Archive: December 2024

Choosing a power of attorney (“POA”) is a critical part of estate planning. A POA is a legal document that grants someone you trust the authority to make decisions on your behalf if you are unable to do so. There are two main types of POAs: financial and health care. Each role is unique, and while the same person you have in mind may work well for both roles, it is okay to have different persons with different skill sets and temperaments serving for each type of POA. Here are some tips for selecting the right person for each role:

Financial Power of Attorney

A Financial Power of Attorney is responsible for managing your financial affairs if you become incapacitated. This includes paying bills, managing investments, and handling other financial transactions. When choosing a financial POA, it’s important to select someone who is:

• Financially Sound: The person should have a good understanding of financial matters and be capable of managing money responsibly. You want to avoid a person who is in a crisis or near crisis financial situation in which they see your money as their ticket out of their current situation.

• Trustworthy: This should go without saying, but this person will have access to your financial assets, so it is essential that you trust them implicitly.

• Asks for Help: They should know how to reach out to professional advisors, such as accountants or financial planners, when needed to ensure your finances are managed correctly. Do not pick a stubborn or obstinate person who is unwilling to ask for help when the need arises—from professional experience, this path does not end well for anyone.

Health Care Power of Attorney

A Health Care Power of Attorney, also known as a medical POA, is responsible for making medical decisions on your behalf if you become incapacitated. This includes decisions about treatments, surgeries, and other medical interventions. When selecting a health care POA, consider someone who is:

• Patient Advocate: Choose someone who will be a compassionate advocate for your health care needs. This person should not be afraid to ask questions of medical providers or push back against decisions they believe are not in your best interest.
  
• Assertive: You don’t want a passive person for this role. The individual should be confident in making decisions and communicating your wishes.
  
• Knowledgeable (Optional): While medical knowledge or expertise is a plus, it is not a requirement. Certainly, that child or other family member who has formal training as a doctor or nurse may be a great choice, but practical experience in serving as a patient advocate for a parent, grandparent, or spouse qualifies, as well. The most important qualities are advocacy and assertiveness.

Final Thoughts

Choosing the right person for both financial and health care POAs is essential for ensuring your affairs are managed according to your wishes if you are unable to do so yourself. Take the time to carefully consider the attributes and capabilities of potential candidates, and I strongly encourage you to discuss your expectations and wishes with them in advance. By selecting the right individuals, you can have peace of mind knowing that your financial and health care decisions will be in good hands.

When it comes to estate planning, a revocable trust is one of the most versatile and beneficial tools you can use. This article will define what a revocable trust is, explain how it works, and discuss its many benefits, including the significant advantage of avoiding probate.

What is a Revocable Trust?

A revocable trust, also known as a living trust, is essentially a legally binding contract that you enter into with yourself, as the initial Trustee, in which you appoint an individual to run point for your family upon your death, known as the successor Trustee, and specify how you want assets to be distributed upon your death. As the name suggests, a revocable trust can be altered, amended, or revoked entirely at any time by you (the “grantor”—the person who creates the trust), provided you are alive and mentally competent. During your lifetime the revocable trust is treated as you, using your social security number, and does not requiring any changes to your income tax returns or filing requirements. The revocable trust will become irrevocable upon your death.

How Does a Revocable Trust Work?

1. Creation: The grantor creates the trust and transfers assets into it. This can include real estate, bank accounts, investments, and personal property. Assets can either be transferred into your name as trustee of the trust during your lifetime OR assets can be designated to the trust upon your death through beneficiary designations on your various assets and accounts. NOTE: Where possible, the latter approach is my preference.
2. Management: The grantor typically serves as the trustee, managing the trust assets during their lifetime. They retain full control over the assets and can use them as they see fit.
3. Beneficiaries: The trust document names the beneficiaries who will receive the assets upon the grantor’s death. The grantor can specify conditions for distribution, such as age requirements or usage restrictions.
4. Successor Trustee: The trust names a successor trustee who will manage and distribute the trust assets in accordance with the express terms of the trust upon the grantor’s death.

Benefits of a Revocable Trust

Avoidance of Probate

One of the most significant advantages of a revocable trust is the avoidance of probate. Probate is the court-supervised process of distributing a deceased person’s estate. Most states, including Ohio, require that an attorney must be hired to open and administer a probate estate. While probate is not a bad process in and of itself, even a simple probate estate can cost at least $5,000 in legal fees, not to mention the time and public exposure involved. By transferring assets into a revocable trust, these assets bypass the probate process, allowing for a more private, efficient, and cost-effective transfer of your assets to your beneficiaries.

Flexibility and Control

A revocable trust provides the grantor with flexibility and control over their assets. The grantor can change the trust terms, add or remove assets, and modify beneficiary designations as their circumstances or wishes change. By designating the trust as a beneficiary on your various assets and accounts, you can make major changes to your overall estate plan by amending one document (i.e., your revocable trust), without the need on every change to go back and update the beneficiary designation on each and every account. In other words, the trust becomes the master document for how your estate will be distributed upon your death, with the successor trustee running point for your loved ones in carrying out your stated desires.

Privacy

Unlike a will, which becomes a public record during probate, a revocable trust remains a private document. This means the details of your estate, including the nature and value of your assets and the identity of your beneficiaries, are kept confidential.

Streamlined Estate Administration

A revocable trust can simplify the administration of your estate, especially if you own property in multiple states. Without a trust, each state where you own property might require a separate probate proceeding. A revocable trust consolidates these assets, allowing for more efficient management and distribution. For large families or for individuals with many beneficiaries (individuals and/or charities), appointing an individual to run point for all beneficiaries (i.e., your successor trustee), streamlines the liquidation of assets and can significantly expedite the distribution process.

Conclusion

A revocable trust is a powerful estate planning tool that offers numerous benefits, including probate avoidance, flexibility, incapacity planning, privacy, and streamlined estate administration. By understanding how a revocable trust works and leveraging its advantages, you can ensure that your assets are managed according to your wishes and transferred to your beneficiaries with minimal hassle and expense. Consult with an estate planning attorney to determine if a revocable trust is the right solution for your needs.