Frequently Asked Questions

Power of Attorney
Special Needs Trust
Joint Will
Guardianship
Estate and Gift Taxes
Living Trust

Frequently Asked Question about Power of Attorney

Why do I need to give someone a medical and financial power of attorney?
What if an accident, illness -- or simply the effects of aging -- left you unable to tell your doctors what kind of medical treatment you want, or made it impossible to write checks to pay your monthly bills?  No one likes to consider such grim possibilities, but the truth is that almost every family will eventually face this kind of difficulty. While medical and financial powers of attorney cannot prevent accidents or keep you young, they can certainly make life easier for you and your family if times get tough.

What Is a Power of Attorney?
A power of attorney is a legal document that gives someone you choose the power to act in your place. In case you ever become mentally incapacitated, you’ll need what are known as “durable” powers of attorney for medical care and finances. A durable power of attorney simply means that the document stays in effect if you become incapacitated and unable to handle matters on your own. (Ordinary, or “nondurable,” powers of attorney automatically end if the person who makes them loses mental capacity.)
With a valid power of attorney, the trusted person you name will be legally permitted to take care of important matters for you -- for example, paying your bills, managing your investments, or directing your medical care -- if you are unable to do so yourself.
Taking the time to make these documents is well worth the small effort it will take. If you haven’t made durable powers of attorney and something happens to you, your loved ones may have to go to court to get the authority to handle your affairs.
To cover all of the issues that matter to you, you’ll probably need two separate documents: one that addresses health care issues and another to take care of your finances. Fortunately, powers of attorney usually aren’t difficult to prepare.

What is a Medical Power of Attorney?
A medical power of attorney is one type of health care directive -- that is, a document that set out your wishes for health care if you are ever too ill or injured to speak for yourself.
When you make a medical power of attorney -- more commonly called a “durable power of attorney for health care” -- you name a trusted person to oversee your medical care and make health care decisions for you if you are unable to do so. Depending on where you live, the person you appoint may be called your "agent," "attorney-in-fact," "health care proxy," "health care surrogate," or something similar.
Your health care agent will work with doctors and other health care providers to make sure you get the kind of medical care you wish to receive. When arranging your care, your agent is legally bound to follow your treatment preferences to the extent that he or she knows about them.
To make your wishes clear, you can use a second type of health care directive -- often called a "health care declaration" or "living will" -- to provide written health care instructions to your agent and health care providers. To make this easier, some states combine a durable power of attorney for health care and health care declaration into a single form, commonly called an "advance health care directive."

What is a financial power of attorney?
A financial power of attorney is a power of attorney you prepare that gives someone the authority to handle financial transactions on your behalf. Some financial powers of attorney are very simple and used for single transactions, such as closing a real estate deal. But the power of attorney we’re discussing here is comprehensive; it's designed to let someone else manage all of your financial affairs for you if you become incapacitated. It’s called a “durable power of attorney for finances.”
With a durable power of attorney for finances, you can give a trusted person as much authority over your finances as you like. The person you name is usually called your “agent” or “attorney-in-fact,” though he or she most definitely doesn’t have to be an attorney.
Your agent can handle mundane tasks such as sorting through your mail and depositing your Social Security checks, as well as more complex jobs like watching over your retirement accounts and other investments, or filing your tax returns. Your agent does not have to be a financial expert; just someone you trust completely who has a good dose of common sense. If necessary, your agent can hire professionals (paying them out of your assets) to help out.

Frequently Asked Question about Special needs trust

How do I leave money to a disabled loved one without jeopardizing eligibility for government benefits?
If you are providing care for a child or other person with a disability, you’ve no doubt thought about what will happen when you’re no longer around. Of course you can leave that person property -- but doing so without some careful planning will almost certainly jeopardize your loved one’s ability to receive Supplemental Security Income (SSI) and Medicaid benefits. An inheritance will disrupt these benefits because SSI is available only to the financially needy -- and eligibility for Medicaid, in most states, is based on eligibility for SSI.
Owning a house, a car, furnishings, and normal personal effects does not affect eligibility for SSI or Medicaid. But other assets, including cash in the bank, will disqualify your loved one from benefits. For example, if you leave your loved one $5,000 in cash, he or she won’t be able to get SSI or Medicaid.

How a Special Needs Trust Can Help Your Family?
A way around losing eligibility for SSI or Medicaid is to create what’s called a special needs trust for your disabled loved one in your will or living trust. Instead of leaving property directly to your loved one, you leave it to the special needs trust. You also choose someone to serve as trustee, who will have complete discretion over the trust property. Because your loved one will have no control over the money, SSI and Medicaid will ignore the trust property for program eligibility purposes.
The trustee is in charge of spending money on your loved one’s behalf. The trust ends when it’s no longer needed -- commonly, at the beneficiary’s death or when the trust funds have all been spent.
If you can’t come up with a good candidate for trustee or are leaving a relatively modest sum and don’t want to set up a separate special needs trust, consider a "pooled trust." These are special needs trusts run by nonprofit organizations that pool and invest funds from many families. Each trust beneficiary has a separate account, and the trustee chosen by the nonprofit spends money on behalf of each beneficiary. Pooled trusts (also called community trusts) are available in many areas of the country.

Frequently Asked Question about Joint Will

Can my husband and I make a joint will?

QUESTION:
My husband and I live in the same house and have no children, nor any complex arrangements tying up our finances. We each want to leave all our property to the other, and then when we're both gone the remainder will be split between my disabled sister and our favorite charity. Wouldn't it be easiest for my husband and I to write one joint will instead of two separate ones?

ANSWER:
Yes.  What you've described is the classic joint will. Two people make a will together, each leaving everything to the other. Then the will dictates what happens to the property when the second person dies. It's legal and it's got its pluses -- but most people find that these are outweighed by the minuses.
On the plus side, a joint will is designed to prevent the surviving person from changing her mind regarding what should happen to the couple's property after the first person dies. For example, if you were worried that your husband would remarry after your death and rewrite his will to leave everything to his new stepchild for ice skating lessons, the joint will idea might look good.
On the minus side, joint wills can tie up property for years, pending the second death. During those years, life circumstances might change so much that a new will would seem appropriate -- but the deceased person will not be around to approve it. The survivor will be stuck with the will as it's written, or have to go through legal hassles to prove that it fits a narrow exception. For example, let's say your husband dies first. Twenty years later, your sister has married a millionaire and doesn't need your money, and you no longer believe in the goals of your once-favorite charity. Tough luck -- all of the property that came to you through the joint will have to be passed on as the will described. Sometimes it's better just to have faith in the living half of the couple to make the decisions.

Frequently Asked Question about Guardianship?

Should I choose a personal guardian to raise them in the unlikely event you cannot?
If your children are young, you've probably thought about who would raise them if for some reason you and the other parent couldn't. It's not an easy thing to consider. But you can make some simple arrangements now that will allay some of your fears, knowing that in the extremely unlikely event you can't raise your kids, they will be well cared for.
All you need to do is use your will to name the person you want to be the "personal guardian" of your children if one is ever needed. Then, if a court ever needs to step in and appoint a guardian, the judge will appoint the person you nominated in your will -- unless it is not in the best interests of your children for some reason.
If you don't name a guardian in your will, anyone who is interested can ask for the position. The judge then must decide, without the benefit of your opinion, who will do the best job of raising your kids.

How do I name a personal guardian?
You should name one personal guardian (and one alternate, in case your first choice can't serve) for each of your children. Legally, you may name more than one guardian, but it's generally not a good idea because of the possibility that the co-guardians will later disagree.
Here are some factors to consider when choosing a personal guardian:

If you're having a hard time choosing someone, take some time to talk with the person you're considering. One or more of your candidates may not be willing or able to accept the responsibility, or their feelings about acting as guardian may help you decide.

Can I Choose a different guardians for different children?
Most people want their children to stay together; if you do, name the same personal guardian for all of your kids.
You can, however, name different personal guardians for different children. Parents may do this, for example, if their children are not close in age and have strong attachments to different adults outside of the immediate family. For instance, one child may spend a lot of time with a grandparent while another child may be close to an aunt and uncle. Or, if you have children from different marriages, they may be close to different adults. In every situation, you want to choose the personal guardian you believe would be best able to care for each child.

Choosing a Different Person to Watch the Checkbook
Some parents name one person to be the children's personal guardian and a different person to look after financial matters. Often this is because the person who would be the best surrogate parent would not be the best person to handle  

What if my child's appointed guardian can't handle money?
For example, you might feel that your brother-in-law would provide the most stable, loving home for your kids, but not have much faith in his abilities as a financial manager. Perhaps you have a close friend who cares about your kids and would be better at dealing with the economic aspects of bringing them up. Provided that your brother-in-law and your friend agree, you can name one as personal guardian and the other as custodian or trustee to manage your children's inheritance.

What if you and the other Parent cannot agree?
When you and your child's other parent make your wills, you should name the same person as personal guardian. If you don't agree on whom to name, there could be a court fight if both of you die while the child is still a minor. Faced with conflicting wishes, a judge would have to make a choice based on the evidence of what's in the best interests of your child.
Again, talk with the people you'd each like to name. Candid discussions with your potential guardians may bring new information to light and help you reach an agreement.

Make Your Wishes Known to the Guardian

Most people have strong feelings about how they want their children to be raised. Your concerns may cover anything from religious teachings to what college you'd like a particular child to attend.
One option is to write a letter to the personal guardian, outlining thoughts and feelings about how the children should be raised. Try not to put in too much detail, though; it could cause your nominee much guilt and frustration later if unexpected circumstances thwart his or her attempts to carry out your plans to the letter.
The best guarantee of an upbringing you would approve of is simply to choose someone who knows you and your children well, and whom you trust to navigate life's complexities on your children's behalf.

Frequently Asked Question about Estate and gift taxes

Has the estate tax been permanently repealed?
No.   After years of debate, Congress passed legislation that will gradually temporarily reduce the estate tax.

What is next for estate and gift taxes?
Currently, the estate tax affects only people who die leaving a taxable estate of more than $2 million. (In 2001, the figure was $675,000.) The estate tax threshold will continue to rise until 2010, when the tax will be repealed. The top tax rate will eventually drop to 45%. The exact dates and amounts of the changes are shown below.

Congress did not repeal the federal gift tax, although it temporarily raised the lifetime exemption and lowered the maximum tax rate. The lifetime gift tax exemption has gone up to $1 million and will stay there (unlike the estate tax exemption). That means you will be able to make a total of $1 million of taxable gifts over your lifetime before owing any federal gift tax. In addition, you can make an unlimited number of $12,000 gifts (to different recipients) of cash or other property each calendar year, completely tax-free.

How the Estate Tax Will Fade Away?

If you're married, estate tax is most likely to be an issue when the second spouse dies. (When the first spouse dies, everything left to the survivor passes tax-free.) But if the second spouse owns all of the couple's property, and it's worth more than the estate tax exemption, estate tax will be due. So if you and your spouse together own more than $2 million (the current estate tax exemption), you may still want to think about using an AB trust, making gifts during life, or using another tax-avoidance strategy.

What other tax changes affect estate planning?

Other tax rules, not just gift and estate tax ones, are changing, too.

Generation-skipping tax. This is an extra federal tax on transfers made from older folks to someone in their grandchildren's generation. When the estate tax is repealed in 2010, the generation-skipping tax will also disappear. Until 2010, the exemption amount will be the same as the estate tax exemption amount (shown in the table above).
Basis of inherited property. A change with far more widespread implications is the end of the "stepped-up basis" rule for inherited property. Under current law, when you inherit something, your tax basis (used to calculate taxable profit when you sell something) is the market value of the property on the date of the former owner's death. So if the property's value has gone up significantly since the former owner acquired it, the basis is "stepped-up" to the date-of-death value. That means you get a big tax break when you sell, because your taxable profit is based on the date-of-death value, not the lower basis of the former owner.  That rule will end when the estate tax does, in 2010. From then on, when you inherit property, you can choose to take a stepped-up basis for only $1.3 million of it. If you inherit more than that, for the rest of the property, your basis will be the former owner’s basis or the date-of-death market value, whichever is smaller. You will have to choose which of the assets get the stepped-up basis.

What is Estate Planning?
Estate planning involves planning for the distribution of assets upon a person's death. Failure to plan your estate, regardless of your wealth, or lack of wealth, can have serious consequences for you and your loved ones. These consequences include the court making decisions on your behalf and the government receiving more taxes than is necessary.   estate planning tools we utilize include:

Frequently Asked Question about Living Trusts

Can I act as my own trustee?
Yes. If you are competent to handle your financial affairs now, there’s no legal reason why you can’t be the trustee of your own trust. In fact, most revocable living trusts have the people who created them acting as their own trustees. If you’re married, you and your spouse can act as co-trustees.
What can I do with my assets once they’re in my Living Trust?
If you’re the trustee, you can do anything you want with the trust assets. When you set up your revocable living trust, you are transferring the title of all your assets from you as an individual to yourself as the trustee of your trust. You then must manage the property for the benefit of yourself as the beneficiary. What this means is that you will have absolute and complete control over the assets of your trust. If you want, you can spend, save, invest or even give the assets away at your discretion. There are no restrictions on what you can do with the assets in your living trust. Moreover, if you don’t like the terms of the trust, you can amend it or revoke it at any time without penalty.

Will my Living Trust avoid income taxes?
No. The purpose of creating your living trust is to avoid probate, guardianship proceedings (if you become disabled), and reduce or eliminate federal estate taxes. It’s not a vehicle for reducing income taxes. In fact, if you’re the trustee of your living trust, you will file your income tax returns in exactly the same way you filed them before the trust existed. There are no new returns to file and no new liabilities are created
Is my Living Trust just a tax loophole that the government will close down?
No. Your living trust has been authorized by the law for centuries. The government has no interest in making you go through guardianship proceedings or a probate. Those proceedings only clog up the court system. Properly drafted revocable living trusts can double the amount you and your spouse can pass tax free. At the current $1,000,000 level, your trusts will allow you to pass $2,000,000 estate tax free.
Can any attorney create a Living Trust?
The drafting of your trust should be done by an attorney trained in the area of tax and trust law. It is important that you seek out a law firm with experience in the creation of living trusts. After all, your trust will be the document which manages and disposes of all your hard earned wealth.
What if I move to another state? Is my Living Trust still valid?
Yes. Your living trust is valid in all 50 states, regardless of the state where it was originally created.
Is a Living Trust a good idea for a single person?
Yes. If you’re widowed, divorced, or unmarried, a living trust offers protection for your estate, as well. It is especially important if you are single to choose who will take over your affairs if you become disabled. The trust will completely eliminate probate, guardianship proceedings (if you become disabled), and you can still pass $1,000,000 free of federal estate taxes.
Are there any major disadvantages to a Living trust?
No. Because you have complete control of all assets in your trust, you’re free to manage it any way you want. Also, because your living trust is revocable, you have the right to make any changes in it while you’re alive and competent.
If I transfer real estate into my Living Trust, will my property taxes go up?
No. Transfers into your revocable living trust have no effect on your property taxes.
If I am only a part owner of property, can I transfer my share into a Living Trust?
Yes. Your share can go into the trust without changing the interests owned by others.
Can I name trustees and beneficiaries who live out of state?
Yes. There is no limitation on where your trustees or beneficiaries must reside.
Does my Living Trust need to be registered or recorded anywhere?
No. It is a private document which is not recorded. However, if you own any interest in real estate, the new deeds showing trust ownership will be recorded by the law firm for you.
Can I sell assets owned by my Living Trust without complication?
Yes. While you’re alive and competent, you can add assets to, or remove assets from, your living trust without penalty at any time.
Can I transfer real estate into my Living Trust?
Yes. In fact, all real estate should be transferred into your living trust. Otherwise, upon your death, there will be a probate in every state where you own real property. When it's owned by your living trust, there is no probate anywhere. Again, the law firm will handle the deed work for you.