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What It Means To Become a “Fiduciary”

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Throughout their life, many people may be asked to be power of attorney for a family member or friend. Your person may be planning for when they might become unable to take care of their affairs. For example, they might become disabled or incapacitated, and they would need a trusted person to step in and manage for them. This is also necessary if the person is writing a will, and his or her estate must go through the probate process.

If you are named as a guardian, executor of a person’s will, trustee, or power of attorney, the law calls you a “fiduciary.” You must act in the best interests of the person who has named you – “selflessly,” in other words. You must act loyally and in good faith.

You are not allowed to use the person’s property for your own profit. You cannot give gifts to yourself or others, if the person has not authorized you to do that. You cannot mingle your person’s property with your own. If you spend the person’s money, you must carefully document the amount you spend and for what purpose.

What is a Fiduciary Relationship?

The “fiduciary” relationship imposes the highest duty in law. If you violate that duty, you may become personally liable.

Or, if you are the one who is thinking about whom you would like to name as your power of attorney (or the like), you must be sure you trust that person absolutely.

A recent New Jersey probate case shows what can go wrong. Mother Christine named Patricia, one of her daughters, to be executor of Christine’s will. On Christine’s death, her other daughter, Diane, received a check from Christine’s estate for $10,000.00 – yet Christine’s house had sold for nearly $230,000.00.

The judge ordered Patricia to produce an “accounting” of where all that money had gone. An accounting is an inventory of estate assets and a record of all income and expenses. Patricia would not do so. Examination of the estate’s inheritance tax return revealed that despite a gross estate value of $319,368.00, the estate bank account contained only $6,886.00.

Patricia had spent $40,000.00 on what she claimed were home repair expenses, but she could produce no building permits. She had also given herself $110,000.00 as “fees” for her executor duties, plus a “gift” to herself of $27,000.00. No wonder she pled the Fifth Amendment.

The judge entered a judgment against her of $200,422.00. The judgment was affirmed on appeal, but with the requirement that the trial judge calculate the damages more specifically.

The case is In re Cenaffra, and can be found here:

https://law.justia.com/cases/new-jersey/appellate-division-unpublished/2020/a5731-17.html

Most people are not like Patricia. If you are named as guardian, power of attorney, or executor, follow a few simple principles. Make sure you don’t personally benefit from what you do with the other person’s property. You might be compensated fairly for your work, but refrain from doing anything that might look like a conflict of interest. If there are other beneficiaries waiting to receive their inheritances, be transparent. Keep the beneficiaries informed. Write down why you acted as you did, at the time you acted. Document everything. Keep receipts.

If you have questions or would like to discuss your particular situation, please don’t hesitate to reach out. We help people determine who should act in their best interests, and we can help those who are already named. We welcome the opportunity to speak to you. Please contact our office or give us a call at (212) 937-8420.

Important things to Understand about Estate Planning

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Estate planning may sound like something that is just for the very wealthy, however, in the eyes of the law, an estate is simply the aggregate of property an individual owns, and most everyone owns something. Property ownership includes individual as well as jointly owned bank accounts, stocks and bonds, retirement accounts, real estate, jewelry, vehicles, your online digital footprint, and even pets. Short of being utterly destitute, you have an estate, and planning for it helps to protect yourself, your family, and your loved ones.

According to Caring.com, fewer Americans than ever are engaging in estate planning. The number of adults who have a will or other types of estate planning documents has fallen nearly 25 percent since 2017. Astonishingly, the demographic of older and middle-aged adults is less likely to have wills and estate plan documents at roughly the same 25 percent rate. Additionally, a growing number of Americans lack the resources and knowledge as to how to get a will. Overall, the prevalence of estate planning documents since 2017 has shown a decrease of almost 25 percent.

In their annual survey, Caring.com posed the question to its participants as to why they have put off having estate planning documents, and increasingly people cite a lack of education or the perceived cost of estate planning as the most significant reason. Yet, 60 percent of the same respondents think planning their estate is either somewhat or very important. Data shows that as a person’s income increases, their likelihood of having estate planning documents like a will, living trust, or advanced health care directives also increases. Still, the number of people with said documents continues to decrease, even in higher-income groups.

In 2020, study participants in the highest income group showed a decrease of 26 percent regarding estate planning documents. Even those Americans with the resources to create a will feel it is something they can put off until later in life, which has disastrous consequences for their loved ones in the case of unexpected death.

 

caring.com

Estate planning is the process of outlining specific instructions as to how you want your money and other property dispersed upon your death. It includes decisions about your medical care and final arrangements as well. Wills, trusts, and advanced medical directives are the three primary estate planning documents you need to understand and put into place as soon as possible.

A will instructs how to divide up assets, debt, personal property, and more. A will can cover all of your estate planning needs; however, it does come with a few limitations. First, a court process called probate must be started upon death. During this sometimes lengthy process, a judge oversees the transfer of ownership of your property according to your will. Once a probate is opened, the will becomes public knowledge, as well as the property that the deceased owns. For those who wish to avoid court or who wish to keep their affairs private, a living trust may be the best option.

A living trust takes effect the moment it is enacted, while your will only becomes effective upon your death. Planning with a living trust can more expensive, but it provides the advantage of avoiding probate court and keeps all of your information (and your beneficiaries’ information) private. Further, a living trust can provide for management of your assets should you become disabled.

An advanced health care directive, like a living trust, is designed to take effect during your lifetime. This directive stipulates your end of life wishes as well as what should happen if you become incapacitated and unable to make decisions about your medical care.

A durable power of attorney covers who will make financial decisions for you if you are unable to. You can specify more than one agent, and you can be very specific about what that agent can do on your behalf, including management of online accounts.

If you are ready to discuss your planning needs, we would be honored to help. If you have an existing plan, we would be happy to review that plan to make sure it still works for you, given your current health and financial circumstances. Please contact our New York office or call us at (212) 937-8420. We look forward to hearing from you!

 

Who Should Make Financial Decisions for You?

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Who should you trust to manage your financial well being when you are no longer able to do so? A power of attorney (POA), otherwise known as an agent to your principal, has the legal authority to represent and make decisions on your behalf. What characteristics should you look for when designating a power of attorney? No matter what type of power of attorney you seek to arrange, your potential agent must be a person you deem to be trustworthy and honorable to conduct your affairs in your best interest.

Often the principal who designates the POA may prefer to choose a family member such as a spouse or adult child. If a family member is unable or unwilling to act when needed you can name a trusted friend or retain professional representation to ensure your interests are well looked after.  Some people choose to have co-agents or name a secondary agent in the event another might pre-decease you.

Stipulations regarding the selection of a POA are minimal. Your chosen power of attorney must meet two legal thresholds; be an adult and not be incapacitated.  There are no special qualifications regarding financial acumen or legal knowledge, and in fact, integrity is considered the most important attribute when selecting your agent.

Some questions to consider beyond your basic level of trust with this person(s) include:

  • How does this person manage their own legal and financial responsibilities? Are they financially responsible? Do they lead a steady life? Are they good at making decisions under pressure?

 

  • Will the person you select charge you a fee for their service? Generally, family members will not but, if you choose professional representation such as a financial planner or an attorney, there is usually a fee associated with their expertise and service.

 

  • Is the person you want to represent you willing to do so? Becoming an agent is a big responsibility to accept, and for many reasons, the person you want may not agree to serve as your agent.

Your power of attorney agent can have broad or limited legal authority to make decisions and transactions on your behalf about your property, finances, and medical care. The agent’s power is derived through your permissions, and if you are dissatisfied with your agent, you can terminate the POA/agent relationship and create a new one. Your power of attorney must comply with state law. When you work with us, we will make sure yours complies with all applicable laws.

There are a few misconceptions about the power of attorney. The first is you can create a POA on your behalf after you are incapacitated. You cannot as it is too late. For your power of attorney to be valid, your agent must be appointed before you become incapacitated through illness or disability. If you do not have your POA agent legally in place and are unable to manage your affairs, it may become necessary for a court to appoint someone to act on your behalf. People appointed to represent your interests in this manner are referred to as guardians, conservators, or committees, depending on your local state law. To avoid someone making decisions for you who you may not have chosen, it is imperative to have the proper power of attorney legally in place before you become incapacitated.

Another misconception is that your POA agent can make whatever financial decision they want to about your estate and that all power of attorney documents are the same. Your selected agent, by law, has an overriding obligation known as a fiduciary obligation to make decisions in your best interests. This responsibility is why it is imperative to choose a trustworthy agent as it can help avoid challenges to and litigation of your estate. You must have full confidence in the actions your agent will take on your behalf. You can appoint different agents for different POA document functions. We can help you figure out which powers should be given to particular agents. For example, you may want a different agent to handle real estate transactions on your behalf.

Selecting an agent and preparing a financial power of attorney is an important part of your overall plan. We would be happy to help you and welcome your call.

How to Talk to Your Aging Parents About Estate Planning

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It is essential that as your parents’ age, you have conversations with them about their finances. To broach the topic, you might bring up current events like the coronavirus pandemic, its effect on economic conditions, and how it relates to the security of their financial future. The conversation should come from a calming place of love and concern. Speak to them respectfully about how the coronavirus pandemic has you thinking about the importance of their planning and preparedness.

Once you begin the conversation, move away from the pandemic as your introductory technique as you do not want to create a sense of panic or fear.  Instead, delve into legal and financial reviews, processes, and parameters. US News reports that your parents’ financial analysis should include essential legal documents, financial accounts, and associated vital contacts, long-term care decisions, and claims. If you live apart, lay the groundwork to help them with their finances remotely.

It is generally most comfortable to begin your conversation with legal documents that hopefully your parents already have in place like a will, trust, living will, and a health care proxy. If your parents do not have these documents, they must retain an attorney and create the ones that best suit their needs. If you need to help your parents manage their finances, you must have a durable power of attorney. A durable power of attorney allows you to make financial decisions for your parents in the event they become incapacitated. This is an essential estate planning document. In the absence of a durable power of attorney, the courts become involved, and solving health or financial issues becomes a lengthy, expensive process over which you have little control. If your parents already have their legal documents drawn up, find out where they keep them and review them carefully. If any documents need to be amended, suggest that your parents meet with an attorney to make the relevant changes. Be sure their documents reflect the state law in which they reside.

Once you have assessed your parents’ legal documents, it is time for some financial discovery. Even if your parents do not currently need help, having an overview of their finances and a durable power of attorney to help them in the future is crucial to their aging success. Begin by listing all of their accounts, account numbers, usernames, and passwords as well as employee contact names. Include insurance policies, the agent’s name, and where the policy is, as well as how they pay their premiums. Include any online medical accounts or list their doctors’ names and office numbers. The idea is to create a comprehensive list of all of these accounts. Gather your parents’ Medicare and Social Security numbers and their drivers’ license numbers. Know where they keep this information so that in the future you will know where to look. Also, learn about any online bill paying or automated, re-occurring activity. These usually include monthly bills like electricity, natural gas, water, etc. but may also include quarterly payments or annual subscriptions.

If your parents still live in their long-time home, discuss if it is viable that they live out their days there, or if downsizing to a retirement community or moving closer to where you live appeals to them. Help them come to a decision that is best for their set of circumstances.  If they do not have long-term care insurance or some other mechanism to aid them in times of need, talk about the topic, and try to come up with a solution. If they do have long-term care, be sure you have a copy of the policy, contact information, and the name of the insurer and agent. Review the requirements for receiving benefits so you can help them when they need to file a claim as most policies have a waiting period of 30 to 90 days before benefits begin. Know what to expect.

Digital technology has made oversight of parents and their finances easier than ever as long as you have a durable power of attorney and access to their account information. If they do not yet pay their bills online, or use auto payment, help them set up this option for their monthly bills. Remind them you will provide oversight to ensure proper billing. Offer to help them with their annual tax filings. Your help relieves some pressure on them and provides you with information about the goings-on in your parents’ accounts. For your parents’ peace of mind, you can establish a monthly video chat to let them know their bill payments are progressing normally. Your involvement will allow you to identify any abnormalities in account activity, which may indicate scam attempts.

Having these financial and planning conversations with your parents today can help them live more securely and with less stress as they age. Most parents will try to avoid these discussions with their children because they may not be adequately prepared for what can lie ahead. Conversations that focus on proper legal documents and gathering financial account information will give you the data you need to help protect your parents.

We would be happy to help you and your parents with critical planning documents. We are open and taking new clients, and we hope to talk with you soon about your particular needs.

Important Information You Should Know About Estate Planning

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Estate planning may sound like the domain of the very wealthy, however, in the eyes of the law, an estate is simply the aggregate of property an individual owns, and most everyone owns something. Property ownership includes individual as well as jointly owned bank accounts, stocks and bonds, retirement accounts, real estate, jewelry, vehicles, your online digital footprint, and even pets. Short of being utterly destitute, you have an estate, and planning for it helps to protect yourself, your family, and your loved ones.

According to Caring.com, fewer Americans than ever are engaging in estate planning. The number of adults who have a will or other types of estate planning documents has fallen nearly 25 percent since 2017. Astonishingly, the demographic of older and middle-aged adults is less likely to have wills and estate plan documents at roughly the same 25 percent rate. Additionally, a growing number of Americans lack the resources and knowledge as to how to get a will. Overall, the prevalence of estate planning documents since 2017 has shown a decrease of almost 25 percent.

In their annual survey, Caring.com posed the question to its participants as to why they have put off having estate planning documents, and increasingly people cite a lack of education or the perceived cost of estate planning as the most significant reason. Yet 60 percent of the same respondents think planning their estate is either somewhat or very important. Data shows that as a person’s income increases, their likelihood of having estate planning documents like a will, living trust, or advanced health care directives also increases. Still, the number of people with said documents continues to decrease, even in higher-income groups.

In 2020, study participants in the highest income group show a decrease of 26 percent regarding estate planning documents. Even those Americans with the resources to create a will feel it is something they can put off until later in life, which has disastrous consequences for their loved ones in the case of unexpected death.

Estate planning is the process of outlining specific instructions as to how you want your money, and other property dispersed upon your death. It includes decisions about your medical care and final arrangements as well. Wills, trusts, and advanced medical directives are the three primary estate planning documents you need to understand and put into place as soon as possible.

A will instructs how to divide up assets, debt, personal property and more. A will can cover all of your estate planning needs however, it does come with a few limitations. First, a court process called probate must be started upon death. During this sometimes lengthy process,  a judge oversees the transfer of ownership of your property according to your will. Once a probate is opened, the will becomes public knowledge, as well as the property that the deceased owns. For those who wish to avoid court or who wish to keep their affairs private, a living trust may be the best option.

Power of Attorneys and Finances Decision Making

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Who should you trust to manage your financial well being when you are no longer able to do so? A power of attorney (POA), otherwise known as an agent to your principal, has the legal authority to represent and make decisions on your behalf. What characteristics should you look for when designating a power of attorney? No matter what type of power of attorney you seek to arrange, your potential agent must be a person you deem to be trustworthy and honorable to conduct your affairs in your best interest.

Often the principal who designates the POA may prefer to choose a family member such as a spouse or adult child. If a family member is unable or unwilling to act when needed you can name a trusted friend or retain professional representation to ensure your interests are well looked after.  Some people choose to have co-agents or name a secondary agent in the event another might pre-decease you.

Stipulations regarding the selection of a POA are minimal. Your chosen power of attorney must meet two legal thresholds; be an adult and not be incapacitated.  There are no special qualifications regarding financial acumen or legal knowledge, and in fact, integrity is considered the most important attribute when selecting your agent.

Some questions to consider beyond your basic level of trust with this person(s) include:

  • How does this person manage their own legal and financial responsibilities? Are they financially responsible? Do they lead a steady life? Are they good at making decisions under pressure?
  • Will the person you select charge you a fee for their service? Generally, family members will not but, if you choose professional representation such as a financial planner or an attorney, there is usually a fee associated with their expertise and service.
  • Is the person you want to represent you willing to do so? Becoming an agent is a big responsibility to accept, and for many reasons, the person you want may not agree to serve as your agent.

Your power of attorney agent can have broad or limited legal authority to make decisions and transactions on your behalf about your property, finances, and medical care. The agent’s power is derived through your permissions, and if you are dissatisfied with your agent, you can terminate the POA/agent relationship and create a new one. Your power of attorney must comply with state law. When you work with us, we will make sure yours complies with all applicable laws.

There are a few misconceptions about the power of attorney. The first is you can create a POA on your behalf after you are incapacitated. You cannot as it is too late. For your power of attorney to be valid, your agent must be appointed before you become incapacitated through illness or disability. If you do not have your POA agent legally in place and are unable to manage your affairs, it may become necessary for a court to appoint someone to act on your behalf. People appointed to represent your interests in this manner are referred to as guardians, conservators, or committees, depending on your local state law. To avoid someone making decisions for you who you may not have chosen, it is imperative to have the proper power of attorney legally in place before you become incapacitated.

Another misconception is that your POA agent can make whatever financial decision they want to about your estate and that all power of attorney documents are the same. Your selected agent, by law, has an overriding obligation known as a fiduciary obligation to make decisions in your best interests. This responsibility is why it is imperative to choose a trustworthy agent as it can help avoid challenges to and litigation of your estate. You must have full confidence in the actions your agent will take on your behalf. You can appoint different agents for different POA document functions. We can help you figure out which powers should be given to particular agents. For example, you may want a different agent to handle real estate transactions on your behalf.

Selecting an agent and preparing a financial power of attorney is an important part of your overall plan. We would be happy to help you and welcome your call.

Why It Is Important to Plan for the Unexpected

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The rise of the coronavirus, COVID-19, has left many unprepared and confused. There are numerous reports of shortages of antibacterial hand sanitizer, disinfecting wipes, and even toilet paper. While we can’t predict when something like COVID-19 might strike, we can take steps to prepare for an unexpected crisis to help reduce the stress on ourselves and family members.

Designate a family member who will check on elderly relatives. Make sure everyone knows who will responsible for checking in with an elderly loved one each day. Also set up a process for notifying other family members of an elderly loved one’s condition – this may including sending an email, text messaging, or phone calls. The method is not as important as agreeing to a process and sticking to it so all family members stay informed.

Seek medical advice in the event of a health care crisis. There has been a great deal of reporting about COVID-19, and some of it has been inconsistent. Reach out to your trusted medical team to understand what you and your loved ones should be doing in this, or any, health care crisis.

Make sure someone knows how to get your bills paid if you are unable to. This type of power can be provided to an agent under a financial power of attorney. Powers of attorney can include numerous powers so it is critical to talk with legal counsel before signing any type of legal document that gives someone else authority over your finances.

Be sure there is an accurate list of medical prescriptions readily available in your home. If you become ill, it is important that someone knows the medicines you take and the dosage. Keep this in your home where others can find it, and make sure the list is dated, noting any time it is updated. Many of us assume that our doctor has an updated prescription list, but if you are seeing multiple specialists, that may not be true.

Designate someone you trust to make medical decisions for you if you are unable to. This should not be a form that is downloaded from the internet. Deciding what type of treatment you want, where you want to live, and what should happen if you have a terminal illness are serious topics that should be considered carefully, then translated into a proper legal document.

Planning for an unexpected health care or financial crisis can help relieve a great deal of stress for you and your family. We would welcome the opportunity to help you come up with a plan that works for you.