With planning, detours are a breeze
There may be detours on that road, there may be health events, there may be financial crisis that come up, but we know you can get past those hurdles with knowledge.
You plan ahead, and it just goes like a breeze, with a little bit of pre-planning, with a little bit of knowledge.
And that’s why we’re here, that’s why we do this.
Today’s topic is gonna be about the most important estate planning documents you will ever sign.
The single one, without a question, I don’t care who you are.
I don’t care what the size of your estate is, whether you’ve got nothing or everything, rich or poor.
I don’t care what religion you are.
I don’t care what nationality you are.
I don’t care anything about you, and yet I can make this one general comment.
In this article is about the most important estate planning document you’ll ever sign.
We are not talking about wills.
And I bet everybody is thinking, “Uh… Oh, they’re gonna talk about wills.”
Nope, that’s not it.
We are not talking about wills.
You know what?
Here’s what I always tell people, the one thing I can promise you:
..and if you’ve known many lawyers, you’ll know that lawyers don’t make a lot of promises…
The one thing that I can promise you is that you personally will never care whether or not you have a will.
Before that will matters to anybody, you’ll be gone.
It does not matter to you.
And while I use the term “estate planning”, we really prefer that you call it “life planning” because that’s what we like to do.
We like to plan for your life, not for your death.
Let’s plan for your life.
And in doing that, we’ve got some very important steps that we’ve got to get in order.
The bottom line is, seasons of life just bring all sorts of changes.
We mature from a child into a young adult. We make dumb stupid mistakes that young adults make, and we learn from those.
And we raise families. We go into middle age maybe a little wiser than we used to be.
And then as we travel into our golden retirement years, that’s also a season of life as well.
A lot of times, that senior season of life brings particular challenges.
We just can’t maybe think about things the way we used to.
Maybe we can’t physically get around the way we used to.
Maybe we’re not as good of a driver, or we don’t drive at night anymore like we used to.
We need to deal with those challenges.
One of the most important documents that can help you deal with these challenges of this senior season is a durable power of attorney.
The general durable power of attorney
Probably the most important document anybody will ever sign.
If you think about what we’re trying to do with this, if I become incapacitated.
For whatever reason, I can no longer carry on my own business, somebody else is gonna have to step in and do it.
I’m still alive, but I’m incapable.
- Maybe I’ve had a stroke.
- Maybe I’ve got Alzheimer’s.
- Maybe I was in a car wreck.
Who knows of the million different things that could leave me in a position where I can’t handle my own affairs?
And yet somebody still has to pay my bills.
Somebody has to talk to my phone company.
Somebody has to make sure my insurance is being paid for, and that when they deny my coverage, that they can argue with my insurance company about all of that, and all of the different things.
It’s what they don’t say that matters
So let’s think about it for a second.
Think about everything you could do, you personally, right now, all of the different transactions you could enter into.
Think about all of the things you can do as a free American.
Now put that in writing, and that is what we’re talkin’ about.
And if you’re getting the picture of how broad in scope this is, good.
With the powers of attorney, it’s not what they say that’s important, it’s what they don’t say because that’s where you get into trouble.
How POWERFUL it really is.
So we wanted to refresh you a bit, and make sure for our new readers, that they understand how important this document is.
How POWERFUL it really is.
So we’re gonna spend the rest of this article talking about this in a bit more detail.
We’ll go into some of the different types. Some of the things they need to say, and some stuff to look for, and that sort of stuff.
I’m gonna dive right in because we have so much information to share with you about the importance and the mechanics of doing a general durable power of attorney.
Now when it comes to these, you can start off by breaking them down into one of two parts:
- There’s what’s called an immediate power of attorney
- And there’s what’s called a springing power of attorney. It springs into existence at some point in time in the future.
So for example, I might have a power of attorney that says, “If at some point in time in the future, I can no longer handle my own business, then I appoint Lisa Shoalmire.”
So that would spring into action if I ever become incapacitated.
Or, I could have a power of attorney that says, “I appoint Lisa Shoalmire to handle business for me.”
Now even though I’m still capable of doing it myself, she has the power immediately.
So one is an immediate power of attorney, one is a springing power.
Every time I mention those two, people seem to think, “Well, I like the idea of the springing one better.”
It springs into existence, so that person doesn’t have any power right now.
It makes the principal or the person who’s signing that power of attorney think they feel a little more comfortable. Their agent has no legal authority until and unless the principal is incapacitated.
But let’s walk it down a few years.
So I sign this power of attorney that says, “If I become disabled, Lisa can handle stuff.”
And let’s say I have become disabled, and I can’t handle my own business.
Lisa walks into my bank to write a check or to pull some money out to pay some bills for me.
They look at that power of attorney. They’ll say:
“Lisa, we would love to let you handle John’s business, but this says you only have that power if he’s incapacitated. And we don’t know that he’s incapacitated. So we’re gonna need you to provide us some sort of proof.”
And that can get real difficult real fast.
So that sends me scurrying back to the doctor’s office to try to get some sort of letter or something from a doctor that says that you’re incapacitated.
I might not be able to get it that day, or even that week.
And sometimes business needs to be handled right then.
So you really set up a barrier for that agent to take care of your business the way you intended.
The response I get back from talking to people about is:
“Well, my child, I’m fine with them if I’m incapacitated taking of care of my business. But I’m just not real comfortable with the idea that while I am capable, that there’s a document out there that designates them as someone who can do business on my behalf.”
I usually try to dig into that a little bit.
The bottom line is, if you don’t have the faith and confidence and trust in an agent that you could name that could act for you immediately, then why in the world would you have the faith, confidence, and trust in that person if you become incapacitated and aren’t capable of looking over their shoulder?
It’s not about whether it’s an immediate power of attorney or a springing power of attorney.
It’s all about the trust and confidence that you have in the selected agent.
I’ve said the same thing to a million different people.
If you’re concerned that the person you’re appointing might misuse that power, you’re appointing the wrong person.
Then there’s just no question about it.
So for most people, an immediate power of attorney is actually the better option, as opposed to a springing one.
That’s the first issue.
The second issue though, once you’ve got somebody you trust, now we get into the nuts and bolts of it.
Now we get into what powers we are giving them.
This is where I would say our state legislators have done us a disservice.
We’ve got a bunch of folks that head to Austin or Little Rock, and they make laws about what a power of attorney is.
How it could be worded, and they even have created an example of a power of attorney that’s in the law books.
And this power of attorney is called a statutory power of attorney because it’s in the statute.
And once you pass ’em, they’re hard to change.
Anybody can grab a law book and open it up. There’s an example of a power of attorney right there in the statute books.
They’re trying to give people tools.
The idea was they wanna make it easily accessible for people to have a power of attorney, where they can get it pretty easy.
And so if you were to get on the Internet and you typed in “Texas power of attorney” or “Arkansas power of attorney”, or if you’ve got a hold of a law book, or even if you went down to legal aid or something and asked them for a power of attorney, most often, you’re gonna end up with the statutory form that the legislators came up with.
It’s very short, about a page, a page-and-a-half long.
And the problem is, it’s just not comprehensive enough.
The thing about laws is, they’re hard to pass.
And once you pass ’em, they’re hard to change.
Anybody that gives you one doesn’t know what they’re talking about
Life, however, changes every second.
And so you can look at that power of attorney and say:
- does it say anything about retrieval of an email password
- establishing online banking,
- or any of the myriad of things that you’re able to do?
You need your agent to be able to handle those things.
That statutory power of attorney just doesn’t get there.
Taking everything that you could do as an adult American free person, and now putting that in writing…
I’m serious. This is not a simple document.
So when people say, “I need one of those simple little powers of attorney,” no such thing.
And anybody that gives you one doesn’t know what they’re talking about.
This is a complex document because the devil is in the details.
There’s some very concrete examples of how those details can negatively affect you if they’re not worded right.
If you don’t know what that power of attorney says.
Provisions that can be in there that can have a big impact on you and your assets
It’s much more important to you than a will or something like that.
This is the thing that’s going to make sure you are being taken care of, that your assets are being managed, and all of that sort of stuff.
While you’re still alive.
So this is your key to quality of life, so that somebody can be there to help manage those things.
And we’ve talked about who do you appoint, and some of the issues related there.
And we also talked about that statutory form that is floating out there, that’s just not very good.
People will say, “John, is this power of attorney legal?”
“Well, yeah. But that’s not the right question. The right question is, is it any good?”
Is it useful?
And those are two different questions.
Something can be legal, but that doesn’t mean it’s very good.
And so we want a good power of attorney.
That’s where it comes into really fleshing out the different things like:
- banking, and
- real estate and
- personal property, and
- oil and gas, and
- investments and
- stocks and bonds and
- securities, and
- dealing with government agencies, and
- health insurance, and
- email, and
- electronic banking, and
- everything else you can possibly think of built in there,
…because it’s not what the power of attorney says that gets you in trouble, it’s what it doesn’t say.
And probably one of those places that really gets people in trouble with not saying the right thing is gifting.
An agent cannot gift
In a simple or a statutory power of attorney, many of those documents are just silent when it comes to the power of your agent to gift your assets.
Now think about what you can do yourself.
Could you make a gift to a child or a grandchild or to your church or a charity of your choice?
Of course you can.
And this is a power that we would like to include in a power of attorney, so that your agent can continue to gift in a manner that you normally would gift.
Also, there are some issues when it comes to arranging assets appropriately for long-term care.
Arranging for access to things like VA benefits or Medicaid benefits, sometimes gifting is a key part of that.
So if the power of attorney you have doesn’t say anything about gifting, a lot of people assume, and they assume incorrectly that, that heck, this document says my agent could do anything that I could do.
The issue though is that in the law, the legislators have specifically put in the law that an agent cannot gift.
So if your document is silent about gifting, then the default is that your agent cannot make a gift.
So that’s one issue.
So silence, again, what it didn’t say, silence doesn’t mean that they have the power.
In fact, the statute says an agent cannot gift.
However, if we draft a good power of attorney, we can include the power of an agent to gift assets.
But sometimes the legislators have included gifting.
But they give you just a little, and then they limit the gift to something called an annual gift tax exclusion.
If you’ve never heard of that before, I bet that your estate and your assets, you don’t have a gift tax problem, so why would we want to limit gifts to a marker created by the IRS?
The legislators think they’re doing us a favor by saving us from a bad agent who’s gonna gift away all of our assets.
The problem is, while the legislators and the simple forms are concerned about one particular possible abuse of that power, they weren’t considering the uses and the need to arrange assets in such a way to be able to access care services and financing for long-term care.
I can’t protect the house.
For example, one of our previous programs, we talked about a Lady Bird Deed.
A way that should you ever need nursing home care, you can protect that home so that when you die, that home doesn’t get eaten up by the Medicaid Estate Recovery Program.
In other words, it doesn’t have to go back to the state to pay for them, to reimburse them for all of that care they provided.
That Lady Bird Deed is a great tool, it’s a fantastic tool, and we use them pretty often.
But often when we’re doing that, the person who owns that home, that’s the person who’s in the nursing home.
And if they’re in the nursing home, many times, it’s because they cannot handle their own business.
And so Lisa’s point is, if I’m acting as Lisa’s power of attorney, if I don’t have the ability to make a gift, I can’t do a Lady Bird Deed.
I can’t protect the house.
When she dies, she may have always wanted that house to go to me.
But it doesn’t happen because the paperwork was not correct when it was done.
So, again, that’s one of those situations where it’s not necessarily what the power of attorney says that gets you in trouble, it’s what it doesn’t say.
And you know, this is just one example of the problems with our more simple powers of attorney.
We could fill up a whole other article with additional examples of some of the deficiencies.
What you want is a simple life
Sometimes we have to get a little more detailed in order to protect our families.
Remember, you don’t want simple documents.
What you want is a simple life.
And you want the documents to be however complicated they need to be to make sure that happens.
If you have more questions, you can always reach out to us every Saturday on 107.1 (Texarkana, TX) during our live call-in radio show, that’s Aging Insight Radio.
Or watch us on the live Facebook feed if you live outside of our area.
Of course, you can pick up one of the Aging Insight Magazines that are out there in the community or online.
They’ve got lots of good information in there.
And lastly, keep watching us on our Youtube channel where we try to tackle every elder question you throw at us.
I hope today that you’ve now learned that the most important estate planning document doesn’t have anything to do with a will or a trust.
It’s a general durable power of attorney.
And if you have one, get it out and check over it, and see if you see some of the things we were just talking about in that document.
We look forward to hearing from you in the comments section of this article. Please make sure to also like and share it with your loved ones.
The content in this article was taken in large part from our original broadcast of The Single Most Important Estate Planning Document You’ll Ever Sign.