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How DURABLE Is Your Power of Attorney… Will It Be There To Catch You?

A Power of Attorney (POA) is a document giving a relative, friend, or institution the power to act for you.  You, as “Principal,” name that person or institution as your “Agent” or “attorney-in-fact” to manage your day-to-day affairs.  The authority that you give to your agent can be as broad or as narrow as you choose to make it.  A POA should be in writing and signed by you so that your agent has something to show as his or her authority to act for you.

The problem with a standard POA is that it is automatically suspended when you become incapacitated.  This is at a point when your family would need it most.  Therefore, a Durable Power of Attorney (DPOA) is required.

A DPOA contains the words “This POA shall not be affected by my disability” or This POA shall become effective upon my disability,” or something similar.  In Order to be valid, it must be signed by you BEFORE you become disabled.

If your POA stated that it is not affected by disability, it is an immediate DPOA and your agent can act on your behalf as soon as you sign the POA.  If your POA states that it is effective upon disability, it is a springing POA and will be more difficult for your agent to use since your disability will need to be proven for your agent to be able to act.  In most cases, you will want your agent to have broad powers and be able to do anything you could do.  A DPOA might authorize your agent to do any or all of the following:
-Pay for support and care
-Borrow funds
-Conduct banking transactions
-Deal with property
-Handle legal claims
-Gain entry to safe deposit boxes
-Deal with insurance and retirement benefits
-Prepare and file tax returns
-Exercise stockholder rights
-Contract for services
-Make gifts
-Collect Social Security and other benefits

In order for a DPOA to work, you have to give the agent a great deal of power and authority.  Thus, you should be sure to choose someone you trust and have confidence in to handle your affairs.

Some people mistakenly believe that their spouse can act in their behalf if they become incapacitated.  Although you spouse can still sign checks and make withdrawals on a joint bank account, they cannot sell jointly owned stocks, real estate, assets, or other property not held jointly without your signature.  Even if you own everything jointly, you both should consider having a DPOA.

The biggest set back problem with any POA is that there is no guarantee that it will be accepted or recognized by third parties.  For example, the Social Security Admin. and Veterans Admin. have their own POA form and generally will not accept any other POA.  There are even institutions like banks and credit unions that may refuse to accept a POA.

Another problem occurs if you have an individual as your agent and he or she “quits” or dies or becomes disabled.  In such event, if you haven’t named an alternate agent, there will be no one to act on your behalf.

Next time we’ll take a look at what happens if you don’t have a POA or DPOA…

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Larry Deason is pleased to announce that Shawn D. Garner has become an associate of the Deason Law Firm.

Garner made the decision to join the Deason Law Firm in order to focus his practice of law on helping people avoid the cost and stress associated with litigation rather than getting involved only after it’s too late to avoid a legal battle.  Since joining the Deason Law Firm he has found great satisfaction in assisting his clients achieve the peace of mind that comes with knowing their affairs are in order.  “I enjoy helping clients take advantage of provisions available under Arizona law to have their assets passed to their heirs and loved ones without the time delays, expenses, court involvement and emotional burden caused by inadequate planning.”

Prior to joining the Deason Law Firm, Garner had been practicing in the Yuma area for three years.  His experience involved primarily litigating contract disputes as well as representing creditors and debtors in bankruptcy cases.  Garner also conducted numerous educational seminars on issues related to construction law.

Shawn Garner is a graduate of the University of Kentucky Law School, where he served as the president of the Trial Advocacy Board and was the member of the Trial Advocacy team which placed 1st in the Midwest Region and 5th at Nationals.  Garner earned his Associates degree from Arizona Western College.  He worked as a surveillance officer with Yuma County Adult Probation prior to moving to Colorado where he graduated in the top 1% of his class from Colorado State University with a double major in Political Science and Criminal Justice.

Estate Planning Attorneys help shape the financial stability and legacy left behind for a client’s future generations.  Deason and Garner do not take that lightly.  They are committed to providing the Yuma Community and surrounding areas with comprehensive Estate Planning.

For more information about Shawn Garner, visit us online at www.deasonlaw.com or call 928-783-4575, Estate Planning… It’s What We Do!

Probate costs money $$$$$

There are many fees associated with Probate.  These fees include attorney fees, personal representative fees, appraisal fees, and court fees.  Additionally, your estate will have to pay taxes and creditors.  Only after everyone else is paid can your heirs or beneficiaries receive their inheritance.  Probate fees vary from state to state, but here are the national average according to a survey by the American Academy of Estate Planning Attorneys:

Attorney’s fees: 1.5 to 4 percent of the value of your estate.

Personal Representative’s fees: 1 to 5 percent of the value of your estate

Overall Probate fees: 3 to 10 percent of the value of your estate

 

I contest that! YES, it’s true… if you have a Will, it’s can be contested – BUMMER.

Many people have heard of Probate, yet not nearly as many truly understand what it is.  Probate is a process that starts at your death.  This process transfers title of your assets to your heirs.  A person’s estate is probated if they die without a Will or they die intestate (w/out a Will).  During this process, your creditors can make claims against your estate, and anyone not satisfied with your Will can contest it.

The Probate process is different in each state; however, there are some fundamental steps that occur in every state.  If you die with a Will, Probate will follow these fundamental steps:

  1. When you had your Will written, you named your personal representative (PR).  Once you die, your PR will file the Will with the Probate court in your county.
  2. Next, the PR must make a list of all the assets and liabilities (debts) of the estate.
  3. Once the estate has been inventoried, the PR signs a document called the Petition of Probate.  This summarizes your Will and names the beneficiaries.
  4. Some states, like AZ, have laws requiring the PR to locate the witnesses to the Will.  Once found, these witnesses may have to state under oath that they witnessed the signing of the Will.
  5. Next, the PR sends a legal notice to the beneficiaries and others required by law to let them know that the Will has been offered for Probate.
  6. Any interested party not happy with your Will now has the opportunity to challenge the contents of the Will.
  7. If no one objects to the appointment of the PR, the judge formally appoints the PR.  If there is an objection, the judge has the option to choose someone else for this task.
  8. Before any assets get transferred to the beneficiaries, the PR must pay all debts and taxes.  The PR will also pay certain expenses such as the burial, legal fees, etc.
  9. When all debts have been paid, the PR will distribute the assets to the beneficiaries.
  10. Once everyone has received his or her inheritances, the PR accounts to the court, and the judge closes the estate and releases the PR.

If you die intestate, you will not have made plans for a PR so the court will appoint one.  Once this is accomplished, the named PR will follow the same steps as outlined above.

Next blog let’s talk about why you WANT to AVOID Probate.

 

Intestate succession statutes – well, that’s a mouthful!

The purpose of intestate succession statutes is to distribute a decedent‘s wealth in a manner that closely represents how the average person would have designed his or her estate plan, had he or she possessed a Will.  However, this default can differ dramatically fro

m what you really would have wanted.  Even if your wishes are known or even if there is a need or special circumstances, if no valid Will exists, your assets will be distributed according to the laws of intestate succession.

It is possible for your estate to be controlled by both your own Will and the laws of intestacy.  This would happen if the Will was poorly drafted and/or failed to dispose of all your assets.

In essence, dying without a Will means that you did not devise a plan for the distribution of your assets, so the state law where you live will now control their distribution, whether your assets total $1 or $100 million.  For some, the results may be desirable; for many, they can border on disaster.

Beyond intestacy, there are simply the problems of Probate.  here are just a few:

Probate can be costly and time consuming.  Probate fees, including legal fees, court fees, appraiser fees, and personal representative’s fees can be as much as 10 to 15% of the entire estate.  In addition, the Probate process can last longer than a year.  The process of Probate can cost your estate money and leave your beneficiaries without your assets for a long period of time.

Probate is public.  Anyone who chooses to go to the courthouse can find out all the details concerning your life and your financial assets.  Additionally, if you have a family business, all the financial details of that business will also be available at the courthouse.  This could be detrimental to the business if the wrong information falls into the hands of the business’ competitors.

Most people who understand the process of Probate do what they can to avoid it.  In fact, once you understand what happens to your loved ones when you die without a Trust, you will want to avoid causing them problems after you are gone.  No one really likes to think of their death, but acknowledging the fact that everyone dies and then taking steps to plan your estate in a way that helps your family rather than hurts them is the responsible thing to do.

What happens to my stuff when I die???

Although a Will and a Living Trust are well-known vehicles for disposing of assets upon death, there are other ways in which this can happen.  Let’s examine three of the most common.

1.  Assets Passed through Assigned Beneficiaries

Some assets have a designated beneficiary, or a person or entity that is the recipient of or will receive some or all proceeds of money or property held by the current owner upon a specified event or condition.  Vehicles such as life insurance policies, 401Ks, IRAs, and assets with a “Transfer on Death” or “Pay on Death” designation may require that a beneficiary be named.  There are 3 diff types of beneficiaries:

1.  Primary beneficiaries are those first entitled to the proceeds;

2.  Secondary beneficiaries are entitled to proceeds only if no primary beneficiary is living when the insured dies;

3.  Tertiary beneficiaries are those entitled to proceeds if no primary or secondary beneficiaries are alive when the owner or insured dies.

Therefore, even if you have a Will or Trust, any assets that have a named beneficiary will transfer to that beneficiary upon your death (according the the noted beneficiary listed)

2.  Assets Passed Through Joint Tenancy

Joint Tenancy is a form of ownership by two or more parties who share equal rights in and control of property, with the survivor or survivors continuing to hold all such rights on the death of one or more of the tenants.  Unlike being a beneficiary, the person receiving the assets upon your death was already a joint owner in that asset.

Although Joint Tenancy is a simple way to pass assets, it is not always the best way, here are some reasons why:

  • If you own an asset with your spouse, upon death, your spouse will lose your portion of the federal applicable exclusion amount – the amount that passes free from estate tax at death.
  • Joint Tenancy does not protect the assets from the other tenants’ creditors.  If someone gets a judgment against any tenant, the entire amount of the joint tenancy property could be used to pay that judgment.  This is true even before your death.
  • The creation of Joint Tenancy in real property may be a taxable gift.  However, for cash assets like joint banking accounts, it is not a gift until the non-contributor withdraws money.  Not understanding the different tax laws can either get you into trouble with the IRS or create tax liabilities you otherwise could have avoided.
  • There is probably nothing worse that can happen upon your death than to have your heirs or beneficiaries fighting over your assets.  If you have given your house to all of your children in Joint Tenancy, one child may decide to sell his or her interest.  The buyer of that interest would be a tenant in common and would have the right to devise his or her interested to whomever he chooses.

These are just a few of the problems with Joint Tenancy.  So, although it is easy to establish, it may not be the best way to transfer your assets upon death.

Assets Transferred Through Intestate Probate

Intestacy is the condition of having died without a valid Will.  This means your property will have to go through Probate.  This is the process through which title is changed from the decedent’s name into the new owner’s name, as is the result if you have only a Will, but not a Revocable Living Trust.  However, unlike when you die with a valid Will, you will have no control over who gets your assets and when they get the assets.

The transfer of assets during intestacy typically goes to the spouse, then to the children, and the grandchildren.  If you have no living spouse or children, the court looks back up your family tree and adds in parents, siblings, aunts, etc.  Eventually, if no one can be found, your property could end up being transferred to the government.

too be continued….

look for my next blog which talks more about the purpose of intestate succession statutes and touches on Probate and why it is to be avoided.

The Public Eye…

There is nothing private about Probate!  In Arizona, the personal representative (PR) usually files the inventory and final accounts with the Court; therefore, everything that you have and everything that you owe can be found at your local courthouse!  In addition, the PR typically will publish the notice to creditors in the local newspaper, alerting all that they can come look at the details of your estate.  This is more than just a privacy matter.  It can be a matter of safety.  Opportunists scour the papers, looking for people to con.  Thus, having your estate in Probate may leave your loved ones vulnerable to abuse.

There has got to be a better alternative…

We believe that there is.  The Living Trust.

Like a Will, a Trust can be changed during your lifetime and, like a Will, it keeps you from dying intestate, thus allowing you to determine the beneficiaries of your assets.  This is where the similarities end.

A Living Trust is a document that take effect during your lifetime.  This document helps you manage your assets before you die as well as after you die.  There are many good reasons to consider a Living Trust.  Let’s look at a few of them.

  • All of the issues of Probate – time, expense, privacy, and access to your estate – are all eliminated when you use a Trust instead of a Will.
  • A Trust will take care of you and your assets should you become disabled and unable to make decisions regarding your health or finances.
  • A Trust helps to reduce the financial burden of estate taxes.
  • A Trust allows you to control your assets even after you have died.
  • A Trust can keep your beneficiaries from losing your assets to their creditors.

How does a Trust do all this, you ask?  Stayed tuned till our next blog, and find out…