What is a Power of Attorney?
A Power of Attorney is an agreement that someone called a "principal" signs to allow another person or entity, called an "agent" to make certain decisions for them.
There are Different Types of Powers of Attorney
There are different types of Powers of Attorney. In Pennsylvania, different sections of our law cover types of Powers of Attorney. Chapter 54 of the Decedents, Estates and Fiduciaries Code covers Health Care Powers of Attorney while Chapter 56 covers Financial Powers of Attorney.
In my office, I prepare separate documents for these. In the past it was common to see these powers combined and I still review a fair amount of documents that were drafted that way.
I like these to be separate because you may wish to choose different people to manage your health care decisions and financial decisions, and, as stated above, the standards for both documents are governed by different sections of law.
Powers of Attorney are Essential for All Adults
I cannot overstate the importance of having Powers of Attorney. Every time I review a client’s estate plan, I review these documents to make sure they are in order.
Married couples are often surprised when I tell them that they need Powers of Attorney and that they may not be able to make important financial decisions for each other without them. Here’s a simple test – ask yourself, do you have a retirement account (an IRA or 401k for example)? If you answer yes, you need a Power of Attorney so that your spouse can make important decisions involving that account in the event you become unable to do so yourself.
Young adults are also surprised to learn that it is wise for them to have Powers of Attorney as well. Even if young adults do not have an accumulation of financial assets to plan for, it is important for them to name the people they trust the most to make medical decisions for them in case they become incapacitated in the future.
You Do Not Lose Power to Manage Your Affairs
When you sign a Power of Attorney, you allow someone else to make decisions for you. You do not give up the power to make these decisions for yourself while you can. You are simply allowing someone else to step in and help you. It is important to understand that in this case, you are not limiting your own power by giving someone else power.
Some Documents are Better Than Others
As I have alluded to earlier in this post, not all Powers of Attorney are written the same way. They are not all of equal quality. I have to draft new Powers of Attorney for clients because their current documents do not grant their agent enough power to protect their assets in the event of a nursing home crisis.
Pennsylvania law has specific criteria that must be met in the document in order for the agent to be able to gift, or transfer assets out of the principal’s name. Most documents that I review allow the agent to make what we call limited gifts but in order to execute most plans to protect assets, we need the document to allow the agent to make unlimited gifts.
I have found trying to save a few dollars by purchasing do-it-yourself documents online or through big box office supply stores to be a particularly bad idea. These documents tend to lag behind important changes in the law because they aren’t updated frequently or quickly enough. The end result is that the client has to pay twice for an appropriate document and therefore has spent more than they needed to by trying to save money.
Trusting Your Agent is Key
The most important factor in choosing an agent for your Power of Attorney is trust. You need to have unwavering trust that the person you are choosing will make decisions that are in your best interest.
The law provides some safeguards regarding the behavior of agents by imposing certain duties on them when they act for you, however, this is no substitute for making sure that you choose someone you trust to fill this role.
Banks May Not Accept Old Powers of Attorney
From a practical perspective, the ultimate goal of having a Power of Attorney is that it will work when your agent has to use it. In other words, you expect that when your agent provides your Financial Power of Attorney to the bank, the bank will put it on file and allow the agent to write checks for you and take care of other important banking activities.
Banks and other financial institutions tend to be suspicious and require more intense scrutiny of documents that were not prepared recently. Powers of Attorney that are 5 years old, for example, may garner heightened scrutiny, and Powers of Attorney that are 10+ years old may be considered “stale.” Sometimes, after review by their legal department, banks choose not to accept these older documents.
The best way to ensure that your Power of Attorney will be accepted is to have it reviewed every 5 or so years and to keep it updated when the law changes. This will ensure that when it is presented to the bank, the most current form is being used.
Although age of the document should not matter because a Power of Attorney should be acceptable as long as it was executed according to the law at that time, it’s best to err on the side of caution here. Instead, focus on what’s important – getting the result that you want, which is making sure your document will be accepted when your agent needs to use it.
As an attorney, I often walk a fine line between listening to my clients describe what they want and on the other hand, explaining to them what they need. It can be difficult sometimes to give meaningful advice and yet not steer the client to the decision I think they should make.
In many cases I find that clients can initially be uncertain about what it is that they want. I attribute this to families not having access to information to help them understand key issues for their planning even before our first meeting.
As I continue to grow in practice, I also continue to further my commitment toward providing truly
client-centered service. To me, client-centered service begins with clients sharing their planning goals with me so that I can show them the legal tools we can use to achieve them. My experience has revealed that education is the most effective tool to assist in bridging the gap between goals and reality, creating a plan with the client that accomplishes their goals and also meets their needs.
It is because of my commitment to education that I decided to create this new blog series – What Your Family Needs to Know.
In this series, I will get right to the point about what I think your family needs to know about important topics in elder law, estate planning, and estate administration. My goal is to provide information so that you can make more informed decisions and clarify your estate planning goals.
It is important to note that the contents of these articles are not to be taken as legal advice but rather to serve as a starting point in becoming educated. You should consult an attorney if you need advice on your specific matter. If you are located in northeastern or central Pennsylvania and would like to speak with Cardinal Estate Planning about your case, we would be happy to setup a free consultation.
One of the most common questions clients ask us is what is the difference between a probate and non-probate asset?
Most clients own a mix of assets that fall into both categories or would fall into both categories with the passing of their spouse. As you will see below, it is very important to understand the difference between these assets so that your plan functions as intended when you pass away.
Probate Assets
Probate assets are the items that you own solely in your name and which do not pass by way of beneficiary designations when you die. These are called probate assets because when you pass away, they will pass through probate to your beneficiaries if you have a Will, or to whomever your state law names as your intestate heirs if you do not.
Some typical examples of probate assets are as follows: bank accounts with no joint owner, real estate with no joint owners with the right of survivorship, and life insurance policies, retirement accounts, and other investment accounts that do not have valid beneficiaries named. Accounts that you have failed to name a beneficiary for, or have chosen to name your estate as the beneficiary for are also probate assets.
Non-probate Assets
Non-probate assets are the opposite of probate assets because when you die they do not require probate to wind up in the hands of your beneficiaries. These assets pass directly to another person or entity when you pass away and are not subject to the terms of your Will or the law of intestacy.
Examples of non-probate assets include real estate held joint tenants with right of survivorship or tenants by the entireties, bank accounts with joint ownership, life insurance policies, retirement accounts, and other investment accounts with valid beneficiary designations, accounts that have transfer on death or payable on death designations, and accounts that are owned by a trust.
Why Does it Matter?
In order to make sure that your plan works the way you want it to, it is critical that you understand what assets that you own will pass through your probate estate and which will not.
A common mistake that I see is that clients take the time to draft a Will which names multiple beneficiaries, but then they add just one child onto a bank account as a joint owner. Typically, this is done so that the chosen child can write checks for them or otherwise help manage their primary bank account. The downfall is that they have innocently thwarted the estate plan they created by doing so because at death only the child with joint ownership of the bank account will have any legal right to benefit from it.
Another thorny issue is that a parent may owe inheritance tax on part of their own bank account if their joint owner child passes away unexpectedly before them. It is important to understand that in Pennsylvania, non-probate does not mean non-taxable for purposes of the Pennsylvania Inheritance Tax. Unfortunately, just as a child would have to pay inheritance tax on the inheritance they receive from a parent, a parent would have to do the same on what they “receive” from their child under these circumstances.
Are You Ready to Plan?
As you can see, there are many issues to consider when crafting your estate plan. Whether you are creating your plan for the first time, interested in reviewing your current planning, or just have questions about estate planning we would love to meet you. Our goal is to help make your entire planning process as simple as possible.
We recommend registering for one of our free workshops to get your questions answered and learn more about our process.
Contact an Experienced Pennsylvania Estate Planning Attorney
If you have questions about probate vs. non-probate assets, contact an Estate Planning attorney at Cardinal Estate Planning by calling 570-252-9043 to schedule an appointment.
Perhaps you have realized that you simply can’t continue to provide adequate care to your loved one. Or maybe your loved one lives far away and your responsibilities at home won’t allow you to serve as caregiver. In either case, you may need to turn to a professional home care provider. The question is, how do you choose the right person for this important task?
How Do I Select the Right Home Care Provider?
The National Association for Home Care & Hospice (NAHC) has created a valuable checklist with questions you should ask providers and others who may be familiar with the provider’s history. Here are some of the questions NAHC recommends.
- How long has the provider served the community?
- Does the provider have literature explaining its services, eligibility requirements, fees, and funding sources? Does the provider have what is known as a “Patient Bill of Rights” outlining the responsibilities and rights of the provider, caregiver and patient?
- How does the provider choose and train its caregivers?
- Are therapists or nurses used to evaluate the patient’s needs? If so, do they consult with the patient’s family members and physicians?
- Does the provider include the patient and members of his or her family in developing a care plan? If changes to the level of care are needed over time, are patients and family members involved in making these decisions?
- Is the patient’s course of treatment documented? Does the patient receive a copy of this documentation, and do the caregivers update it as changes occur? Does the provider take the time necessary to educate family members on the care being provided to the patient?
- Does the provider assign supervisors to oversee the quality of care patients receive in their homes? If so, how often do these supervisors make visits? Who can the patient and his or her family members contact with questions or complaints? How does the provider follow up on and resolve any problems that might arise?
- What are the provider’s billing procedures? Does it furnish written statements explaining all of the charges? Are payment plans available?
- What procedures does the provider follow in case of an emergency? Are the provider’s caregivers available 24 hours a day, seven days a week?
- How does the provider ensure patient confidentiality?
Next time we’ll discuss the importance of asking providers for references, and what to ask them.
Contact an Experienced Pennsylvania Elder Law Attorney
If you have additional questions or concerns regarding finding the right home care provider, contact the experienced Pennsylvania Elder Law attorney at Cardinal Estate Planning by calling 570-252-9043 to schedule an appointment.
