When you have been appointed as an agent under a Durable General (Financial) Power of Attorney, you presume that financial institutions will honor the document appointing you and provide you with access to funds and financial information on behalf of the person who appointed you as agent. It can be a frustrating experience to be told that you cannot access accounts or get the information you are seeking. To resolve the problem, it is important to ask for a clear explanation for why the document is not acceptable. There are some common reasons for a bank, financial institution or other agency to refuse to acknowledge the power of attorney.

1.) The Power of Attorney Is Not Durable
Read the document carefully. For a power of attorney to be effective after incapacity, it must contain specific language indicating that the power of attorney is “durable,” meaning it continues to be effective after the principal becomes incapacitated. Otherwise, it is only effective while the principal is still of sound mind. Since most individuals want the power of attorney to be effective in the event they are no longer able to handle their financial affairs, they should be sure that the power of attorney contains the appropriate durable language when it is drafted. If there is no such language, the agent has no authority and a bank will not honor the power of attorney. If the principal is already incapacitated, they will not be able to execute a new power of attorney and a guardianship may be necessary to access accounts and financial information.

2.) The Power of Attorney Has Not Been Activated
Most Durable General (Financial) Powers of Attorney contain language about how they become effective, again it is important to read the document very carefully before you need to use it, so you can determine what must occur for it to become activated. Some powers of attorney contain language indicating they are “springing,” meaning they only become effective upon the incapacitation of the principal. Some indicate that the document becomes effective after the principal signs a written statement indicating it is effective and they want the agent to act for them. Other powers of attorney are effective immediately the day they are executed, meaning the principal does not have to be incapacitated for the agent to use the document to act on their behalf.

3.) You Have Not Provided Required Documentation
If the power of attorney requires incapacitation before it is effective, you must provide documentation to the bank or financial institution showing that incapacitation has occurred. You may need medical records or a statement from a physician; or if the document requires it, the signature of two physicians who have examined the principal and determined that he or she is unable to manage their affairs due to mental incapacity. If the document requires a written statement from the principal, you must present that document, along with the power of attorney. If you are a secondary agent, named to act in the event the primary agent is unwilling to act or is unable to act due to death or incapacitation, you must provide documentation as to why the first named agent is not acting (e.g. a written resignation, death certificate or certificate showing the first agent has become incapacitated).

4.) The POA Is “Stale”
The notion of “staleness” implies that if a power of attorney was executed a number of years ago, then there is a chance the principal may have revoked the power or has executed a new one. In Wisconsin, a person may not refuse a power of attorney based on the date it was executed; however, a person may ask for a certification of the power of attorney which provides that the principal is still alive, has not revoked or amended the power of attorney and that the contingency requiring it to be effective has occurred.

5.) Handling Power of Attorney Issues with Banks
Keep in mind that banks and other financial institutions are often trying to prevent fraudulent transactions, giving access to an unauthorized person or granting access to an authorized person under the wrong circumstances. They want to protect their customers and can be held liable for granting unauthorized access. While this can be frustrating for the agent, try to remember that you would want the utmost caution taken if someone were trying to access your personal information or accounts.

Remember, if you have communicated clearly and have provided all documentation without successfully accessing the needed information, your attorney may be helpful in providing the bank or financial institution with the legal authority necessary to access the information.

 

Being asked to wind up the affairs of a deceased loved one may feel like an honor, but the duties of a Personal Representative, or Executor, as the position is sometimes called, can also be complicated. If you have been named as Personal Representative in the Last Will & Testament of someone who has died, here are some things to keep in mind:

1. You Will Need Patience.
Being appointed takes time. Your nomination as Personal Representative does not give you authority to act on behalf of the estate. Before you can act, you will need to file an application with the probate court to request that you be appointed. You will be required to file a number of documents to open the administration, and will be appointed only after all interested parties, heirs, and beneficiaries have been given notice of the proceedings and any applicable waiting periods have passed. The process and time frame varies depending upon the number of heirs and beneficiaries, and whether any party raises an objection to the Will or to your appointment as Personal Representative. In the meantime, you will not have authority to pay bills, secure property, or handle administrative tasks for the estate.

2. You Will Need Help.
You will often need the assistance of an attorney to prepare the initial required filings and help you through the remaining probate process. The required legal filings can be complicated. In addition, you will need legal advice regarding claims filed against the estate, tax issues, distribution methods, or objections by beneficiaries. Your attorney can coach you through legal questions and situations as they arise. He or she can also conduct research on specific matters and look over or prepare paperwork before filing.

3. You Will Need Information.
Before initiating the probate process, you will need information about the decedent’s assets and the original Last Will & Testament. Not all estates are subject to probate. If the deceased named direct beneficiaries on his or her life insurance, bank accounts or retirement accounts, for example, these assets will not need to go through the probate process. How assets are titled matters in determining what procedures will be necessary to handle the decedent’s affairs. If you don’t have very much information regarding assets and expenses, an attorney will not be able to tell you which procedures can be used until you gather more information. It may be necessary to sort through files and go through all of the decedent’s paperwork before you can begin the process.

4. You Will Need Time.
Administering an estate is very time consuming. It will take several months to administer a basic estate, and much longer for complicated estates. In Wisconsin, there is a three month period after the estate has been opened, during which creditors may file claims in the estate. In addition, the estate will need to remain open until all assets, including real estate, are liquidated and transferred. This may mean waiting several months to a year or more for real estate to be sold. Being a Personal Representative can feel like a “second job” as you spend time making phone calls to obtain information from banks, mortgage servicers, investment firms, and life insurance companies and schedule meetings with financial advisors, realtors, accountants, and attorneys. You may need to sort through and dispose of years of accumulated paperwork and personal property, often while dealing with other grieving family members who also have an interest in personal property and sentimental items.

5. You Will Need Excellent Skills.
You must have good organizational and financial skills. Personal Representatives are required to keep very good records and provide an accounting to the probate court for all expenditures. You will need to keep meticulous records of financial transactions, as well as communications with attorneys, accountants, bankers, and other contacts. If you hate the thought of balancing your own checkbook, and happily relinquish financial tasks in your household to your spouse or partner, you will have difficulty dealing with the tasks of a Personal Representative. In that case, a good Personal Representative will enlist the help of professionals to organize the estate’s finances.

6. You Will Need Money.
As Personal Representative, you will likely incur expenses during the administration of an estate, such as travel, mileage, postage, etc. Fortunately, you are entitled to be compensated for out-of-pocket costs. You are also entitled to compensation in the form of a Personal Representative’s fee, typically 2% of the value of the estate. Be prepared, however, that heirs do not always understand the amount of time involved in administering an estate, and the Personal Representative’s fee may become a source of conflict. While the law allows the fee, many Personal Representatives feel uncomfortable accepting payment.

7. You Will Need to Fulfill Legal Duties.
Personal Representatives have a duty under the law to properly administer the estate. Personal Representatives are required to complete certain duties, such as paying administration and funeral expenses, publishing notices to creditors, filing tax returns, providing notice to heirs, and following the distribution instructions as set forth in the decedent’s Will. The law also provides a time frame in which these tasks must be completed. In addition, you have a legal duty to properly value assets and make sure that heirs receive the inheritance to which they are entitled.

The role of Personal Representative of an estate requires time, patience, and the organizational skills to deal with a somewhat overwhelming amount of legal and financial documents. With this information, we hope that you are more prepared to handle the responsibility of being Personal Representative. Please note that Anderson O’Brien Law can assist you in the process of administering an estate.

 

Clients often seek the advice of an elder law attorney regarding the best protection for their assets in the event they need long-term care in a nursing home or assisted living facility. Since Medicare does not pay for long-term custodial care, having enough to pay for several months to several years of care in a facility is a serious concern for many seniors.

If you have minimal assets, you may qualify for Wisconsin’s Medicaid program to pay for care. But what if your assets exceed the limits for Medicaid qualification? Should you purchase long-term care insurance, or a combination of life insurance and long-term care insurance (called “hybrid” policies)? Factors to consider when choosing between the two include your current health status, available financial resources and your risk tolerance.

With traditional long-term care insurance, you will pay a monthly (or sometimes annual) premium. If you end up needing long-term care, the policy pays out a daily or monthly benefit, up to a lifetime maximum. If you never need long-term care, you end up with no return on the premiums you have paid. While this is the nature of many types of insurance (auto, home, term life), some find the “use-it-or-lose-it” strategy difficult to swallow.

As an alternative, some individuals will purchase so-called hybrid policies. These are policies that combine long-term care insurance with permanent life insurance policies that include a savings/investment component that builds over time. If you end up needing long-term care, you withdraw funds from the policy as they are needed, and the insurance company continues to pay for your care when those funds run out. If you never need long-term care, the funds are still available during your lifetime, and if you die without having expended the funds, your heirs receive the funds upon your death.

Typically, it is easier to qualify for hybrid type coverage because traditional long-term care insurance has stricter underwriting requirements and, therefore, the status of your health will be a consideration in which type of product to invest. Affordability may also be a factor. Hybrid policies are paid over a much shorter period of time, so you will not be able to stretch payments out as long as you would with traditional long-term care insurance, which means you will need to consider available resources. Individuals with more substantial resources may wish to look at alternative investments.

You should also inquire as to whether the payments you will be making are tax deductible. Payments for some hybrid products may not be deductible. Finally, be sure to consult with your attorney, accountant, and financial advisor as to the legal, financial, and tax consequences of your purchase before you make your final decision.

 

Special needs planning involves parents or caregivers who are interested in ensuring quality of life, advocacy and services to a child or individual with special needs. The planning itself is two-fold: First, parents and caregivers will want to be sure that they can use their own assets to provide resources and services and to ensure that such resources are appropriately handled after death. Second, for individuals with special needs, inheritances, like other resources, can have an adverse impact on needs-based or financially-based public benefits. Therefore, special needs planning also incorporates planning for those types of benefits as well.

A properly drafted special needs plan has two primary goals: (1) preservation of resources and (2) ensuring quality of life. The foundation of such planning includes a Will or Revocable Trust, a Special Needs Trust, and in some cases, Guardianship.

If you do not have a Will, Wisconsin Statutes will determine the beneficiaries who receive your property (the Laws of Intestacy). If you have a child with special needs who is receiving public benefits, you may not want that child to receive your property directly. Instead, you can set up a Special Needs Trust in your Will for your child with special needs ensuring that public benefits will remain intact after your death. If you have been court appointed as legal guardian for your adult child, you can also nominate a successor guardian in your Will.

As an alternative to your Will, you can execute a Revocable Trust, which is a trust that provides for distribution of your assets upon death. Unlike a Will, if the Revocable Trust is properly funded, it will allow you to avoid probate procedures. You can also provide for the distribution of assets to a Special Needs Trust within your Revocable Trust.

A Special Needs Trust is a trust arrangement whereby income and assets are preserved and used for the beneficiary without interfering with or jeopardizing the beneficiary’s eligibility for Medicaid, SSI, and other needs-based government benefits. Assets are held and managed by a Trustee, who distributes the assets in accordance with the instructions in the Trust document.

A Special Needs Trust created under a Will or Revocable Trust is called a third-party trust. A third-party trust is one created and funded with assets owned by someone other than the beneficiary. A third-party trust can also be created and funded prior to death and is called a living trust, or inter vivos trust. Under 42 USC 1396p (d)(4)(A), third-party trusts are not subject to a Medicaid lien.

All Special Needs Trusts provide that funds held in the trust are not to be placed under the control of the beneficiary, and most provide specifically that disbursements from the trust are not to be made to the beneficiary but are to be in the form of payments to vendors. The Special Needs Trust must also be irrevocable. The trust also provides what is to be done with any funds remaining after the death of the beneficiary. Unlike Special Needs Trusts established with a disabled individual’s assets (self-settled trusts), a third-party trust contains no requirement to pay back benefits paid to the beneficiary during his or her lifetime. It is important not to commingle the assets of a third-party trust with a self-settled trust because of this distinction.

Special Needs Trusts involve complex estate planning concepts. It is important that you work with someone who is familiar with different types of Special Needs Trusts, the various options for establishing such trusts, and public benefits planning to ensure that your assets are properly managed and that your loved one maintains necessary benefits following your death.

Clients often ask questions about the use of beneficiary designations in their estate planning. Beneficiary designations can be a convenient way to avoid probate in some situations. If an individual is named as a direct beneficiary on an asset, that asset passes automatically to that individual, regardless of the terms of the decedent’s Will, Trust, or other estate planning documents.

Your attorney will often recommend that you coordinate your Payable-on-Death (POD) beneficiary designations or Transfer-on-Death (TOD) beneficiary designations to follow the distribution patterns in your overall estate plan for the purpose of avoiding probate. Despite the convenience, however, there are several good reasons to consider alternatives to direct beneficiary designations.

1. When you name direct beneficiaries using TOD and POD beneficiary designations to transfer all of your assets directly to those named beneficiaries, there is no one in charge of settling your estate. Furthermore, naming direct beneficiaries means there is no funding mechanism so that the person in charge can pay for funeral and burial, medical bills, debts, and administration expenses.

2. If you have relied on TOD and POD beneficiary designations to transfer all of your assets on death, there is no legal method for handling the disposition of tangible personal property, such as household furniture and furnishings, personal effects of sentimental value, motor vehicles, RVs, and watercraft.

3. While using TOD and POD beneficiary designations avoids the need to have an executor or personal representative appointed, this means that there is no one with the legal authority to file final income tax returns for the decedent. A trustee of a revocable trust has this authority, and so does the executor or personal representative named in a Will. The personal representative named in a Will has no legal authority unless there is a probate proceeding which admits the Will to probate.

In addition to the potential complications above, there are unique complications with respect to Transfer on Death (TOD) deeds for the purpose of transferring real estate without probate.

1. A TOD deed designating multiple children will effectively transfer title of the real estate directly to those children without probate proceedings. While the ease of transfer is convenient, none of the children have a greater say in the maintenance and disposition of the real estate. This can leave children in an untenable situation if they disagree about the disposition of the property, such as whether to sell the property or whether to make improvements to the property to prepare it for sale; not to mention the expenses in maintaining the property in the interim. The TOD transfer of title would even make it legal for one of the children to move into the residence and live there, while refusing to sell the residence.

2. A TOD beneficiary designation often does not cover contingencies. What happens if the named beneficiary predeceases the owner? We might expect that a parent will change their TOD beneficiary designations if a child predeceases them; however, what if the parent is mentally incapacitated, or simply does not take care of it? There is no simple procedure for determining who the successor beneficiaries are for purposes of providing clear title to the real estate. In the event a predeceased beneficiary’s minor children become the successor beneficiaries, real estate cannot be transferred to them without cumbersome court proceedings, such as a guardianship. Going forward, the court would be involved in all transactions involving the real estate, including sale. Furthermore, there is no ability to hold assets for the minor beneficiaries once they become the age of 18.

3. If a TOD beneficiary is in a nursing home and receiving Medical Assistance (Medicaid) benefits, the automatic transfer of real estate to them will affect their Medicaid eligibility and, in all likelihood, cause a loss of benefits. Their proceeds from the sale of the property will likely have to be used to pay nursing home expenses.

Consideration of whether or not to use direct beneficiary designations is crucial to your estate plan. While it may work well in some situations, it is important to consider both the advantages and disadvantages and work closely with your estate planning attorney to avoid common pitfalls. When in doubt, seek proper legal advice before completing direct beneficiary forms to make sure your designations are consistent with your overall estate planning goals.