What Legal Documents Does An 18-Year-Old Need?

Interested Youths

What Legal Documents Does an 18-Year-Old Need?

by Christopher L. Kelly, Esq.

Many homes across America now have new adults in their midst. People who were high school seniors just a year ago, but are now—according to the law—fully-grown adults. (Notwithstanding the fact they didn’t walk a graduation line!) While some families are planning to send their students off to college in the fall and others are sending these new adults into the workforce, few parents think about their new legal needs now that they’ve had their 18th birthday.  Buying dorm furniture, picking out meal plans and buying new work clothes are important, but it’s also important to think about what legal documents your new eighteen (18) year-old adult may need. You could be in for a terrible realization when something has happened to your child and you find out you are no longer able to make decisions on his or her behalf.  It may be hard to admit it, but you have an adult in the house—and that adult needs adult legal documents.

What are the documents the new adult needs? Here are four essentials.

1. A Last Will and Testament. While a new adult may not own very much at this point in his or her life, it is still prudent to consider executing a fairly basic Last Will and Testament. This will appoint a person or persons as Executor who can handle any final matters in the event of an untimely death. No one knows exactly how their estate may look upon death, so having someone appointed in a Will to deal with any final legal matters could make it much easier for those left behind.

2. A Durable Power of Attorney for Healthcare (DPOAHC). Up to this point, a parent has generally been able to make medical decisions on behalf of their children without any issues. Since the child is now eighteen years of age, the parent is legally no longer able to do so. With a DPOAHC, the young adult appoints someone who can make healthcare decisions for them when they are unable to do so. It is important to ensure that this document contains the necessary HIPAA authorizations so health privacy issues do not arise. 

For example, Johnny is away at college. He’s involved in an accident that requires hospitalization, so he is taken to College Town General Hospital where he is rendered temporarily incompetent due to the medications given to him.  Johnny’s roommate calls his parents to let them know. After they arrive at the hospital, the doctors pose some critical questions about Johnny’s treatment, but there is no one authorized legally to make decisions. In this case, the decisions are left completely up to the medical staff to make in the moment. If it appears that the period of incompetency will extend for some time, his parents do have the option to pursue a conservatorship. However, this can be time intensive when quick decisions are vital. A properly-executed DPOAHC that appoints one or both of the parents as Johnny’s agent takes care of this issue.

3. A Durable Power of Attorney For Financial Matters (DPOAFM). While a young adult’s business relationships may be fairly limited or so intertwined with their parents that there are no issues with gaining access to your young adult’s business records, it is still prudent to have a DPOAFM. Similar to the DPOAHC, in this document a child can appoint an agent to make financial decisions on his or her behalf. This instrument may be useful in dealing with banking, insurance or other business matters when your child may need some assistance. Most DPOAFM are written so that the person named as the Agent may take action whether the child is deemed incompetent or not. This way, the parents could still deal with issues at the local bank even if their child is attending school or working hours away.

Also, since the typical young adult spends so much time online or in the social media realm, you’ll want to ensure the DPOAFM contains the correct language to allow the Agent access to these accounts (i.e. bank accounts, social media accounts, payment apps, etc.).

4. Educational Records Release. The Family Educational Rights and Privacy Act (FERPA) requires that students who are eighteen or older must provide written consent before their educational records are provided to a parent or guardian.  Most schools have their own version of this form, so check with your student’s school about getting a copy of it. Having access to this information will keep the parent or guardian informed about key deadlines (i.e. financial aid, scholarships, dorm deposit deadlines, etc.) as well as the student’s academic information.

Even though that new 18-year-old in the house may still seem like the same kid as last year, it is important to be aware of the changes brought about the moment he or she blew out the candles on his/ her last birthday cake. These four basic documents will cover most of the legal issues that a new adult may encounter, keeping parents informed and empowered to help if the need should arise.

NOTE:

Out-of-State Issues 

If a child will be working or attending school out of state, it is important to ensure that any legal documents the child executes will be recognized as valid in the same state as the school or workplace is located.

Military

If you have a child entering the military, the respective branches of the military provide basic legal services to its members. Encourage your child to check with their command staff about meeting with a military attorney.

Ready to get started?

You can reach us via phone at (615) 371-2029 or fill out this form.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

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COVID-19 Update

COVID-19 Update

June 8, 2020

Dear TBF Friends & Clients,

As of June 8, the Tennessee Baptist Mission Board (TBMB) Church Support Center (CSC) in Franklin, Tennessee is back open with normal business hours. The Tennessee Baptist Foundation staff will also resume normal operations as our staff moves from working remotely to being back in the office. Over the next few months we will be cautious and still try to social distance and balance some work from home along with work in the office. However, there will be staff in our office each day. 

The TBMB has taken proactive measures to have our building sanitized before all staff return and has put some safety guidelines and procedures in place for employees and guests. There will be limited use of all common areas and social distancing will be practiced. Masks are not required but will be available for any individual who would like one. Currently, the TBMB is NOT allowing any visitors or outside group meetings in the CSC until after June 30.

The Foundation staff will be doing some limited travel to meet with church groups and individuals, when requested, through the summer months. Some churches and individuals are not quite ready to meet in person and we understand that. We have found Zoom to be a great tool in communicating and we are even able to conduct seminars for your church via Zoom. The Foundation staff are prepared to connect with you virtually using Zoom or other videoconferencing technology, or by phone. You can make a virtual appointment or request an in-person meeting with one of our staff members by calling 615.371.2029 or by sending us a message on our contact page.

Please continue to pray with us as we trust God to save lives and alleviate suffering caused by COVID-19. I encourage you to hold close these words from Jesus found in John 10:27:

“Peace I leave with you; my peace I give to you. I do not give to you as the world gives. Do not let your hearts be troubled and do not be afraid.“

Serving Christ with you,

Rev. Bill Gruenewald, President-Treasurer

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

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How an Estate Plan Brings Peace in a Pandemic

Blue sky and mountains

How an estate plan brings peace in a pandemic

by Christopher L. Kelly, Esq.

People often wait until major life events before they prioritize estate planning—perhaps a doctor gives an unexpected diagnosis or a difficult family situation emerges. The shared health crisis of COVID-19 is unfortunately giving us vivid examples of how quickly our health can deteriorate and how fragile life really is. As a result, many people are wondering what would happen if they were diagnosed with the disease.

A good estate plan not only lays out what happens to your possessions after you die but also includes provisions for your own healthcare in case you are ever unable to make health-related decisions for yourself.  

You can effectively plan for such a time through two documents: the Durable Power of Attorney for Healthcare (DPOAHC) and an Advance Directive (AD). With a DPOAHC, you appoint someone, referred to as an Agent, who can make healthcare decisions for you if you should become incompetent and unable to do so. Note that incompetence may be temporary, such as when under the influence of a prescription drug, or it can be permanent, as in the cases of dementia or Alzheimer’s. During your time of incompetency, your Agent would be able to confer with your doctors, review your medical history, and make healthcare decisions on your behalf—even decisions of life and death. 

Through an Advance Directive (AD), you are documenting the medical procedures that you do or do not want, should you be unable to express those wishes. For example, you can document your decision to refuse life support if you have a terminal illness, or specify that you want artificial hydration and nutrition if you are in a coma. The AD allows you to give guidance to the person or persons making these decisions as to how you would make them if you were able to do so.

If you are a Tennessee resident, you can utilize the Tennessee Advance Directive for Health Care form (download it here) to give these directions and to appoint your Agent to make healthcare decisions for you. 

To legally execute the document, it must be signed in the presence of a notary or two witnesses, but not both. (I recommend utilizing a notary, as I believe it adds formality to the document.)

If you haven’t done any of the above-mentioned estate planning, it’s never too early. Irrespective of the current crisis, the reality is that most of us will find ourselves at some point unable to make our own healthcare decisions, so making preparations for it will bring tremendous peace and certainty to you and those having to make decisions on your behalf. If you have any questions, please reach out to us at the telephone number below. We are more than happy to help. 

Ready to get started?

You can reach us via phone at (615) 371-2029 or fill out this form.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

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Free Church Finances Resource for TN Baptist Churches

Church Excel: Practical Help from the Experts on church accounting and reporting, financial policies, pastor compensation planning, budgeting, board oversight, and much more

Free Church Finances Resource for TN Baptist Churches

by Bill Gruenewald

We know managing church finances can be overwhelming sometimes, especially when you have so many other responsibilities on your plate as a church leader. The Tennessee Baptist Foundation believes you should have the resources you need to succeed, so we are thrilled to be able to offer one particularly helpful tool for all Tennessee Baptist churches: CHURCHEXCEL.

TBF’s membership in the Evangelical Council for Financial Accountability (ECFA)* allows you free access to CHURCHEXCEL, a resource designed to help churches steward their finances well through webinars, electronic tax guides, ebooks, toolboxes, podcasts and more. You’ll find information from experts on topics like:

  • Church accounting and reporting
  • Financial policies
  • Pastor compensation planning
  • Budgeting
  • Board oversight
  • …and much more!

When you join CHURCHEXCEL, you’ll get all the resources ECFA provides, and you can access them all via a convenient mobile app. You’ll also receive monthly updates about the latest changes and trends in the world of church administration and taxes. 

To access your free resources, simply visit our page on the ECFA website.

No matter the size of your congregation, the resources provided by CHURCHEXCEL will be a tremendous help to you and your ministry. For more information about ECFA, visit www.ecfa.org.

CHURCHEXCEL can help you spend less time stressing about finances and more time investing in your congregation. Sign up today!

*Founded in 1979, ECFA provides accreditation to leading Christian nonprofit organizations that faithfully demonstrate compliance with established standards for financial accountability, transparency, fundraising and board governance. The Christ-centered ministries accredited by ECFA include churches, denominations, educational institutions, rescue missions, camps, and many other types of tax-exempt 501(c)(3) organizations. Collectively, these organizations represent over $29 billion in annual revenue.

Have any questions?

You can reach us via phone at (615) 371-2029 or fill out this form.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

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Supporting Kingdom work and getting a tax break

Coins spilling out of a jar

Supporting Kingdom work and getting a tax break

by Christopher L. Kelly, Esq.

If you are required to take required minimum distributions (RMD) from your IRA, by now you have probably received a notice from your IRA provider about the amount you have to take out in 2020 to avoid a 50 percent tax penalty. You will have to pay federal income tax on your RMD — unless you direct it to a charitable organization.

Your IRA provider is allowed to pay that RMD directly to a qualified charitable organization (like your church or other Baptist cause), and the amount paid to the charity is completely non-taxable to you. That means you don’t have to include it with the rest of your income for the year, but it is still credited towards your RMD, so it satisfies the legal requirement. This donation is called a qualified charitable distribution (QCD).

This tax-savings technique has become even more important in recent years due to the higher standard income tax deduction. While the higher standard deduction is better for the vast majority of Americans, it reduces and even eliminates the possible tax benefits of giving to a charity since the amount given to charities (along with other deductible items) must exceed the standard deduction in order to produce a tax benefit to the donor. The standard deduction is even higher for persons over 65 years of age ($13,850 for individuals, $27,000 for couples) which means the total itemized deductions must be even higher (than for those under 65) before the donor can use them. Thus, the QCD is different from other charitable contributions, as it does not have to meet any minimum threshold before it is beneficial to the donor. The QCD is simply not included in your taxable income for the year.

Also, since Medicare premiums for Parts B and D are based on your household income, having a lower income may result in some cost savings for your insurance. 

As with any government tax strategy, there are rules to follow: 

  • You can only distribute $100,000 from the IRA to qualify for QCD treatment. 
  • You must have an accompanying receipt from the charitable organization to prove it received the distribution. 
  • The distribution must be made directly to the charity to qualify (either the IRA provider sends the check directly to the charity, or it makes the check payable to the charity and gives it to the donor for delivery to the charity). 

It’s also important to remember you cannot make a QCD from every type of IRA, nor from other types of retirement plans. Your financial advisor will be able to tell you whether or not you are eligible. Also, not every charity qualifies to receive the QCD, so please be sure to check with the charity prior to making the donation. 

If you know you are going to make a contribution to your church or other charity this year, and you also have to take an RMD, talk with your financial advisor about making them one and the same. Not only will you use your RMD to benefit Kingdom work, but you’ll reduce your tax bill for 2020 at the same time.

Ready to get started?

You can reach us via phone at (615) 371-2029 or fill out this form.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

The Spiritual Practice of Estate Planning

The Spiritual Practice of Estate Planning

The Spiritual Practice of Estate Planning

by Christopher L. Kelly, Esq.

It’s hard to believe that we are now in the 20s! With a new year (and now a new decade), it’s a natural time to consider different resolutions in various areas of our lives. In the spiritual realm, we may be striving to read Scripture more frequently and diligently, pray more often or serve the Kingdom through our church. But have you thought about estate planning as a spiritual process to approach this year? 

While the textbook definition sums up estate planning as the process of determining who becomes the owners of assets after we die, for believers, estate planning can mean much more. Here are a couple of spiritual benefits that occur when believers have a well-thought-out estate plan. 

  • A good estate plan can provide peace to a family. When someone dies without an estate plan (or when theirs is outdated), many times families are left in turmoil. Coupled with the natural instability that occurs with the death of a person, the uncertainty as to how assets will pass often gives rise to internal conflicts within the family — conflicts the deceased person may have never imagined would be an issue. While even the most well-designed plan cannot guarantee smooth sailing between family members, many common issues can be minimized or alleviated due to the certainty provided when the deceased person’s intentions are clearly expressed. When there is no estate plan as a guide, the door is open for a beneficiary (or would-be beneficiary) to influence the final results, often in a way that would benefit him or her the most. In Matthew 5:9, Christ commends those who are peacemakers.  As a follower of Christ, we should strive to be instruments of peace in our world, especially within our family. A well-thought-out estate plan can be a key component of bringing that peace after we are gone.
  • The estate planning process can reflect the values that are important to you. In Luke 12:34, Christ tells us we can evaluate our actual view of wealth by examining where we have deployed our assets. He says our heart — what matters most to us — is revealed in the ways we spend our money and financial resources. While we normally think of this verse as instructing us as to how we spend money during our lifetime, it also applies to how we dispose of our assets after we are gone. If Kingdom work has been important to you during your lifetime, your estate plan can also reflect its value to you by making provisions for Christian ministries. It is important to note that supporting Kingdom work (such as your church or other Baptist cause) does not happen by default under the law. To make a provision for Christian ministries, you must have your intention clearly stated in the appropriate documents. 

Addressing your estate plan is a significant gift you can leave for your family as well as ministries you support. If you do not have a plan in place or if you have not updated it in a while, make estate planning a priority this year. One of the reasons TBF exists is to help all Tennessee Baptists develop estate plans that reflect their values. We have various resources available on our website to assist you in getting started, and we are always available to discuss and consult with you on any questions you might have. 

Ready to get started?

You can reach us via phone at (615) 371-2029 or fill out this form.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

Your Guide to 2019 Charitable Giving

New Year Countdown

Your Guide to 2019 Charitable Giving

by Christopher L. Kelly, Esq.

It’s hard to believe that 2019 (and this decade) is almost over! Before we flip the calendar to 2020, now is a great time to review a few charitable giving ideas to see if any of these might make sense for you to implement before 2019 comes to a close, especially as you think of ways to support your church or other Baptist cause.  

Make a Regular Donation.

  • The easiest way to make a gift is to simply write a check or donate online (if your church has this capability). If your check is postmarked by December 31 or if your online donation is processed by December 31 (note that the time of day may be important), you may be able to take a charitable deduction for the gift, depending on your particular tax situation.

Batching Contributions

  • With the 2017 tax bill, Congress raised the standard deduction for individuals ($12,200) and couples ($24,400). Overall, this is great for taxpayers, but it does make it a bit harder to take advantage of deducting charitable contributions if your overall deductions do not exceed the standard deduction.
  • One strategy around this issue is to “batch” your charitable contributions, meaning that you combine this year’s gifts with what you anticipate giving next year and make both contributions in 2019. You’re basically loading up two years of gifts in one tax year. Thus, you have a higher charitable amount to apply towards your deductions in 2019, which may result in a better result than simply taking the standard deduction.  

Give Gifts of Appreciated Assets.

  • With the improved financial markets, many people now find themselves holding stocks, bonds, mutual funds or real estate that has significantly increased in value. Selling these assets may create substantial capital gains for the owner.
  • However, rather than increasing your tax burden, you can donate the appreciated asset to your favorite Baptist cause. You get a deduction for the full market value of the asset, and the charity recognizes no gains when it sells the asset. Win-win! 

Required Minimum Distribution (RMD)/Qualified Charitable Distribution (QCD)

  • If you still have not taken your 2019 RMD, you can have it paid to your church or other Baptist cause. Please note that not all charities are eligible to receive a QCD, so check with them before you make it. 

Remember, when the ball drops on December 31, you will lose the ability to take advantage of these strategies for 2019. If any of these ideas interest you, begin the process now to make sure you allow plenty of time for the process to be completed by year-end. 

From the Tennessee Baptist Foundation, we wish you the happiest of Christmas seasons as we celebrate Immanuel!


Ready to get started?

You can reach us via phone at (615) 371-2029 or fill out this form.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

Revocable Living Trusts

Grandparents and grandkids

Revocable Living Trusts

by Christopher L. Kelly, Esq.

So far in our series on basic estate planning documents, we’ve covered the Last Will and Testament, powers of attorney, and medical advance directives. In this final installment, we’re talking about revocable living trusts, or as they are more commonly called, living trusts (LT). 

A living trust is a legal arrangement by which a person (known as the grantor) during his or her lifetime transfers assets to another person or entity (known as a trustee) for the grantor’s benefit. The arrangement is documented in a trust document that includes language allowing the grantor the option of terminating the trust whenever the grantor would like, making the trust revocable. The document details how property is to be managed during the grantor’s lifetime and also how the property is to be distributed from the trust when the grantor dies. 

Once an LT is created, the grantor transfers assets into the name of the trust. This may require retitling bank accounts or filing new deeds to transfer real estate into the trust. It is imperative that assets are correctly transferred to the trust, as the terms of the LT only control property that has been transferred into the trust. 

In an LT, the Grantor usually names him/herself to be the trustee for his/her lifetime. At the same time, the Grantor generally names a successor trustee who will manage the trust if the grantor should become incompetent or die. In the event of death, the trustee functions much like an executor with a last will and testament in settling the deceased person’s estate and making sure that his/her intentions are honored.  

One of the benefits of a living trust is the fact that it does not have to be probated. Probate is the legal process by which a will is reviewed and approved by a probate judge in the county where the person resided at the time of his/her death. Because the will is being reviewed by a court, it becomes a part of the public record. The will must be recognized by the court before any property can be conveyed or given to anyone else. In contrast, the property in a trust can be conveyed to others without the necessity of going to court. Since a trust does not have to be recognized by the court, it is highly likely the trust will never be a public document.  

Whether a living trust is the right option for you depends on your unique situation. Despite many articles in the financial media that declare everyone must have a living trust, the reality is that for most people, it is not the best option. The complexity it adds to a person’s life while he/she is alive may not outweigh the benefits enjoyed after someone is dead, so it is important to meet with an experienced estate planning attorney to determine the approach and documents most suitable for accomplishing your estate planning goals.

Ready to get started?

You can reach us via phone at (615) 371-2029 or fill out this form.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

How to Ease the Burden of End-of-Life Care Decisions

stethoscope

How to Ease the Burden of End-of-Life Care Decisions

by Christopher L. Kelly, Esq.

In this third installment of our series on basic estate planning, we will examine medical advance directives (see the first two articles here and here).

Advance directives are documents used to inform family and medical personnel of a person’s final wishes as to end-of-life medical treatment. These documents can also be referred to as Living Wills or Advance Care Plans. In 2017, the Tennessee Department of Health created the Advance Directive for Health Care, which combined the elements of the Living Will, Advance Care Plan, and a Medical Power of Attorney (find the form here). 

While the other types of documents executed before 2017 are still valid in Tennessee, it is worth taking a look at the new form, as it is far superior in the scope and breadth of topics it covers. Simply stated, it does a better job than previous documents in making sure a patient’s intent is clear on a variety of health care questions. 

An advance directive becomes important when a patient is facing the end of his or her life, generally after a doctor has delivered a terminal diagnosis. While a person is competent, he or she will always be able to make his or her own health care decisions. However, if a person has been rendered incompetent for any reason, the advance directive allows the patient to communicate the types of treatments that he or she may or may not want when facing the end of his or her life. The directive can speak to whether specific measures (such as CPR, respirators, etc.) should be employed or not. It can additionally codify a person’s desire for pain medication or not. Additionally, on the Tennessee form, a person can name his or her agent to make health care decisions for him or her.

Once a person has executed an advance directive, it is advisable for him or her to provide copies to the agent (the one who is named to make health care decisions in the document) as well as to a person’s doctors and local hospital. By providing copies before they are actually needed in a moment of crisis, a person can have a conversation with these people as to what the person’s clear intentions are regarding end-of-life treatments. This ensures there is time to clarify and even re-execute documents in case the providers discover issues that prevent them from honoring the documents as presented. 

While there are some unsettled areas in this area of law in Tennessee, generally the agent cannot overturn the express wishes of the person as expressed in a properly executed advance directive. Thus, it is important to ensure your wishes are clearly expressed in it. The document not only ensures that your wishes are known, but also gives the agent and family the peace of mind that he or she is making the correct decision when the time comes. And when a family is already dealing with a crisis, giving them clarity on this decision is a gift beyond measure. 

Ready to get started?

You can reach us via phone at (615) 371-2029 or fill out this form.

Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Everyone has an estate, but not everyone has a plan. Do you have a plan? Take our 10 minute estate plan audit to get started.

Learn More

Powers of Attorney

Estate planning vs. a will

Powers of Attorney

by Christopher L. Kelly, Esq.

In the last article, I provided basic information about the Last Will and Testament and its place in the estate planning process. In this next installment of our series on estate planning basics, I will discuss Powers of Attorney (POA).

As part of a comprehensive estate plan, individuals must plan for situations in which they may find themselves unable to make their own decisions, whether by physical or mental disability or even when simply not physically available. A POA is a document in which a person appoints someone (an “Agent”) who can act on his/her behalf in a variety of situations when the person is unable to act on their own. 

Powers of Attorney are important because the statistics show that 68% of Americans over 65 years of age will at some point be considered disabled.1 And disability is just not for retired persons: almost one-third (1/3) of long-term disability claims were made by people under the age of 65.2 When you consider other short-term scenarios when a person may not be able to act on his/her own (i.e. surgeries, rehabilitation, hospitalizations, etc.), it becomes even more apparent that the POA is an essential part of someone’s estate plan.

A POA may be crafted so that it is only effective when a person is unable to make decisions for himself/herself (called a “springing POA”), or it can be written so that it is effective even when a person is competent. An individual may also grant very broad powers to his/her agent or may grant only specific, limited powers. Including these features or not is purely at the discretion of the one drafting the POA. 

There are two main types of POAs commonly used in estate planning: (1) The POA for Financial Matters, and (2) The POA for Healthcare Decisions.  

For Financial Matters, a person names someone who can handle financial matters on their behalf in the event he/she is unable to do so. Many times, these types of POAs are effective immediately on signing, whether the individual is competent or not. This is helpful in instances when it may simply be inconvenient for someone to handle matters on his/her own (for example, if someone is out of town). However, a POA may also be written so that a person must be incompetent before the agent can act. Making incompetency a requirement can sometimes add complication to the process, as it normally must be objectively proven. However, if it is important to the client, it can certainly be included. 

For the Power of Attorney for Healthcare, a person names someone who can make healthcare decisions on his/her behalf. POAs for Healthcare are only effective when the person is incompetent. As long as someone is competent, he/she can always make his/her own decisions. However, in instances when someone is not competent (i.e. due to medication, anesthesia, or a mental issue), the appointed person can consult with the doctors and make the best decision for the person. Appointing someone in a POA to make healthcare decisions on behalf of someone else does not change that person’s ability to make their own decisions when they are competent. 

Powers of Attorney are distinguished by whether or not they are “durable,” which simply refers to whether the POA will remain in effect when someone is incompetent or not. Without a statement in the document to that effect, the POA is invalid when the person who granted it becomes incompetent. While incompetency is normally the situation for which a person plans, it is imperative that language concerning durability be included in the POA. 

What happens if someone does not have a POA? If a person becomes incompetent, with no one to make decisions on his or her behalf, their family or friends will find themselves in a costly (and grueling) process of having the court appoint a Guardian or Conservator for them. POAs provide economical and efficient solutions for these situations. 

In the first article, I discussed the Last Will and Testament, a document that controls what happens after we die. Having Powers of Attorney for both Financial Matters and Healthcare gives individuals coverage for difficult situations they could encounter during life. By having all of these documents in place, they can provide peace of mind for themselves and their families.

Have questions? We’re here to help! Let’s talk

1. AARP. Beyond 50.2003: A Report to the Nation on Independent Living and Disability, 2003.

2. Rogers, S., & H. Komisar. Who needs long-term care? Fact Sheet, Long-Term Care Financing Project. Washington, DC: Georgetown University Press, 2003

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