse; then, get your wishes in writing.

  • Financial Documents

Consider naming your new spouse as your agent under your financial power of attorney and as a trustee of your revocable living trust. As in all estate planning documents, name contingent trusted helpers as well; don’t just name your spouse.

  • Passing Financial Assets

If your spouse is dependent upon your income and assets, be sure to make your spouse a beneficiary of your will or trust, retirement plans, life insurance, pensions, and annuities. However, if you have children from a previous relationship, consult with a qualified estate planning attorney to balance these interests; otherwise, you might unintentionally disinherit your children.

  • Final Arrangements

Chat with your spouse about what is important to you regarding final arrangements. Do you want the body to be buried, cremated, or both? Do you want certain people invited, a specific clergy person to speak, or a special song to be sung?

  • Love Letter

Write your spouse (and other loved ones) a love letter and keep it with your estate planning documents and other important papers. It will create a lasting legacy and, likely, become the most treasured inheritance.

If you’ve recently gotten married or are about to, consult with a qualified estate planning attorney to update your estate plan.

 

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Thank you to all the Veterans who have served and continue to serve our country, as well as to the families of Veterans! Through your sacrifices, you have given the rest of us peace and freedom.