Tuesday, November 23, 2010

Avoid Disagreements Between Your General and Health Care Power of Attorney Agents

A general power of attorney and a health care power of attorney are two very important estate planning documents. Both allow other people to make decisions for you in the event you are incapacitated. Because the individuals chosen will have to coordinate your care, it is important to pick two people who will get along.

A general power of attorney allows a person you appoint -- your agent  -- to act in your place for financial purposes when and if you ever become incapacitated. A health care power of attorney is a document that gives an agent the authority to make health care decisions for you if you are unable to communicate such decisions.

While the health care agent is the one who makes the health care decisions, the person who holds the general power of attorney is the one who needs to pay for the health care. If the two agents disagree, it can spell trouble. For example, suppose your health care agent decides that you need 24-hour care at home, but your general power of attorney agent thinks a nursing home is the best option and refuses to pay for the at-home care. Any disagreements would have to be settled by a court, which will take time and drain your resources in the process.

The easiest way to avoid conflicts is to choose the same person to do both jobs. But this may not always be feasible -- for example, perhaps the person you would choose as health care agent is not good with finances. If you pick different people for both roles, then you should think about picking two people who can get along and work together. You should also talk to both agents about your wishes for medical care so that they both understand what you want.

If you have questions about whom to name for these roles, or you haven't yet executed these all-important documents, contact my office for help.

Tuesday, October 19, 2010

Charitable Remainder Trusts: Income for Life and a Good Deed at Death

Many people like the idea of leaving bequests to favorite charities in their wills. But instead of leaving money to a charity in your will, you can put that money into a charitable remainder trust and collect income while you are still alive. Charitable remainder trusts have many other advantages, including reducing your income and estate taxes and diversifying your assets.

A charitable remainder trust is an irrevocable trust that provides you (and possibly your spouse) with income for life. You place assets into the trust and during your lifetime you receive a set percentage from the trust. When you die, the remainder in the trust goes to the charity (or charities) of your choice

A charitable remainder trust has many benefits:

•At the time you create the trust, you will receive an income tax deduction for charitable giving.

•Any profit from the sale of investments within the trust are not subject to capital gains tax, which means the trustee may have more freedom in managing the assets.

•When you die, the assets in the trust will pass outside your estate and be eligible for the estate tax charitable deduction.

The downside of a charitable remainder trust is that it is irrevocable, meaning once you create the trust, you can't cancel it. While you can't revoke the trust, you may have the ability to change the beneficiary if you decide to give to a different charity. You may also serve as trustee, giving you control over how the trust assets are invested. In addition, note that any income you receive from the trust will be subject to income taxes.

To find out if a charitable remainder trust is right for you, talk to a qualified estate planning or elder law attorney.

Wednesday, September 29, 2010

Prevent Your Power of Attorney from Being Ignored

A durable power of attorney is one of the most important estate planning documents there is. It allows someone you appoint -- your agent or "attorney-in-fact" -- to act in your place for financial purposes when and if you ever become incapacitated. However, many people experience difficulty in getting banks or other financial institutions to recognize the authority of an agent under a power of attorney.

Banks are often reluctant to accept powers of attorney for fear of being sued if the power of attorney isn't valid. A certain amount of caution on the part of financial institutions is understandable. Still, some institutions go overboard, for example requiring that the attorney-in-fact indemnify them against any loss.

To prevent problems later, contact your bank when you execute your power of attorney to find out what information it needs to accept the document. Many banks or other financial institutions have their own standard power of attorney forms. If this is the case, get the bank's form and sign it in addition to your own power of attorney form. While, it isn't legally necessary, signing the bank's form can save your agent a lot of trouble and time down the road. In addition, you can provide the bank with copies of your power of attorney. It is also a good idea to update your power of attorney frequently so the bank knows it is current.

If a bank is giving you a hard time about accepting a power of attorney, you can try talking your way up the chain of command. You can also have the lawyer who prepared the power of attorney call the bank. If that doesn't work, you may have to have a lawyer deal with the bank.

Sunday, September 19, 2010

Nursing Home Residents Have Rights

Many people incorrectly believe that once someone enters a nursing home, their freedom is over. In fact, nursing home residents have many rights, and it is important to know those rights and to be able to enforce them.


Nursing home residents' rights are protected under federal law. In broad terms, nursing homes are required to ensure that every nursing home resident be given whatever services are necessary to function at the highest level possible. Following are some of the specific protections that residents have:

• Nursing home residents have the right to privacy in all aspects of their care. This means phone calls and mail should be private, and residents should be able to close doors and windows. In addition, residents may bring belongings from home, and nursing home staff is required to assist the residents in protecting those belongings.

• Residents have the right to go to bed and to get up when they choose, eat a variety of snacks outside meal times, decide what to wear, choose activities, and decide how to spend their time. The nursing home must offer a choice at main meals, because individual tastes and needs vary.

• Residents have the right to leave the nursing home and belong to any church or social group they wish to.

• Residents must be allowed to participate in planning their care. Residents may also manage their own financial affairs.

• Residents may not be moved to a different room, a different nursing home, a hospital, back home or anywhere else without advance notice and an opportunity for appeal. For more information on fighting a nursing home discharge, click here. click here

For a full list of nursing home resident rights, click here

If a disagreement with the nursing home does arise, there are a number of steps you can take to enforce the resident's rights. The first step would be to talk to the nursing home staff directly. This may be all it takes to solve the problem. If that doesn't work, then you may need to talk to a supervisor or administrator. The next step is to contact the ombudsperson assigned to the nursing home. He or she should be able to intervene and get an appropriate result. Contact information for the Ombudsman Program in your state can be found at: www.ltcombudsman.org/ombudsman. Additional steps include reporting the nursing home to the licensing agency and hiring a geriatric care manager to intervene. If the direct approach isn't working, you may need to hire a lawyer to try and resolve the issues. The last resort is to move the resident to a different facility.

For more information on resolving nursing home disputes, click here.

Friday, July 23, 2010

LegalZoom Sued for Deceptive Practices

One of the most prominent sellers of do-it-yourself wills and other estate planning documents, is the target of a class action lawsuit in California charging that the company engages in deceptive business practices and is practicing law without a license.


The lawsuit was filed in Los Angeles Superior Court on May 27, 2010, by Katherine Webster, who is the niece of the late Anthony J. Ferrantino and the executor of Mr. Ferrantino's estate.

Knowing that he had only a few months to live, Mr. Ferrantino asked Ms. Webster in July 2007 to help him use LegalZoom to execute a will and living trust. Based on LegalZoom's advertising, Ms. Webster says she believed that the documents they created would be legally binding and that if they encountered any problems, the company's customer service department would resolve them.

But after the living trust documents were created and signed, the financial institutions that held his money refused to accept the LegalZoom documents as valid. Ms. Webster tried to get help from LegalZoom, with no success. Mr. Ferrantino died in November 2007.

Ms. Webster was forced to hire an estate planning attorney, who petitioned the court to allow the post-death funding of the trust. The attorney then had to convince the banks to transfer the funds -- a more difficult task following Mr. Ferrantino's death. The attorney also discovered that the will LegalZoom created for Mr. Ferrantino had not been properly witnessed. All this cost Mr. Ferrantino's estate thousands of dollars.

The lawsuit claims that Ms. Webster and others like her relied on misleading statements by LegalZoom, including that LegalZoom carefully reviews customer documents, that it guarantees its customers 100 percent satisfaction with its services, that its documents are the same quality as those prepared by an attorney, and that the documents are effective and dependable.

"Nowhere in the [company's] manual do defendants explain that using LegalZoom is not the same as using an attorney and that its documents are only 'customized' to the extent that the LegalZoom computer program inputs your name and identifying information, but not tailored to your specific circumstances," the lawsuit states, adding that "the customer service representatives are not lawyers and cannot by law provide legal advice."

Ms. Webster is suing not only on her behalf but on behalf of anyone in California who paid LegalZoom for a living trust, will, living will, advance health care directive or power of attorney. The lawsuit estimates this class embraces more than 3,000 individuals.

"LegalZoom's business is based on nurturing the false sense of security that people do not need to hire a traditional attorney," says San Francisco attorney Robert Arns, one of the attorneys who filed the lawsuit. "The complaint points out that LegalZoom advertises that you don't need a real attorney because its work is legally binding and reliable. That's misleading. Improperly prepared estate planning documents are a ticking time bomb that can result in improper tax consequences and other items that could cost the estate and heirs huge sums."

"LegalZoom preys on people when they're at their most vulnerable, when they are of advanced age or poor health and need a will or a living trust," adds San Francisco elder abuse attorney Kathryn Stebner, Ms. Webster's lead counsel.

One of the defendants named in the suit is LegalZoom co-founder Robert Shapiro, who appears on the LegalZoom Web page and TV ads and who is best-known for being one of O.J. Simpsons attorneys.

This is not the first suit against LegalZoom. In December 2009, a Missouri man who paid LegalZoom to prepare his will sued the company for engaging in the unauthorized practice of law (Janson v. LegalZoom). The lawsuit is also seeking class action status. LegalZoom is trying to have the case removed from Missouri state court to the United States District Court for the Western District of Missouri.

Monday, June 28, 2010

What Is the Generation-Skipping Transfer Tax?

The estate tax gets all the press, but if you are leaving property to a grandchild, there is an additional tax you should know about. The generation-skipping transfer (GST) tax is a tax on property that is passed from a grandparent to a grandchild (or great-grandchild) in a will or trust. The tax is also assessed on property passed to unrelated individuals more than 37.5 years younger. Like the estate tax, it is currently repealed, but is scheduled to return in 2011.

The GST tax was designed to close a loophole in the estate tax. Normally, grandparents would leave their estates to their children, incurring estate taxes. Then the children would pass on the estates to the grandchildren, incurring estate taxes again. Wealthy individuals realized they could leave their estates to their grandchildren directly and avoid one set of estate taxes. Congress established the GST tax to prevent this by taxing transfers to related individuals more than one generation away and to unrelated individuals more than 37.5 years younger.

A GST tax is imposed even when property is left in trust for a grandchild. For example, suppose a grandparent sets up a trust that leaves income to her children for life and then the remainder to her grandchildren. The part of the trust left to the grandchildren will be subject to a GST tax.

The GST tax has tracked the estate tax rate and exemption amounts. In 2009, the federal government exempted $3.5 million from the tax and the tax rate was 45 percent. The GST tax expired in 2010 along with the estate tax, but it is scheduled to return in 2011. Unless Congress acts in the meantime, the 2011 GST tax exemption amount will be $1 million and the tax rate will be 55 percent.

Tuesday, June 1, 2010

Don't Let Your Life Insurance Trigger An Avoidable Estate Tax

Although your life insurance policy may pass to your heirs income tax-free, it can affect your estate tax. If you are the owner of the insurance policy, it will become a part of your taxable estate when you die. While the federal estate tax is currently zero, the exemption will be $1 million and the rate will increase to 55 percent on January 1, 2011, if Congress fails to act in the interim.

In New Jersey, the estate tax may be triggered for estates exceeding $675,000. You should make sure your life insurance policy won't have an impact on your estate's tax liability.

If your spouse is the beneficiary of your policy, then there is nothing to worry about in the short term. Spouses can transfer assets to each other tax-free. But an en estate tax may be triggered on your spouses death that could have been avoided with proper planning.

If the beneficiary is anyone else (including your children), the policy will be a part of your estate for tax purposes. For example, suppose you buy a $200,000 life insurance policy and name your son as the beneficiary. When you die, the life insurance policy will be included in your taxable estate. If the total amount of your taxable estate exceeds the estate tax exemption, then your policy will be taxed.

In order to avoid having your life insurance policy taxed, you can either transfer the policy to someone else or put the policy into a trust. Once you transfer a policy to a trust or to someone else, you will no longer own the policy, which means you won't be able to change the beneficiary or exert control over it. In addition, the transfer may be subject to gift tax if the cash value of your policy (the amount you would get for your policy if you cashed it in) is more than $13,000. If you decide to transfer a life insurance policy, do it right away. If you die within three years of transferring the policy, the policy will still be included in your estate.

If you transfer a life insurance policy to a person, you need to make sure it is someone you trust not to cash in the policy. For example, if your spouse owns the policy and you get divorced, there may be no way for you to get it back. A better option may be to transfer the life insurance policy to a life insurance trust. With a life insurance trust, the trust owns the policy and is the beneficiary. You can then dictate who the beneficiary of the trust will be. For a life insurance trust to exclude your policy from estate taxes, it must be irrevocable and you cannot act as trustee.

If you want to transfer a current life insurance policy to someone else or set up a trust to purchase a policy, consult with your estate planning law attorney.

Saturday, May 15, 2010

What is a Durable Power of Attorney?

For most people, the durable power of attorney is the most important estate planning instrument available--even more useful than a will. A power of attorney allows a person you appoint -- your "attorney-in-fact" -- to act in your place for financial purposes when and if you ever become incapacitated.

In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, your representative may have to seek court permission to take planning steps that she could implement immediately under a simple durable power of attorney.

A power of attorney may be limited or general. A limited power of attorney may give someone the right to sign a deed to property on a day when you are out of town. Or it may allow someone to sign checks for you. A general power is comprehensive and gives your attorney-in-fact all the powers and rights that you have yourself.

A power of attorney may also be either current or "springing." Most powers of attorney take effect immediately upon their execution, even if the understanding is that they will not be used until and unless the grantor becomes incapacitated. However, the document can also be written so that it does not become effective until such incapacity occurs. In such cases, it is very important that the standard for determining incapacity and triggering the power of attorney be clearly laid out in the document itself.

However, attorneys report that their clients are experiencing increasing difficulty in getting banks or other financial institutions to recognize the authority of an agent under a durable power of attorney. A certain amount of caution on the part of financial institutions is understandable: When someone steps forward claiming to represent the account holder, the financial institution wants to verify that the attorney-in-fact indeed has the authority to act for the principal. Still, some institutions go overboard, for example requiring that the attorney-in-fact indemnify them against any loss. Many banks or other financial institutions have their own standard power of attorney forms. To avoid problems, you may want to execute such forms offered by the institutions with which you have accounts. In addition, many attorneys counsel their clients to create living trusts in part to avoid this sort of problem with powers of attorney.

While you should seriously consider executing a durable power of attorney, if you do not have someone you trust to appoint it may be more appropriate to have the probate court looking over the shoulder of the person who is handling your affairs through a guardianship or conservatorship. In that case, you may execute a limited durable power of attorney simply nominating the person you want to serve as your conservator or guardian. Most states require the court to respect your nomination "except for good cause or disqualification."

Tuesday, April 27, 2010

What Is Estate Planning?

The definition of Estate Planning is easy: it is a plan for your estate.  Your estate is what you own; it is your stuff. 

If you become mentally incapacitated, perhaps by accident or illness, you can no longer manage your stuff.  You can't buy or sell what you need, pay you bills, or file your taxes.  Someone will have to do this for you.  If you plan for this with Powers of Attoney or Trusts, you get to choose who helps you manage your stuff.  If you don't, a judge will choose someone for you after an expensive court proceeding.  You may not agree with the judges choice and it may be a stranger who is charging you hourly.

When you pass away, the ownership of you stuff must pass to someone else (sorry).  If you plan in advance for this, you get to choose who gets what, when they get it and how they get it.  You even get to avoid taxes that will be due if no planning is done.  You can do this by getting a Will or Revocable Living Trust.  You can also control who gets what with beneficiary designations such as with life insurance and retirement accounts.  Bank accounts can be designated Payable on Death (POD) to your beneficiary.  You can also own an asset jointly with someone else so that they become the sole owner if you die.  If you do not plan in advance, the law sets forth who gets what.

A typical Estate Plan may have a Will, Trust, Financial Power of Attorney, Healthcare Power of Attorney and a Living Will.  This planning is really not so much for you but for your loved ones.  If you have an Estate Plan, check to see if it needs an update.  If you don't have a plan, get one.  Your loved one's will thank you someday.

Friday, April 9, 2010

What Is An Estate?

As an estate planning attorney, the term "estate" has a specific meaning to me.  Yet I am constantly reminded that the term "estate" often means something else to others.  For example, prospective clients often say to me "I don't need estate planning, I only need a Will". 

What does the word "estate" mean to you?  I used to picture a mansion in the English countryside surrounded by a large well manicured lawn behind an iron gate and brick walls.  Law school changed that meaning for me. 

Your estate is simply what you own in your own name or jointly with others.  So your estate may include a house, car, bank accounts and investment accounts like mutual funds or other stocks and bonds.  Your retirement plan, such as an IRA or 401k is part of your estate.  The value of your insurance policy is part of your estate even though someone else is getting the money.  Other estate assets are debts owed to you and the value of any business you may own.  Your estate even includes your "stuff" like the contents of your home.

So we all have an "estate".  You can plan ahead to decide what should happen to your estate should you die or become incapacitated.  There is a term for planning ahead like that, wait ... it is on the tip of my tongue ... Estate Planning!

Sunday, March 14, 2010

Does Your Will Name an Alternate Beneficiary?

Does Your Will Name an Alternate Beneficiary?

What will happen to your estate if your primary beneficiary does not survive you? If your will does not name an alternate beneficiary, your estate will be divided according to state law. The way the state divides your estate may not agree with your wishes. Your money may go to someone you don't like or to someone who is unable to handle it.

For example, suppose your will divides your estate among your spouse and three children. If one child dies before you, do you want his or her portion of your estate to go to your grandchildren? To your other children? To your spouse? Or perhaps to a charitable organization or institution? Another issue to consider is whether the person who would inherit under the law is too young or has special needs. In that case, you may need a trust to protect the assets.

Double check your will to make sure it names an alternate beneficiary. And if you don't already have a will, being able to name an alternate beneficiary is an important reason to create one.

Naming an alternate is a good idea for other provisions in your will as well. If you have young children, you should also consider naming an alternate guardian for your children in the event your first choice is unable to fulfill his or her obligation. In addition, you may want to appoint an alternate executor in case the first one cannot serve.

Saturday, February 20, 2010

General Durable Power of Attorney

Your Durable Power of Attorney

For most people, the durable power of attorney is the most important estate planning instrument available--even more useful than a will. A power of attorney allows a person you appoint -- your "attorney-in-fact" or "agent" -- to act in your place for financial purposes when and if you ever become incapacitated.

In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, your representative may have to seek court permission to take planning steps that she could implement immediately under a simple durable power of attorney.

A power of attorney may be limited or general. A limited power of attorney may give someone the right to sign a deed to property on a day when you are out of town. Or it may allow someone to sign checks for you. A general power is comprehensive and gives your attorney-in-fact all the powers and rights that you have yourself.

A power of attorney may also be either current or "springing." Most powers of attorney take effect immediately upon their execution, even if the understanding is that they will not be used until and unless the grantor becomes incapacitated. However, the document can also be written so that it does not become effective until such incapacity occurs. In such cases, it is very important that the standard for determining incapacity and triggering the power of attorney be clearly laid out in the document itself.

However, attorneys report that their clients are experiencing increasing difficulty in getting banks or other financial institutions to recognize the authority of an agent under a durable power of attorney. A certain amount of caution on the part of financial institutions is understandable: When someone steps forward claiming to represent the account holder, the financial institution wants to verify that the attorney-in-fact indeed has the authority to act for the principal. Still, some institutions go overboard, for example requiring that the attorney-in-fact indemnify them against any loss. Many banks or other financial institutions have their own standard power of attorney forms. To avoid problems, you may want to execute such forms offered by the institutions with which you have accounts. In addition, many attorneys counsel their clients to create living trusts in part to avoid this sort of problem with powers of attorney.

While you should seriously consider executing a durable power of attorney, if you do not have someone you trust to appoint it may be more appropriate to have the probate court looking over the shoulder of the person who is handling your affairs through a guardianship or conservatorship. In that case, you may execute a limited durable power of attorney simply nominating the person you want to serve as your conservator or guardian. Most states require the court to respect your nomination "except for good cause or disqualification."