Webinar – Guardianship What Is It, When Is it Appropriate, and What Are Some Alternatives?
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A power of attorney designates a trusted individual to make decisions or conduct transactions on your behalf. They could be related to personal finances, business operations, or medical needs and used for a single immediate purpose or an ongoing situation.
This may sound pretty straightforward. You might be tempted to download a free power of attorney form to take care of it when looking for services online. But will that be enough to ensure the document is legally recognized, important matters are handled quickly, and your specific instructions are followed? More than likely – no.
Understanding Powers of Attorney
Implementing Power of Attorney (POA) documents is an integral part of your estate planning process. All states recognize powers of attorney, but rules and requirements will differ from state to state. The POA document gives one or more individuals the legal authority to act as your agent on your behalf.
Depending on which POA you choose, you may limit the agent’s power to a particular activity. This might include things like real estate sales or broader applications.
A power of attorney may give permanent or temporary authority to the agent you appoint. You can set the POA up to invoke immediately. Or, you can have it activated when a future event, such as a physical disability, occurs. The latter is a “springing” power of attorney.
Other types of powers of attorney include limited, durable, and general POAs.
For example, a general POA permits the agent to deal with any matters on your behalf that state law allows. Under such an agreement, the agent may sign checks, handle bank accounts, sell property, manage assets, and file taxes when you are unable. This POA has a wide latitude of authority. Therefore, there needs to be coordination between you and your agent to ensure your best interests are always represented.
The better-known powers of attorney are durable and take effect if you are incapacitated. The word “durable” means the powers will remain intact even when you can no longer manage your affairs. There are two types of durable POAs; one handles financial matters, and the other manages medical affairs, often called a health care directive.
You also may rescind powers of attorney. However, most states will require written notice of revocation to the named individual or entity.
Consider the following scenarios when free, online powers of attorney don’t prove as helpful as you may have hoped.
Financial Power of Attorney
Suppose a business colleague wants you to take care of their business operations. You become responsible for making critical decisions while they are out of the country.
They give you POA by using a free online legal document that promises to contain everything you need to comply with state law. The document seems noticeably concise. You wonder why legal documents need to be so lengthy and expensive in the first place.
When you go to your friend’s bank to transfer funds, the bank denies you access. You discover why: The bank requires different forms and rules for a power of attorney. Your friend had no knowledge of these requirements, and now you won’t be able to contact them for several weeks.
When you track them down, they must fill out additional forms with the bank and get them notarized before you attempt any more transactions. The legal document failed.
Health Care or Medical Power of Attorney
You receive a call about a good friend who has suffered a head injury and needs urgent nursing home care. He is looking at long-term care costs between $5,000 and $8,000 a month for rehabilitation. However, you know he lives on a fixed income of only $2,500 a month from Social Security. Medicare doesn’t cover long-term care services, and his income is too high to qualify for assistance from Medicaid.
On top of facing a financial crisis, someone needs to make decisions about the level and cost of care he can afford. Your friend doesn’t have the capacity to make them in his current situation.
You know what he has expressed in the past about specific treatments and efforts to prolong his life. You even witnessed the online form he used for a healthcare power of attorney.
However, his family members contest the document. Meanwhile, the doctors won’t listen to you without more specific advanced health care directives and a signed HIPAA release form. Another legal document failure.
The Dangers of Free Online Documents
How can online documents be legally approved for use by the public but insufficient when you need to use them? The free power of attorney documents that you may have believed would prove helpful in the scenarios above only offered general information for the most basic needs. With so many variables in finances, business, and medical situations, the language is often not specific enough to address the unique problem.
When you get a POA through an estate planning firm, each document contains wording regarding several circumstances and refers to other critical documents, like living wills and trusts. Additional details instruct the person you’ve chosen to act on your behalf when dealing with decisions regarding banking and medical institutions or personnel. For example, it may permit them to set up another trust, reorganize assets, open and close banking or investment accounts, and require healthcare professionals to comply with your medical wishes.
Connect With an Estate Planning Attorney
A free online power of attorney could cost you valuable time, money, and frustration. Many other legal considerations determine how your power of attorney will work.
As opposed to a free power of attorney document online, the best way to establish powers of attorney is to contact the experienced estate planning attorneys at Elville and Associates. Your attorney can go over common pitfalls and discuss options on how to avoid them. They also understand the criteria for identifying the individuals or agents to represent your interests, help you identify your goals, answer your specific questions, and help create solutions and a path forward for you.
When you rely on legal documents to get an important job done or simplify decisions in an emergency, it more than likely won’t work as promised or intended. Consult with a qualified attorney at Elville and Associates to ensure you are prepared to handle any situation. Contact us here or reach out to us at 443-393-7696.
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The Essentials of Estate Planning and Elder Law
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For nearly a decade, people with disabilities have had the option to accumulate savings in a special tax-free account – without risking their means-tested public benefits. In 2024, the annual limit on how much money one can deposit into these savings vehicles, known as ABLE accounts, will rise, allowing individuals to add up to $18,000 per year.
What Is an ABLE Account?
Many people across the disability community rely on such government assistance as Medicaid, Supplemental Nutrition Assistance Program (SNAP) benefits, or Supplemental Security Income (SSI). Yet having too many assets to their name can disqualify them from receiving these often critical benefits. For example, in most states, the resource limit to qualify for Medicaid is just $2,000. In 2014, Congress signed the Achieving a Better Life Experience (ABLE) Act into law to help address this issue.
Individuals with an ABLE account can save up to a total of $100,000 – tax-free – while remaining eligible for public assistance programs. Family members, friends, and others can make contributions to the account, too. The disabled person can then use these funds to help maintain their independence by spending them on disability-related expenses, including assistive technologies, education, transportation needs, vacations, legal fees, and health care.
Unlike a special needs trust (SNT), an ABLE account can be opened by the individual with the disability. This offers them more control over the account funds compared with an SNT. ABLE accounts and special needs trusts often work in tandem as part of a well-developed special needs plan. You’ll want to consult with your special needs planning attorney at Elville and Associates to discuss how these tools work together to help achieve the best results for your loved one with disabilities.
Starting in 2024, the annual limit on contributions to ABLE accounts will be $18,000, up from $17,000 in 2023. Through the end of 2025, ABLE account owners who work can contribute their employment income to these savings vehicles even beyond the per-year deposit limit. (Learn more about these rules under the ABLE to Work Act.)
The idea for these accounts derived from the concept of a 529 college savings plan. Similar to a 529 plan, funds in an ABLE account grow tax-deferred over time. In addition, each state administers its own ABLE account program.
To qualify, you must meet the Social Security Administration’s strict definition of “disabled.” You also must have incurred your disability before age 26. (Note that the age cutoff will shift to age 46 come 2026. According to estimates, this age adjustment will result in roughly 6 million more individuals becoming eligible to open these types of savings accounts.)
Why Open an ABLE Account?
People with disabilities are among those most at risk for financial disaster. According to research, just 10 percent of people of working age who are living with a disability are financially healthy.
ABLE Accounts, or 529A accounts, can serve as a form of future financial support for these individuals. Yet the vast majority of those who could benefit from these accounts remain unaware of them. As of 2022, 8 million people were eligible for this type of account, yet a mere 120,000 had one in place.
Get Support With ABLE Accounts
To learn more about setting up this type of savings account, consult with the special needs planning attorneys here at Elville and Associates – and also learn how an ABLE account can be part of a comprehensive estate and special needs plan for yourself of your loved one with a disability. Initial consultations are typically free and the most ideal way for your attorney to understand your individual or family’s situation, answer your specific questions, and create solutions and a path forward for you.
With the arrival of the new year, revisions to the annual gift tax and estate tax exclusions will be going into effect, as recently announced by the Internal Revenue Service (IRS).
Gift Tax Exemption for 2024
Every calendar year, you can gift up to a certain amount to another individual (or individuals) tax-free. These gifts can include cash as well as other types of property. The IRS typically adjusts this gift tax exclusion each year based on inflation.
Starting on January 1, 2024, the annual exclusion on gifts will be $18,000 per recipient (up from $17,000 in 2023). A married couple filing jointly can double this amount and gift individuals $36,000 apiece in 2024.
This means that if an individual taxpayer gifts less than $18,000 to any one person during 2024, they generally don’t have to report the gift to the IRS. However, if they gift more than $18,000 to someone in 2024, the gift giver must then file a gift tax return. (Note that the gift giver may not necessarily have to pay a gift tax when giving a gift of more than $18,000 to someone. This is because they can choose to apply their lifetime gift tax exclusion. Learn more about lifetime gift tax limits below.)
2024 Federal Estate Tax Exemption
The federal estate tax exemption is also set to increase come 2024. It will rise to $13.61 million in 2024 (up from $12.92 million in 2023). For couples, this exemption will equal $27.22 million.
In other words, an individual’s estate valued at less than $13.61 million in 2024 will not be subject to federal estate taxes. Most people, of course, are not multi-millionaires. Today, heirs of only a small fraction of the most affluent Americans need worry about the impact of the federal estate tax. (State estate taxes are a different story; those vary depending on where you live.)
Imagine Vanessa, a successful, single business owner with a total taxable estate worth $16 million. As a wealthy individual, Vanessa would likely want to consider how federal estate taxes could affect her heirs. If she were to pass away in 2024, her $16 million estate would exceed the $13.61 million threshold and owe the IRS a federal estate tax.
This is why very affluent people may choose to gift assets to loved ones during their lifetime. It is one way to help cut down on the taxes their estate will need to pay upon their death.
Combined Gift and Estate Tax Exclusions
Over the course of your lifetime, you can give away only up to a certain amount before the IRS imposes taxes. This limit is called the “lifetime, or combined, gift and estate tax exemption.” Because it’s linked to the federal estate tax exemption, it, too, is set to increase in 2024 – to $13.61 million for individuals and $27.22 million for couples.
Perhaps Vanessa decides to give a vacation home worth $1 million to her only child. She could take advantage of the lifetime gift and estate tax exemption by deducting $982,000 from her combined exemption ($1 million minus $18,000 = $982,000). This would allow Vanessa to give away another $12.62 million in assets before meeting her lifetime gift exclusion limit ($13.61 million minus $982,000 = $12.62 million).
It’s important to note that this high lifetime gift and estate tax exclusion of $13.61 million is currently on track to decrease drastically at the end of 2025, to about $6 million. For high-net-worth individuals who die in 2026, there may be tax implications for their estates. (Read more about the sunset of the Tax Cuts and Jobs Act and strategies that may help avoid any negative impacts.)
Consult With Your Estate Planner
The rules regarding gift and estate taxes can get quite complex quickly. For instance, on top of federal taxes, some states – including Maryland – impose an estate tax and even an inheritance tax. Consult with the estate planning and elder law attorney at Elville and Attorneys. They can help you plan for your legacy by finding the most ideal tax planning strategies for your specific situation.
About 45 percent of adults say they plan to travel for the holidays, per The Vacationer.
With multiple generations getting together for holiday meals, gift exchanges and quality time, these annual gatherings present an opportunity to broach sensitive but important topics with your aging loved ones. By communicating with them and knowing their wishes, you can help them plan for their future.
Key Considerations in Aging
Understanding how the older adults in your life feel about certain issues – such as where they want to live and what kind of care they would like to receive as they continue to age – can help you provide appropriate support. Having these discussions can also help your loved ones reflect on their goals and consider making plans before there is a crisis.
If your family member still needs to meet with an estate planner, you can also suggest taking this step. Connecting them with the experienced elder law and estate planning attorneys at Elville and Associates is a great first step!
According to Caring.com’s 2023 Wills and Estate Planning Survey, two out of three Americans have yet to make an estate plan and do not have any estate planning documents. Such documents can include a will, power of attorney, portable medical order, and advance directive. Barriers to estate planning include procrastination and not believing one has enough assets; however, the reality is every adult – regardless of asset level, health situation, or other factors needs an estate plan in place. Otherwise, the courts will get involved once the person passes away and his or her estate may not flow as the decedent desired.
Yet, while we often think of estate planning as making wills and determining who receives assets, it is an integral part of preparing for old age. It encompasses housing and long-term care, financial planning, medical care, and insurance. Creating an estate plan involves making decisions about how people would like to live and receive care as they age.
Most people could benefit from this type of planning (no matter what their age). Talking with your loved ones can be an initial step to help them develop a plan that preserves their autonomy in old age.
What to Discuss With Your Older Loved Ones
As the holidays get underway, prompt your family members to start thinking about their future. You may encourage them to consider the following topics and questions:
Housing Options
AARP reports that 77 percent of adults 50 and older want to age in place instead of moving into senior living. Yet remaining at home poses safety concerns for many families, according to the National Institute on Aging.
Older adults may eventually need help with activities of daily living (ADLs), household tasks, mobility, meals, health care, and transportation. Families may be able to provide caregiving or explore in-home services. Others may choose assisted living.
The following questions may help to spark meaningful discussions between you and your aging loved ones.
- Where do they want to live? Do they want to live at home as they get older, or would they prefer to reside in a senior living community?
- If they would like to stay at home, is the residence adaptable to any potential mobility difficulties they may face down the road?
- What kind of additional support might they need?
- Who will help with their activities of daily living and household chores such as preparing meals or cutting the grass?
Health Care Preferences
Health challenges often accompany aging. According to the National Council on Aging, 95 percent of adults 60 and older have at least one chronic condition.
As the seventh leading cause of death worldwide, dementia affects many older adults, per the World Health Organization. The National Institute of Health reports that one in seven Americans age 71 and older have dementia.
Older adults should think about and communicate their health care wishes with their families before an adverse health event occurs. The following questions can help families begin these difficult discussions.
- Do they have a power of attorney or living will, or are they planning to create one?
- What would make life continue to be worthwhile for them if they were to become frail, ill, or develop dementia?
- Would they want medical care to prolong their life if they have a terminal, incurable illness?
- If they fell ill, would they prefer to pass away at home in hospice or in a medical setting?
Personal Values
Having a clear picture of what someone would value most at the end of their life can help families provide support. Erik Erickson’s stage theory of psychosocial development suggests that older adults living in line with their personal values may feel peace, wisdom, and acceptance.
Physical and cognitive decline associated with aging can jeopardize autonomy. This is why knowing your loved ones’ values and wishes can help you more effectively support their independence. They should have a plan in place for end-of-life decisions so that, if necessary, you or another surrogate decision-maker can make choices that reflect their wishes.
These questions present a good starting point.
- What does your loved one believe they will come to value most as they grow older?
- Is religious or community involvement important?
- What do they define as a good life?
- What do they feel would be most essential to them in their final years?
- What kind of funeral or memorial service would they envision for themselves?
- Have they thought about passing certain sentimental items, such as photo albums and jewelry, to certain family members?
Consult With Your Estate Planning Attorney
As you and your loved ones work together to begin addressing these topics, work in partnership with the estate and elder law attorneys at Elville and Associates. An ideal starting point is an initial consultation. Consultations are the best and most ideal way to have your attorney understand your situation, answer your specific questions, offer education and counseling, and create a path forward and solutions for you. They can help create a framework for autonomy in older age, working with your loved ones and you to develop a plan.
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