When contemplating the creation of an estate plan, it is a common desire for clients to want “simple” documents. The thought of too much complexity and the fear that long and complicated “legal jargon” will be difficult to understand makes a lot of people uneasy. This feeling is understandable, especially since the overall goal of an estate plan is to make things as simple and as efficient as possible for loved ones who acting as “fiduciaries” and are tasked with administering an incapacitated or deceased person’s estate.
However, once a person becomes incapacitated or passes away, all that is left to rely upon is the four corners of the estate planning documents. “Simple” documents that do not provide precise detail can actually create problems for fiduciaries in their attempt to establish authority and administer an estate. Financial institutions are known to squabble over the definition of certain terms, such as whether the power to “engage in banking and other financial institution transactions” includes the power to access a bank’s safe deposit box. As a result, detail is of paramount importance in effecting the intent of any estate plan: to make things easy for fiduciaries.
The following is an overview of some fiduciary powers that are often lacking in basic estate plans but can be critical in the administration of an estate.
Power to Fund:
A trust-based estate plan cannot be effective unless assets are properly titled to the trust. One of the biggest problems encountered during a trust administration process is the failure of the trust-maker to transfer assets into the trust. This issue might not be discovered until after the trust-maker loses capacity. A detailed power of attorney document should include the specific power for the fiduciary to transfer assets into the trust-maker’s living trust.
Power to Manage Digital Assets:
Although most estate planning documents include the power to manage real property and personal property, few estate planning documents also include the specific power to manage “digital assets” such as email accounts, digital music, digital photographs, digital videos, software licenses, blogs, tax-preparation service accounts, online stores and auction sites, online accounts, social media accounts, and devices such as cell phones, computers, and storage devices.
Power Regarding Governmental Benefits:
The power to deal with governmental benefits including Supplemental Security Income (SSI), Medicaid/Medi-Cal, Medicare, and Social Security Disability Insurance (SSDI) is critical. In addition, a comprehensive estate plan should include specific powers that allow the fiduciary to make gifts in order to qualify for governmental benefits such as Medicaid/Medi-Cal.
Power Regarding Retirement Plans and Other Employee Benefits:
Having access to retirement plans, being able to make contributions to retirement plans, withdrawing a required minimum distribution from an IRA, make elections and exercise options on retirement plans, and convert retirement plans to a Roth IRA are all powers that a fiduciary commonly needs but basic, “simple,” estate plans fail to address. Including these powers will help the fiduciary effectively manage a critical category of assets.
Power Regarding Safe-Deposit Boxes:
As referenced above, the typical power to manage bank accounts might not be sufficient to also manage safe-deposit boxes. Including the specific power to access a safe-deposit box and to remove contents from a safe-deposit box will alleviate this common problem.
Power Regarding Taxes:
Incapacity does not excuse the filing of a person’s income tax returns. A fiduciary should have the express authority to prepare, sign, and file all federal, state, and local tax returns as well as engage a tax preparer, accept refunds, and request an extension.
Power Regarding Mail:
It would be difficult for a fiduciary to pay bills and manage a person’s finances without having access to that person’s mail. A fiduciary therefore should be expressly permitted to open, read, respond to, and redirect mail.
Power for Care and Control:
In addition to specific powers regarding assets and other financial needs, a fiduciary should also have the power to care and control an incapacitated person. These powers would include the power to provide domestic help, clothing, transportation, food, medicine, recreation, travel, spiritual needs, and companionship.
Although the thought of long and detailed legal documents can seem overwhelming, precise terms actually make things simpler in the end. Your loved ones will be thankful for the giant estate planning document with hundreds of pages!
KRASA LAW, Inc. is located at 704-D Forest Avenue, Pacific Grove, California and Kyle may be reached at 831-920-0205.
Disclaimer: This article is for general information only. Reading this article does not establish an attorney-client relationship. Before acting upon any of the information presented in this article, it is critical that you consult a competent attorney who is licensed to practice law in your community.