Transcript taken from our Youtube Channel
Hey everybody, it’s Victor Medina with Medina Law Group and Palante Wealth Advisors, your one-stop shop for retirement planning. You know, I began my career as an estate planning attorney, and then we began doing financial services for people and helping people in retirement, but when I was focusing on estate planning, we would review a lot of people’s Powers of Attorney to figure out whether or not they were documents that we could keep in their plan or things that we needed to replace as we were drafting new documents. Now, if you’re not aware of it, a Power of Attorney is a document that you sign to make sure that if you become incapacitated in the future that you have named somebody that can help you do your planning when you can’t do planning on your own.
Now Powers of Attorney are documents that most people know that they should have. If you go to the AARP and you go to their website about the three documents that everyone should have in their estate plan, a Financial Power of Attorney is one of those documents. So most folks are aware that they should have a Power of Attorney as part of their planning. However, a lot of people inadvertently think that they, their Power of Attorney is the same, whether they get it from the internet or they get it from somebody that did their house closing or they got it from somebody like me who focuses on estate planning attorney, and those documents are not interchangeable. So I want to highlight three provisions that your Power of Attorney must have in order to be a top-shelf Power of Attorney in order to work when you need it.
Now these aren’t the only provisions that your Power of Attorney should have. They’re just ones that are often overlooked when you draft your documents or when you sign them.
Now the first provision in there is the ability to gift. Now this is something that is required in the Power of Attorney because when you give somebody the authority to make decisions on your behalf, they’re actually a fiduciary. That means that they have to look out for your best interests ahead of their own, and if you don’t give them the power to gift money from your estate, that is to say, make you poorer by transferring away. It’s not a power that is assumed to be in the document. Now you might think, why are you gonna give somebody the power to give money away? And the answer for that is actually two different planning opportunities that you might have in the future. As we all know, the federal government is growing in its desire to take money from you. And so, if you need to do gifting in order to get money out of your name to avoid on taxes, that’s a reason why you might want a gifting provision. The second reason might be that you might be concerned about growing older and needing long-term care like an assisted living facility or a nursing home. Well the rules about how you qualify for that kind of aid and the rules about how much money you have to spend out of your own account, well, those are pretty difficult rules to navigate, and one of the ways that a good plan comes together to help you save money is when you’re able to gift money away so that they can’t take it from you. So number one is a gifting provision and it’s an important provision to have.
The second provision that your Power of Attorney must have is a provision around self-dealing. Now self-dealing is actually a term of art that in legal terms basically means that the person who is your agent can give money to themselves. That’s what we call self-dealing. Again, because that person’s a fiduciary, if you don’t outline the right for them to give themselves money, then they can’t do it in the document. So we want to make sure that that provision is in there because many times a successful plan includes transferring assets to a child, and most people name their children as their Power of Attorney agents after a spouse.
The third provision that your Power of Attorney must absolutely have is a provision that allows the agent to create trusts on your behalf. That’s a contract that you make with yourself about what you’re gonna help protect and put in a container, and we’ve got a number of videos on the site that talk about the difference between trusts and wills and when you need one or the other, but the important thing for your Power of Attorney is that you want to be able to grant that person the ability to create a container that holds your money so that it’s protected against taxes or Medicaid spend down in the future.
As I mentioned, it’s not the only provision that you need to have. There are a number of them that we recommend, but those are three provisions that when I was reviewing Powers of Attorney, day in and day out, I would find missing, and it didn’t matter whether or not the client got it off the internet or got it from an attorney that didn’t specialize in estate planning, it turns out that they were often missing in their plan. So if you’ve got a Power of Attorney, go and check that out and see whether or not you have those three provisions that we say that you must have in your Power of Attorney. The ability to gift, and by the way, that gifting should be unlimited, the ability to self-deal, and the ability to create and fund trusts. If you don’t have those provisions in there, it might be a good idea to have your estate plan reviewed and/or updated, and the good news is we can help you.
At Medina Law Group, we do estate planning and elder law planning day in and day out, and so, if you’d like to learn more information about how we can help you or even get free resources like one of the books that I’ve created, visit us at medinalawgroup.com and register for an appointment, and we’ll send you a free book. Meanwhile, if you like this video, please do us a favor and hit the like button, as well as share it with a friend, and make sure that everybody is subscribed to our YouTube channel where we provide advice like this day in and day out. Hope you have a good one, bye-bye.