Do You Want These Estate Planning Benefits?

Estate planning may not save lives, but it provides important benefits.

Your estate plan makes a difference to the people you care about. You can also benefit your favourite charitable causes.

Today, I’ll cover the three key benefits of estate planning.

1. Estate plans provide protection

Your spouse and children will need you to protect them when you are gone.

Having a professionally prepared will provides a proper transition for your loved ones. You can make sure they remain in their home, fund their education or pay off a mortgage.

Do you believe you don’t have enough money to achieve such goals?

Think again.

Life insurance can create an instant estate to satisfy your wishes. Tax-free life insurance benefits play a key role in everyone’s estate plan.

You can also, inexpensively, create a trust in a professionally prepared will.  Setting up a trust is a complex tax and estate tool. It is not a project for a do-it-yourself will kit.

Trustees or executors named in your will can manage inheritances for:

  • minor children;
  • a second spouse in a blended family situation; and
  • a spendthrift beneficiary unable to handle money.

Are there charitable causes that depend on you? Your charitable donation can help a local shelter save animals. Cancer, heart and stroke research and foundations also rely on your donations.

2. Estate plans reduce expenses

On top of that, you can minimize some income taxes your family would otherwise have to pay. Using your RSP or RIF to donate, you can save taxes on your registered plans. You can also receive a tax credit.  You’ll need professional advice on the tax rules that apply to you personally.

A proper estate plan will transfer your money to loved ones at a low cost.  Your plan can reduce or eliminate probate costs, income tax and legal fees. This trio can otherwise devour a small estate.

Do some homework for your estate plan. You will need professional advice. Don’t rely on tips from a bank teller or your beer buddies.

You can find low-cost ways to transfer ownership of your assets. This can help avoid probate. You’ll leave more money for your loved ones. Probate of a simple estate can take 1-3 years. Imagine the substantial saving of time and expenses proper transfers can achieve.

3. Estate plans put the right person in charge

You choose who is in control of your estate. Do not assume your family will know what to do if you are suddenly out of the picture.

You must name an executor or estate trustee in your will.  This person will be in charge, so choose wisely. You can authorize someone to operate your business. You can spell out who sells it or continues to operate it.

What if you don’t have a great deal of money, property and assets? You can still benefit from having an estate plan.

Your plan should include, at least, a will and powers of attorney.

You name a person authorized to close your bank accounts, pay for your funeral and deal with your final tax bill.

Powers of Attorney for Property and Personal Care can protect you and your money while you are still alive.

Get these legal documents for your estate plan. You will have your own lifebuoy.

About Ed

Edward Olkovich (BA, LLB, TEP, and C.S.) is an Ontario lawyer, nationally recognized author and estate expert. He is a Toronto based Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of Executor Kung Fu: Master Any Estates in Three Easy Steps. Visit www.ExecutorSchool.com © 2013

Stop these Top 10 Powers of Attorney Abuses

You must know the risks involved in signing powers of attorney. Here is a list of the top 10 abuses by people acting as attorneys. Still, the benefits of a power of attorney outweigh the risks of not having one. I’ll show you how to protect yourself from power of attorney abuse.

Here’s my top ten list of attorney abuses:

1. attorney misappropriating money
2. using the POA for identity theft
3. inappropriate taking of bank funds and investments
4. causing losses with improper financial decisions
5. making bad investments
6. selling or transferring real estate
7. changing beneficiaries or creating joint assets
8. neglecting the person who gave the power of attorney
9. breaching fiduciary duties as an attorney
10. being unable to explain where the money went

Provincial Laws Control Powers of Attorney

In Ontario, for example, it is the Substitute Decisions Act, 1992 that applies. This Ontario law states what a person, like Sheila, must know to make a POA. Sheila is presumed to have legal capacity to make a continuing power of attorney.

“Continuing” means her son, Kevin, can use her POA if Sheila later becomes incapable. Section 8 of the Ontario law governs here. Upon signing the POA, Sheila must appreciate that there is risk of:

1. Kevin not managing Sheila’s property prudently, causing its value to decline; and
2. Kevin misusing the authority given to him.

Sheila loves to golf during the winter. She wants to give Kevin her power of attorney for property decisions. She figures this is a good idea since she travels south before the snow falls.

Should You Include Conditions in Your POA?

Most people decide to make a POA that is effective immediately.

Sometimes clients want the POA to become operative only if they become incapable. There are problems with such “in the event of my lack of capacity” stipulations. These are referred to as springing POAs. This condition may be difficult to satisfy.

Picture Kevin telling Sheila’s bank that he wants to move money into her chequing account using Sheila’s POA. He needs to pay her mortgage and condo fees.

The bank’s legal department will look at how the condition is worded. The bank must be satisfied before Kevin can use the POA. In questions of incapacity in Ontario, only assessors can make assessments. This can take weeks when medical reports and capacity assessments are required. Is this really what Sheila wants? She can consider other options.

Consider These Options for Making Your Power of Attorney

  • Make a POA that is only effective while you are out of the country.
  • Give someone rights to manage property, but not sell it.
  • Specify that you can make multiple powers of attorney. Create one to pay your bills and one to handle digital passwords or assets. You can make another POA to allow someone else to make investment decisions.
  • Restricted powers may not be required on all attorneys. (Presumably you would only name attorneys you trust.)
  • Discuss options with your estate planning lawyer. You may have property or personal needs that require more supervision by an attorney.
  • If you place too many burdens on your attorneys, they may refuse the job.
  • Always name a back-up attorney in case one resigns.
  • Specify attorneys can share financial information with certain relatives only.
  • State in the POA your attorney can use your money to pay for professional advice – otherwise, your attorney may be afraid to hire a professional advisor.

Remember, attorneys are bound by the rules imposed on all fiduciaries. They must put your interests before their own.

Summary

1. Every family is different. How many of your family members should act as your attorney? Should they act jointly or individually? These are important decisions. Your lawyer can help you make them.

2. Powers of attorney are legal documents. They are subject to court review. POAs should be drafted by an experienced estate lawyer.

3. Financial institutions worry about power of attorney abuse. They will consider suspicious POAs not drafted by lawyers.

4. You need to meet with a lawyer to review your circumstances. In cases of blended families, having an independent review is crucial.

5. Deal with your own lawyer, not your proposed attorney’s.

6. You need to appreciate the risks of a POA, but you can take steps to stop possible abuse.

For related posts on powers of attorney, visit my law firm blog.

About Ed

Edward Olkovich (BA, LLB, TEP, and C.S.) is an Ontario lawyer, nationally recognized author and estate expert. He is a Toronto based Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of Executor Kung Fu: Master Any Estates in Three Easy Steps. © 2013

Powers of Attorney: 6 Costly Mistakes to Avoid

You have heard of the advantages of having a power of attorney. Today I’ll explain easy steps you can take to avoid costly mistakes.  These mistakes can make your Power of Attorney (POA) useless and put your money at risk.

A POA is a legal document that must be in writing and witnessed. You, the grantor, give certain powers to another person (an attorney). The document allows your attorney to act for you as your agent. You can give a general POA to handle everything or limit it to only to sell your car.

A POA can be as short as one line, “I appoint my daughter as my attorney.” You may have used a kit or online form to prepare a POA for yourself. Or you may have had one prepared by a lawyer. Regardless of how it was prepared, you should check your POA form now. It may be too late later to correct what are common mistakes.

Mistake no.1: your potential incapacity is not covered

What is the real benefit of a POA? It allows the attorney to act on your behalf if you can no longer act because you are incapable. Your POA must then specify that it is valid even after any legal incapacity on your part.

The words “enduring”, “continuing”, and “ongoing” are not enough. There must be a reference to the POA being valid even if you subsequently become legally incapacitated.

Every province and state has its own rules for POAs. So you cannot expect a document you sign where you live to be valid in another jurisdiction. Remember, this post is for information purposes only. It is not a substitute for proper legal advice.

Mistake no.2: your capacity is not confirmed

All POAs must be signed while a person is competent. This is why planning in advance is so important. Persons in nursing care, those suffering any illness or the elderly may need to have their capacity to give a POA confirmed to prevent legal challenges.

Confirmation is usually done by a lawyer. The lawyer confirms that there is no undue influence, coercion or suspicious circumstance present. He then confirms that you as grantor or donor of the POA have the capacity to sign.

A meeting between you the grantor and lawyer must take place to assess capacity. What if one of your parents develops mild dementia? You would like to act as their attorney. You must remember that the parent must be capable of requesting the POA and not you as attorney.

Mistake no.3: you forgot to designate an alternative attorney

You should make sure that there is always an alternative attorney designated. This is in case one of your attorneys moves away or the person chosen refuses to accept the responsibility of acting as attorney.

You should confirm with your attorneys in advance of the appointment. This is important to ensure that they will accept the position.

POAs made by persons in middle age will need to be checked regularly to ensure that the attorney has not moved away, died or lost capacity themselves.

Mistake no.4: you don’t fully trust your attorney

The attorneys can do whatever you can do, including spending or mismanaging your cash and selling your property. Abuses are always possible, even among family members. If you don’t fully trust  a person, find a replacement or restrict the attorney’s powers.

Mistake no.5: your POA is not properly witnessed

If not properly witnessed, your POA could be invalid. Two qualifying witnesses are required. The witnesses cannot be a spouse or partner of you or your attorney. You and the attorney and your children cannot act as witnesses. Witnesses may need to give evidence that you had capacity at the time that the POA was signed.

The staff of nursing homes or hospitals usually will not agree to act as witnesses. Any documents executed in these circumstances may require that you bring two witnesses and confirm capacity by obtaining a written opinion from your attending physicians.

Mistake no.6: you forgot to amend the standard forms

Some POAs are four legal sized pages of printing. Not all the material on the POA may be appropriate to your needs. You need to read the form and initial changes.

If you do not want the attorney to deal with your home, to sell or mortgage it, then you will need to specify this in the document. If it is only for the purpose of dealing with foreign assets, specify this too.

Make sure that a lawyer in the foreign jurisdiction prepares or has approved the document’s use. If the POA is only for a particular bank account then the document should specify this. If you believe that your attorney should not be compensated for his services, then you may wish to specify this in the document.

Related post and the MrWills guide to POAs:

Why Resolve to Get a Power of Attorney This January?

Powers of Attorney: 10 Essentials You Need to Know

Edward Olkovich (BA, LLB, TEP, and C.S.) is an Ontario lawyer, nationally recognized author and estate expert. He is a Toronto based Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of seven estate books. © 2013

 

Why Resolve to Get a Power of Attorney This January?

Power of attorney v. court appointed guardians

Making a power of attorney (POA) is simple. If you fail to sign power of attorney it is, sadly, a darker story. Without a POA, no one can manage your affairs if you are suddenly unable. You face going through the costly guardianship process which powers of attorney can easily avoid.

Here are key differences between powers of attorney and guardianship.

Powers of attorney can be straightforward documents you sign. There are few requirements to make these documents legal.

  • You choose or name an attorney in the document to act as your agent.
  • Attorneys act on your instructions or restrictions in the document you sign.
  • The attorney or agent will be your substitute decision-maker.

Usually you must sign the POA in front of two qualified persons as witnesses.

Types of powers of attorney

Powers of attorney come in many different types.

A simple banking POA allows someone to handle a bank or investment account. A simple POA could allow someone to sign legal papers for you. Typically, these are used to sell stocks or sell a house while you were on vacation.

POAs can also specifically cover property or health and personal care decisions. These POAs can specify an attorney may continue to act even after you are incapacitated. You can become incapable at any age due to an accident or illness.

POAs are often referred to as an enduring or continuing POA. This means the attorney can act even if you no longer can act independently.

The trick with a POA is it must be signed before you become incapable. Get it before you need it.

The person signing the POA must be legally capable of giving a power of attorney. In law, this is called having capacity.

Key features of a power of attorney:

  • the document can be revoked or canceled
  • the document can set restrictions on the attorney
  • compensation for the attorney can be specified
  • your specific wishes or standards can be detailed
  • authority can be given to sell your assets
  • the attorney cannot change your will
  • the attorney can continue if you become incapable as grantor

Guardians are Different from POAs

Guardians must be appointed by a court. They are selected when you have no power of attorney. Your next of kin or friends must apply in court to be appointed a guardian for property. You will also need a guardian to make personal care or health decisions.

Your court appointed guardians will need to:

  • hire estate lawyers to prepare court papers
  • advise the government of your incapacity
  • pay for medical assessments
  • prepare detailed management plans to deal with your property
  • file guardianship plans for your care and personal care decisions
  • purchase a bond to ensure your assets do not disappear
  • consult with your family members who can object to the application

Court Appointed Guardians need permission from the court to:

  • keep you in your home with care givers
  • sell your home to place you in a nursing home
  • decide where you are to live
  • make decisions about your health care
  • decide to spend or invest your money

Advantages of a POA

  1. You can avoid a court investigating your financial and personal health.
  2. The POA offers privacy, less costly procedures and greater flexibility.
  3. POAs allow your attorney to make decisions as circumstances require.

Having a lawyer prepare a POA can cost a few hundred dollars. Having a lawyer prepare a court application for a guardianship will cost tens of thousands of dollars.

Conclusion

Your estate plan should include POAs for property and personal care. Resolve to make or update your POA in January.

See my related blog posts and free guide

About Edward Olkovich

Edward Olkovich (BA, LLB, TEP, C.S.) is a nationally recognized author and estate expert. He is a Toronto estate lawyer and Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of Executor Kung Fu. Visit his website, mrwills.com, for more free valuable information.

© Edward Olkovich 2012