You’ve probably heard the term “power of attorney” before, but you might not know the ins and outs of what it requires. In this article, we’ll go through ten things to know about a power of attorney. 

1. What is a Power of Attorney? 

A power of attorney is actually a legal document. This legal document allows you to appoint an individual (or more than one) to be in charge of your financial, healthcare, and/or legal affairs in the event that you are unable to make these decisions yourself, due to illness. The POA ensures that you will be taken care of, even if you are unable to communicate your wishes to doctors, the bank, or a lawyer. 

2. Who Needs a Power of Attorney? 

You may think that just the elderly need a POA. However, that is a misconception. Anyone can need a POA, even someone who is in the best shape of their life in their twenties. Not to sound gloomy, but illness (especially now, as COVID-19 is spreading more and more rapidly every day) can affect anyone. Don’t think that because you’re young and healthy now that you won’t need a power of attorney one day.

3. General Power of Attorney

The next four items on this list are definitional. A general power of attorney is also called an “attorney in fact” or an “agent.” This person gets a broad scope of power over your affairs. They handle financial decisions, business transactions, settling claims, employing professional help, making gifts, and even the purchase of life insurance. 

4. Special Power of Attorney

A general power of attorney is different than a special power of attorney, as the latter has less of a broad scope. A special power of attorney is a document that grants someone scope over a limited transaction or small part of your life. You might sign a special power of attorney giving someone the ability to manage your property, collect debts on your behalf, or handle business transaction. The scope is far more limited with this document. 

5. Durable Power of Attorney 

A durable power of attorney is not its own separate POA. “Durable” refers to its validity even if you become mentally incompetent. A special power of attorney or general power of attorney can be a durable power of attorney. This means that it will be valid even while you are mentally incompetent or mentally ill. It’s essentially a protective measure, granting your POA durability—lasting validity. 

6. POA for Healthcare

A POA for healthcare is a power of attorney that strictly revolves around your healthcare decisions. Say you are in the hospital for an illness and you are unconscious; your POA for healthcare will make medical decisions on your behalf, keeping in mind what you would want. The POA for healthcare will mirror your healthcare wishes. 

7. Who Should You Choose?

Only you can decide who to choose. However, the main factor is trust. Do you trust this person to make sound decisions on your behalf? Your life will quite possibly be in their hands. Level-headedness and trustworthiness are two of the most important characteristics of a POA, with a special emphasis on the latter. 

Should you suspect your POA of wrongdoing, you are not left in the lurch. There are state resources, such as an ombudsman or other legal advocates, who can look into transactions and ensure that your POA is not abusing his or her powers. If you feel you are in danger, contact law enforcement.  

8. Appointing Multiple People

You can appoint more than one power of attorney, but you need to specify whether they must make decisions together or if they are permitted to make them separately on your behalf. Note that a possible downside of this is that your POAs might not agree, slowing down decision-making and causing conflict. 

9. Can Your Choice Be Questioned? 

Your choice is valid if you are mentally competent when you sign it. Each state has its own specific laws on competency when signing such a document, and you should contact an estate planning attorney to safeguard your choice from people who may naysay.

10. Now What? 

To create a power of attorney, you should contact an estate planner. This attorney will walk you through the document and ensure it is done properly. 

With the uncertainty surrounding the coronavirus, now is the time to make sure your affairs are in order if the worst-case scenario comes to pass. Contact an estate planning attorney and set up a POA as soon as possible.

This article is tricky, as every person’s estate is different. “Prioritizing assets” is usually a term used in an emergency situation, when someone does not have an estate plan and the clock is ticking. So, currently, with COVID-19 being the huge threat that it is, estate planning has taken on an emergency function for many people.

Which asset should you protect first? This article will give suggestions as to what you should prioritize. The list runs from “most important” to “less important,” but it is all relative. At the end of the day, it is up to you to decide. Contact an estate planning attorney to determine how your particular estate plan should look.

Most Important: Living Assistance, Healthcare Decisions, POA

Living Assistance

Most people will need long-term living assistance once they get older. You may not know this, but Medicare does not pay for living assistance, such as a nursing home or assisted living. Medicaid does pay for this assistance, but many people are rightfully concerned about the quality of care they will receive if they use Medicaid. 

Setting aside a sufficient fund (even if you have to liquidate property to do so) for your living assistance is a top priority. You deserve to have a good retirement, and that includes the portion of your life where you require assisted living. 

Healthcare Decisions 

A healthcare directive allows you to delineate medical decisions before they happen. This document contains your wishes for your medical care, and doctors and nurses will abide by it. A healthcare directive is a useful document to have if you are unable to communicate these wishes (such as a Do Not Resuscitate order) yourself. 

POA

POA stands for “Power of Attorney.” A power of attorney is a document that grants someone the authority to make financial, medical, business, and/or legal decisions on your behalf. The person who you designate as POA in the legal document should be someone you trust to be level-headed and make decisions that would mirror what you would want.

Moderately Important: Business Succession, Trusts

Business Succession

This is definitely in the “most important” section for people who own a business, but for people who don’t own a business, it is not relevant, so business succession planning evens out somewhere in the middle.

If you own one of the 30.2 million small businesses in America, it is vitally important that you have a succession plan in place if you pass away. Who will get your business? Do you want your business liquidated or sold? Perhaps you want it to merge with another company, based on a pre-arranged agreement. It is never too early to plan for a business succession. 

Trusts

A trust is a legal document that sets up an immediate asset transfer. You, the donor, transfer title to an asset to a trustee. The trustee acts as a third-party representative until such a time as he or she transfers his or her legal title to a beneficiary. The beneficiary is the person you want to end up with the property after you die.

This type of document avoids probate court. It goes into effect immediately, so, in an emergency, a trust is not a bad tool to look into.

Relatively Less Important: Gifts, Last Will and Testament, Miscellaneous Transfers 

Gifts

When you’re thinking of the less-important transfers, gifts would likely qualify. Once you have everything else settled, deciding who gets what gift from your estate can become your main priority.

Last Will and Testament

Many of the courts are closed for another month until COVID-19 passes, so a last will and testament will not be probated for a long time. This document, which specifies where you want your property to go after you die, is not ideal in an emergency.

Misc. Transfers 

Small transfers (such as a favorite painting or other, non-essential item) likely can occupy the back-burner for now until more pressing matters are taken care of.

If you’re reading this article and questioning the order of the list, that is perfectly valid. Only you understand your estate situation, and everyone’s property is different. What is important to one person may be unimportant to another. Consult with a lawyer to create an estate plan that is right for you and your loved ones.

There’s no missing what’s going on out there today. Coronavirus (COVID-19) has swept across the globe and is an international pandemic. Coronavirus is, according to the CDC, more likely to be fatal to the elderly and people who have autoimmune deficiencies or preexisting illnesses. 

It’s no surprise that many people are asking how to draft an estate plan in an emergency. As you may or may not know, an estate plan is a way to legally decide where your assets will go after you pass on. People who have no estate plan, or who have an old, outdated estate plan, should take this time to make sure that they have one. And, if a global pandemic doesn’t count as an emergency, nothing does. 

First Things First: Talk to an Estate Planning Attorney 

This blog is not meant to be legal advice, and your situation is different from your neighbor’s. You will want to talk to an estate planning attorney about drafting an emergency estate plan. The important thing is not to wait, particularly if you have no estate plan or an estate plan that needs updating. 

Drafting an estate plan in an emergency is not the ideal way to do things, but that’s where we are today. Here are some suggestions as to which components of the estate plan to draft first.

Components to Draft First 

The suggested drafts include, if applicable, a healthcare directive, power of attorney, trust, last will and testament, and business succession plans. We’ll look at each one individually. 

1. Healthcare Directive

If illness causes you to become incapacitated, you still want the doctors and nurses who are taking care of you to know what your wishes are. For example, you might not want to be resuscitated (a DNR order). A healthcare directive lays out these wishes in advance, and the hospital will have them on file to refer to in the event that you cannot communicate. 

2. Power(s) of Attorney 

Finance and healthcare are two sectors of your life where you may need a power of attorney. This trusted individual, who you select, will have decision-making capacity regarding your financial and healthcare decisions in the event that you are unable to make these decisions yourself, such as in the case of severe illness or unconsciousness. An estate planning attorney can help you set up a power of attorney. Make sure you speak with your proposed individual beforehand to ensure they are on board.

3. Trust

A trust is a three-party relationship between you (the donor), a trustee, and the beneficiary. You sign over title to certain assets to the trustee for the eventual benefit of the beneficiary. The title switch goes into effect immediately. The trustee now holds title to the asset, and, when you pass on (or at another time you designate), your beneficiary will get the asset. 

A trust is beneficial in an emergency because it goes into effect right away, and it does not require the document to pass through probate court. 

4. Last Will and Testament (with a Word of Caution) 

If you don’t want a trust and have your heart set on a will, a last will and testament is an option. It describes your wishes for your property after you die, including to whom you want it transferred and how. The word of caution with this document is that a last will and testament must go through probate court. As the courts are closed now because of the pandemic, the wait time on probate court may be even longer than usual—and it was a pretty time-consuming process before all this happened.

5. Business Succession 

If you own a business, a business succession plan is a must-have. If you die, you want your business to fall into the right hands. Or, you might want it liquidated or sold. Either way, having a set plan will prevent your hard-earned business from falling into chaos.

This list is by no means exhaustive, and that is why it is so important to contact an estate planning attorney first. The attorney will listen to your particular situation, and he or she will advise you on the most important documents to draft. This session can be done over the phone or via email, but make sure to check with your attorney’s office as to the precautions they are taking during the pandemic. 

Your business is important to you. You have worked hard to achieve the success your company has, and you want to make sure that your business is protected even after you are long gone. Succession planning is part of a well-rounded estate plan. Business owners use succession planning to determine who will take over their company—if anyone—after they die. Here are the things to know about succession planning. 

Life Insurance 

It might seem odd to start a succession planning discussion with life insurance, but, if you die with life insurance, you should direct the life insurance payout to your business. That way, your company gets a cash boost during a tumultuous time. There will be enough money in the bank to satisfy the payroll, and the cash influx will prove instrumental in ensuring a smooth succession—if there is to be one.

Documentation 

Have you thought about what you want to happen to your business if you die? If so, it is important to document this in writing. Only you can make this decision, though it is wise to confer with your management team as to what they think should happen. Once you feel comfortable, document it in writing. Contact an estate planning attorney to ensure that your documentation is properly done. Otherwise, your business may be put in the middle of an acrimonious succession.

Liquidation 

Perhaps you want your business to be liquidated and sold after you die. An M&A transaction stands for “Mergers and Acquisitions.” M&A transactions are complicated. During these transactions, ownership of the business (or the cash from the liquidation) is transferred to another entity or the company is consolidated with another entity. If you decide that this is what you want to have happen after you die, that also needs to be documented.

During an M&A transaction, some of your management team will need to stay on to see the process through. Give some consideration to how you want to incentivize them to stay through the process, even though it means that they will be losing their jobs. 

Other Considerations 

You might also want to keep your business in the family. Only you can determine whether your children are the best ones to take over your business, but note that, in terms of family transfers, a business is gifted to your kids, not sold. 

This is actually a good thing because it helps avoid certain taxes if you still want income from the business. If your kid has to buy your business, they will first have to make the money and pay taxes on it. After that, you will be paid a dividend on which you will have to pay a capital gains tax. Though gifting means you won’t get anything in return for the ownership you gift your kids, this could pay off in the long run, if you are being kept financially secure by your old company.

Buy-Sell Agreements 

If you’re not gifting your business and your company has multiple owners, you will likely run into one of these buy-sell arrangements: an entity plan or a cross purchase agreement. 

In an entity plan, each owner of the business has their own private agreement with the business as an entity. This agreement states that the entity will buy the dead owner’s interest after his/her death. 

In a cross purchase agreement, there are usually two or three people who own the business. the cross purchase agreement is established between the owners. When one dies, the surviving owners each purchase a proportionate share of the dead owner’s interest. 

All of this is a little confusing, and that isn’t a bad thing. You want a succession plan to be detailed and comprehensive. Hire an estate planning attorney to ensure that your succession plan is done properly and documented correctly.

Valentine’s Day is the season of cards, flowers, roses, and chocolate. This romantic holiday has been around for centuries, ever since 496 A.D. Back then, the Romans hosted the holiday, which they called Lupercalia. Lupercalia was celebrated as the beginning of springtime, but, over the years, it has been changed both in name and in purpose. 

Valentine’s Day is all about showing love. While cards and chocolate are nice gifts, they are somewhat fleeting. If you want a gift that will last, consider how you can use estate planning to achieve that goal. 

Your Spouse (Or Spouse-to-Be)

Your Estate 

If you are married, about to be married, or are in a civil union, estate planning is important to ensure that your spouse has some protection in the event that you die or fall ill. Even if you and your partner are not married, failure to plan will cause you to have issues with inheritance and end-of-life medical care. 

A typical estate planning tool that can provide for a spouse/long-term partner after your death is a revocable trust. A revocable trust arrangement can take many forms, but the most common is the continual income trust. This legal document is devised by the grantee (you) for the grantor’s (your spouse’s) remaining life. Your estate will pay out a distribution to your spouse after you die for the rest of their life. Other grantors can include your children, grandchildren, or other relatives. 

An example of this is Frances Bean Cobain, the daughter of Nirvana frontman Kurt Cobain. After her father’s tragic death, Frances Bean Cobain revealed that Cobain left a huge chunk of his estate. She gets over $100,000 per month from his estate to this day.

Medical Care

Another important aspect of this type of planning for spouses/partners is end-of-life medical care. If you make your spouse your power of attorney, that will allow him or her to have a say in your financial and medical decisions when you are unable to make them for yourself. Assumedly, you trust your spouse and find them responsible. Giving the person closest to you control over such important, personal decisions is an important aspect of an estate plan. This works both ways. 

Your Kids

If something were to happen to you and your spouse, who would you want to take care of your children? Part of your estate plan should involve your kids. This includes not only estate distributions, such as in the case of Kurt Cobain’s daughter, but also guardianship. Guardianship refers to the person who will take care of your kids until they reach the age of majority (18).

Discuss these plans with your proposed guardian to make sure they are on board and consider themselves fit to assume the role of guardian, should anything happen. Most common choices include grandparents and aunts and uncles. 

Your Parents/Grandparents 

This one applies to those of us who have aging parents. If your parents or grandparents have not put together an estate plan, it is important that they do so. For example, if you know your elderly relatives have very specific medical wishes (such as a DNR), they should include those in an estate plan. That way, the hospital and end-of-life caregivers will honor these wishes even when your elderly relatives cannot communicate them.

Other Loved Ones 

Estate plans can include anyone. If you have assets that you want to leave to specific relatives, that is something that estate planning can handle. If you don’t make these arrangements before death, your chosen relatives might not get what you want them to. Instead, your assets will be divvied up and sold off by probate court.

As you can see, there is more than one way to show your loved ones how much you care about them. Estate planning provides a useful way to give a gift that will last long after you’re gone. 

I think we can all agree that one of the highlights of paying taxes (since we all have to pay them) is seeing how much we can avoid having to pay. In this article, we’ll talk about how to make the most of exemptions for which you might qualify. Don’t forget—tax day is April 15th, and you should start working on your taxes now to avoid possible penalties for lateness or inaccuracy. 

What is a Tax Exemption? 

Getting the vocabulary correct is essential to accurate taxes. A tax exemption is the removal of a liability to pay. A tax exemption reduces or removes a compulsory payment that you (or your estate) would have to pay. Tax-exempt status, as it’s known, can provide complete or partial relief from taxes. An example of an entity with tax-exempt status is a church. 

What is a Tax Deduction? 

A tax deduction is a little different. This income is the result of expenses you incur, usually for a business. A tax deduction reduces your income, and they are a form of tax incentive. Exemptions and credits are the other two tax incentives available. 

What is a Tax Credit? 

Thirdly, a tax credit is a tax incentive that allows taxpayers to reduce the payment they owe to the IRS. They subtract the amount of the credit accrued from the total payment owed to the IRS. This credit can be granted as a form of state support or as a recognition of taxes that you have already paid. 

Each of these incentives is unique in their own way, but the bottom line is the same. These incentives allow you to pay less money to the government, if you know how to take advantage of them.

Standard v. Itemized Deductions

With standard and itemized deductions, you pick one or the other. A standard deduction is a flat dollar amount that you can subtract from your income before the income tax is levied. The standard deduction changes based on your filing status (Married, Single, etc.). For example, in 2019, people who were filing as Head of Household over the age of 65 in 2019 could take a standard deduction of $1,650. 

Itemized deductions, by contrast, require their own form. These are eligible expenses that you can claim on your tax form. These expenses are deducted from your final, taxable income. They decrease your taxable income, and you can claim itemized deductions if you are not taking the standard deduction. Making the decision as to which to take—itemized or standard—is easy. Pick the one that saves you the most money. If your standard deduction would be (for example) $2,000 and your itemized deduction $1,850, take the standard deduction.

Most Overlooked Itemized Deductions 

Should you choose itemized deductions, make sure that you aren’t overlooking some common ones. The most commonly-itemized deductions include charitable payments, medical expenses, dental expenses, home mortgage points, work-related education expenses, state/local income tax, sales/property tax, personal casualty losses, business use of your home, and more. All of these have their own caps and requirements to take them. 

Note that several deductions will be unavailable through 2025. The IRS took them off the list in 2018, and they will remain that way for five more years. Items like home equity lines of credit, loans, alimony, moving expenses, certain types of casualty losses, and other miscellaneous deductions are not available.