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and special needs planning.
and special needs planning.
4 Reasons to Consider a Custom Financial Power of Attorney
We all want to save time and money when possible. So, when clients ask me if pulling a generic power of attorney form off the web, like the standard Wisconsin power of attorney for finances, will work, I understand the motivation to put a crucial document in place quickly and economically. A generic form is valid and will give your agent certain powers to manage your finances. However, they do have limitations to be aware of.
Often a generic form will lack provisions that may be necessary for making complex financial decisions to ensure your plan is carried out. We often face navigating more complex financial situations when planning for Medicaid. You should consider the following four factors before using a generic form.
Funding Your Trust
Nearly as important as creating the trust is the concept of "funding the trust." The trust itself is the "vehicle" for your assets; your assets are the "passengers" and must get into the vehicle in order for the trust to do its job properly. If you don’t properly fund the trust, your assets may have to go through Probate, simply to get into the trust! That can defeat some of the purposes for creating a trust.
For Real Estate, this means that deeds need to be prepared and properly executed for transferring ownership of real estate into the trust. Some people prefer not to record the deeds during their lifetime for a variety of reasons. This is acceptable, but we do recommend that the deeds be prepared and be in recordable form. However, sometimes original documents are misplaced or accidentally destroyed; keep this in mind. For vehicles, the same is true. Titles should be prepared in assignable form so that they can be immediately transferred to the trust. Again, some people, for convenience, prefer not to make the actual conveyance through the motor vehicle department during their life.
You should be sure to have your Bank Accounts, Stocks and Bonds, properly transferred so that they are in your trust. Most bankers and stockbrokers are familiar with this process and can assist you in making these transfers, as appropriate.
In addition to transferring assets at the time of creating the trust, it is important that any assets received later should likewise be transferred, or funded, into the trust. For example, many people will change the vehicle that they own, many times. It is important that not only the first car that you have, or car that you own at the time of creating the trust, be placed in the trust, but likewise that any replacement vehicles be properly titled or funded into the trust. So should you receive assets from some other source (gift, inheritance, earnings, etc.) they should likewise be funded or titled in the trust.
The proper title for any of these assets would be, for example: "John A. and Jane A. Smith, trustees of the John A. & Jane A. Smith Trust dated December 31, 20XX, or its successor trustee."
As described above, the Marital Property Agreement, if appropriate, can fund assets into the Trust, at either the death of the first spouse, or the second spouse. The advantage of funding by way of the Marital Property Agreement, verses a Pour Over Will, is that the Marital Property Agreement does not have to go through probate, whereas a Will does.
If you have questions regarding your Trust or any elements of your Estate Plan, please contact our office.
This post continues our series about common problems or issues that arise in the context of Estate Planning. Part one can be found here.
In this post, I want to discuss two common, related problems that occur far more frequently than they should. This is the use or misuse of the Wisconsin Statutory Health Care Power of Attorney and Durable Power of Attorney for finances.
From the attorney’s perspective, what often will happen is that we will meet with client, go through a thorough estate analysis, raise questions and get answers regarding the individual or couple’s choice of agents under both Health Care Power of Attorney as well as the Financial Power of Attorney. Sometimes these discussions can be fairly brief, but in many cases, it can be quite thorough.
At the conclusion and as part of the estate planning process, we draft the Health Care Power of Attorney and Financial Power of Attorney, send it to the client to review; they approve it, and eventually come back to the office to sign and finalize. We will then take care of contacting the agents, to make sure they are aware that they have been named as agents, have them sign the proper forms acknowledging that they are aware that they are agents, and proceed to finish the Estate Plan.
However, we later find that in an emergency, or sometimes not even in an emergency, the client winds up in a doctor’s office or the hospital and some well-meaning assistant, social worker, nurse, etc., will thrust a Health Care Power of Attorney in front of the individual, and say let’s fill this out and sign here. The client does.
What they have unwittingly done is revoke the Health Care Power of Attorney that was painstakingly produced at the attorney’s office. They may have different choices of agents and more commonly than not, they leave large blanks in the document, because they never discussed this.
Even worse, with the Statutory Financial Power of Attorney, much the same thing can happen. Except now it is not at a hospital or clinic, but rather at the insurance agent’s office or a financial advisor, possibly a bank, and someone produces the blank Wisconsin Statutory Power of Attorney, and again it gets quickly signed and unwittingly revokes the one produced at the attorney’s office.
To make this even worse, in my own opinion, the Statutory Financial Power of Attorney in Wisconsin is largely a useless document, because I have seen far too many cases where third parties, such as banks, insurance companies, or other financial institutions, will not accept the Wisconsin Statutory Power of Attorney, and now you have a document that is worthless, except that it revoked the earlier one which likely would have worked.
Then, as if this were not bad enough, sometimes these freely available Statutory Financial Powers of Attorney are used by unscrupulous individuals, who will have a parent who may be vulnerable to influence or threats or intimidation, where they sign such a document, authorizing the unscrupulous person to have access to their accounts, or even to gift money in the accounts to themselves. If you think it doesn’t happen here, you are wrong. There have been numerous cases right here in the Chippewa Valley where elderly folks have been cheated out of hundreds of thousands of dollars by unscrupulous agents who employ these same tactics.
This is the first post in a series of posts looking at common problems or issues that arise in the context of Estate Planning but looking at them from different perspectives.
In this first post, I want to address a mistake or problem that commonly occurs, when the parent or parents, add one of their children as a joint owner on their bank accounts.
I have seen this many times over the years, where an individual or couple may have a perfectly good estate plan, wonderfully drafted, properly executed, and then they ruin it by going to the bank or banks, and adding one of their children as a joint owner on their accounts. Often, when asked about it, I am told that the banker recommended it for one of a variety of reasons: either to avoid probate, or to assure that money is immediately available to pay bills and expenses, or because that person was named as the agent under Power of Attorney anyway.
So what’s the problem with this? First of all, under the law, after death, the money in that joint account becomes the property of that surviving joint owner. It is what I call the “Mom must have liked me best” problem. And sometimes that son or daughter will share the money with the other family members, but in my experience, most times they do not.
Secondly, during the lifetime of the parents, even while they are alive, again under Wisconsin Statutes, that joint owner has full and unrestricted access and they can remove any or all of the money with very little recourse to try to get it back.
I was successful in recouping money under such circumstance one time, where a son had removed a substantial amount of money from his mother’s account while his mother was alive. We were successful largely due to the fact that the banker who had set up the joint account testified in court that the mother had explained that she only wanted the son to get this money after her death, not during her lifetime. Even assuming that to be accurate, one questions why the banker didn’t suggest a Payable on Death Beneficiary designation, rather than the joint owner designation. But in any event, we were successful in that case in getting it back, but in most cases, you might not find a banker who handled that particular transaction, or even if you can locate him or her, they may not have any memory, notes or other records about why the joint ownership was selected.
Third, even if that surviving joint owner does share with the rest of the family, they often won’t use it for the intended purpose of paying the bills and expenses, but rather they will have the bills and expenses paid out of the estate and simply pocket the money.
Finally, to make matters worse, the parents might do this on most if not all of their accounts, so that their finely tuned Estate Plan is turned upside down, because the joint ownership designations take precedence over the will, trust, or other Estate Planning documents.
In coming posts, we will talk about other mistakes that people make that can ruin a perfectly fine Estate Plan.
Attorney Aric Burch
Grosskopf & Burch Law Firm