Why You Need a Durable Power of Attorney



What do you think of when you hear “Power of Attorney”?  If you are like most people, you probably think a POA is designed to assist a person with his/her day-to-day responsibilities including management of financial assets in the event he or she becomes incapacitated by illness or an unfortunate accident.  While an agent acting under a Power of Attorney can take specific actions on your behalf, such as writing checks, paying your bills, or managing certain aspects of your business, the POA cannot manage your financial matters if you become incapacitated—unless the Power of Attorney document is “durable.”


Most people have heard of a Power of Attorney but not everyone has heard of a “Durable Power of Attorney.” A power of attorney (POA) legally assigns authority to a representative to act on your behalf in matters that you specify within the document. There are different types of Powers of Attorney that provide the representatives with varying levels of authority.  One common scenario is to give an employee a power of attorney over a business bank account in order to communicate with the bank, write checks on behalf of the business, etc.  A durable power of attorney extends the life of the POA in the event of your incapacity.


You can also design a durable power of attorney so that it only becomes effective upon your incapacity.  This is a common approach when working with an estate planning attorney.  Under this scenario, as long as you have capacity, you will be the person managing your legal and financial affairs.  In the event that you are temporarily or permanently incapacitated, the Durable Power of Attorney document will name an agent to act on your behalf.  This person is referred to as your “attorney-in-fact”.


Nobody wants to think about what would happen to his/her financial assets and other day-to-day responsibilities in the event he/she becomes incapacitated by illness or an unfortunate accident. Unfortunately, without a Durable Power of Attorney, you relinquish control of how your affairs will be managed should you become incapacitated. Your family will be forced to establish a Conservatorship with the court to handle any financial issues. For people without a close relationship to their family, this can be especially problematic.  The person may find themselves in a divisive situation, as estranged family members gain access to their assets.


It is also important to note that you should have a “Medical Power of Attorney” in addition to your Durable Power of Attorney. The Medical Power of Attorney appoints an agent to make health care decisions on your behalf. In California, the Medical Power of Attorney is called an “Advanced Health Care Directive.” This is a document that designates a trusted person to make decisions regarding medical matters when you are unable to do so for yourself.


As with anything else, planning ahead is an essential and easy way to avoid unnecessary stress, hardship, and financial burden.



3 Estate Tax Myths Debunked



The language of estate planning can be confusing for those just getting started with their planning. There is so much terminology, so many acronyms, and important concepts to remember. People may wonder what’s the most important? What will be the most relevant to my needs? While most people are being guided by an estate planning attorney throughout the process, having a basic working knowledge of commonly discussed but little understood areas of estate planning can prove helpful. The estate tax, for example, is frequently mentioned but little understood. In fact, because of the popular idiom “Death and Taxes,” there are a number of incorrect assumptions. Below, several common estate tax myths are debunked.


The estate tax is the same thing as the “death tax”


This is false. Although every person technically has an estate, even if modest, not every person will be responsible for an estate tax after death. The estate tax is only owed by individuals whose estates have a value of over USD $5.4 million, or married couples with estates over USD $10.8 million.


Most small businesses will be forced to liquidate to pay estate taxes


Bearing in mind the falsehood of the previous myth, only a few small businesses will owe any estate tax, and the majority would not need to be liquidated to pay any tax.  For larger businesses that are included in a taxable estate, the Trustee of the estate can elect what is known as a “6166 election”, which will essentially create a loan with the IRS so that the estate taxes can be paid over time and the business can avoid liquidation.


Your Future Heirs Will Be Required to Pay Off Any Remaining Debt


Not true! If large debts are left behind to creditors, your estate itself would pay off the remaining balances—not inheritors individually. It’s possible there could be a court order to liquidate assets (such as real property) to pay off any large loan balances, but, beneficiaries themselves wouldn’t have to pay off debt.


Taking the time to educate yourself on the estate tax and other areas of estate planning can help mitigate stress and overwhelm when working with an estate planning attorney.

4 Ways to Protect Your Personal Assets with an LLC



If you are a business owner, chances are you had a long period of rumination before deciding on your current business entity. Friends, business gurus, and other “experts” may have given you information that made certain business entities seem more attractive than others.  While S-Corps, C-Corps, and even Sole Proprietorships have benefits unto themselves, the reality is that an LLC, which is an acronym for “Limited Liability Company” is one of the best business entity structures for offering some degree of asset protection.


You may think that you don’t need to worry about asset protection, particularly if your business is young and you’re not yet seeing sizable revenue. Even if your business isn’t raking in 7 figure earnings, however, there are many circumstances that could still put your personal assets at risk and an LLC could provide significant protection.


Having an LLC, however, without an asset protection strategy is like having a car without a full gas tank—it can only take you so far.


Below are four strategies to maximize the benefit and protection you will get from having your business registered as an LLC.


Maintain your LLC as a Separate Entity


It is not uncommon for new business owners to comingle their personal and business assets. This unfortunately can have disastrous consequences, subjecting your personal assets to a creditor, as you could be perceived as an alias or “alter ego” for your company. If your business is sued, you could be held personally liable for being the “alter ego” of your business. To prevent this type of “alter ego liability” separate your personal assets from your business assets, and keep them separate. Ensure that all business-related documents are consistently executed by the LLC rather than you personally. Even if you have no staff and are a “one stop shop” (i.e. a freelance editor with an editing business or similar) you should still create this distinction.


Create Separate LLCs for Each Parcel of Real Property


Let’s say that your business is now wildly successful, and you have decided to purchase real estate. Maybe you’re so successful now that you bought a primary residence and an investment property, with the latter to be used as a passive income stream. Great! But these new assets must also be protected. Creating a new LLC for each of your properties helps to shield them from personal and business liability, as each property/each LLC would be considered its own stand-alone business



Get Business Credit


When you’re first starting out, your business funding will likely come from personally- guaranteed business loans or investments—not loans opened under your business name. The good news is you can eventually establish business credit which may help prevent your need to personally guarantee loans in the future. To start, make sure your LLC has its own EIN (Employer Identification Number) rather than your personal social security number. Open accounts under your business name and make sure to pay all bills on time.



Obtain LLC Insurance and Personal Umbrella Insurance  


If someone sues your business of wrongdoing, chances are you individually will be brought into the lawsuit as well. Good liability insurance can protect both you and your business if you get sued. As the saying goes, “it’s better safe than sorry.”  Umbrella insurance is usually quite affordable and well worth the peace of mind.



An LLC can provide better asset protection \when compared with other business entity structures. If you want additional support in creating asset protection strategies beyond a simple LLC, consult with an attorney experienced in asset protection.


Do You Still Need ‘AB Trust’ Planning in Your Estate Plan?



If you are married and sought the counsel of an estate planning attorney several years back, chances are your estate plan contains an “AB Trust.” Unless you are well-versed in estate planning, the likelihood of you remembering terms like AB Trust is slim. An AB Trust is a specific type of planning available to married couples.  An AB Trust was often a recommended strategy to help minimize estate taxes on the death of the first spouse to die. Specifically, a joint revocable trust with AB Trust provisions is designed to divide into two or more trusts upon the death of the first spouse to die.


Following the death of the first spouse to die, a Bypass Trust (this is where the “B” comes from) would be established to protect the available estate tax exemption of the deceased spouse.  Without a ByPass Trust, the unused exclusion amount of the deceased spouse would be lost forever. Recent changes to the Estate Tax law, however, have made traditional AB Trust planning less appealing for many married couples.


One reason AB Trust planning is becoming less of a must, and more of a fuss, is because there are much higher exemption amounts available.  In addition, there is something called “portability”. In 2016 the federal tax exemption available to an individual was $5.45 million.  This means any U.S. citizen or permanent resident could leave this amount to his or her heirs without paying any estate tax. This exemption amount increases annually to adjust for inflation. Portability allows the surviving spouse to “port over” and use any remaining estate tax exemption of the deceased spouse.  This means that wealthy couples could leave a total of $10.9 million to their heirs without being taxed.  If the law stays as it is currently, this number that will continue to rise in future years to keep up with inflation.


If you created an AB Trust before these recent law changes, you may assume there is nothing wrong with leaving the trust in place. Unfortunately, leaving AB Trusts in place when they are not needed can be disadvantageous. To reiterate how AB Trust planning works, when one spouse passes away, the trust splits into two trusts: Trust A and Trust B. The B trusts are irrevocable, so the living spouse has no ability to modify its terms.   The biggest problem is that assets sent into the ByPass Trust will not receive a step-up in basis on the death of the second spouse to die.  This can create a less-than-ideal tax outcome for the beneficiaries if there is no estate tax to consider.


With that being said, there are other reasons why a couple may want an AB Trust structure.  A ByPass Trust can help protect assets from second marriage situations and provide a considerable degree of asset protection for the surviving spouse.  With that being said, if you had your trust established 10 or more years ago, you should have it reviewed by a qualified estate planning attorney to ensure that it is drafted in such a way to maximize the benefits to both the surviving spouse, as well as the remainder beneficiaries.

Financial Planning vs. Estate Planning: What’s the Difference?

people-2563460_640It is common for people to confuse the responsibilities of financial planners and estate planners. Both professionals offer substantial value to those interested in organizing their financial assets, planning for the future, and creating greater peace of mind and security. In actuality, however, financial planners and estate planners have important differences in their specific areas of expertise. The key distinction is that estate planning is typically directed by an estate planning attorney rather than a financial planner.  Estate planning also includes elements beyond financial assets, including who can make health care decisions on your behalf, open your mail, care for your pets, etc.


Financial planning includes assessing a person’s current financial goals, including the review of investment accounts and business investments.  A financial planner works with her client to make decisions about present assets to hopefully grant greater financial freedom and meet personal/business future financial goals. This type of planning may include saving to purchase real property, or planning for retirement, such as determining whether funds should be saved into a 401K versus an IRA account.  Financial planners also assess clients’ overall financial health. An experienced financial planner helps clarify existing options and recommends products, investments, or other strategies to help one achieve her financial goals.


Estate planning, on the other hand, is handled exclusively by an estate planning attorney. While it is extremely common for financial planners, financial advisors and other financial professionals to recommend clients consult with an estate planning attorney, they cannot offer legal advice regarding how to prepare for possible incapacity, nor can they draft the required legal documents.


Many people incorrectly assume that a financial planner is the only professional they need to see when it comes to protecting financial assets. Estate Planning attorneys are necessary to ensure that one’s assets are properly organized and protected during lifetime, as well as to plan for incapacity and the proper distribution assets to beneficiaries following death. Failure to plan one’s estate can have dramatic and negative consequences. Horror stories abound of celebrities who have either failed to plan or inadequately planned their estates.  The result is an expensive, drawn-out, emotionally-charged battle among potential heirs, all of which could have been avoided through proper planning.


A sophisticated and experienced estate planning attorney will look at every possible scenario and create a detailed estate plan that addresses what will happen should any of the scenarios occur. Good estate planning is about planning for as many “what if’s” as possible.  It is only through creating a lasting document that includes the many variables that exist in life, that there can be greater assurance that one’s wishes can be met and his or her estate smoothly administered.


Estate planning and financial planning are both important—but for specific reasons. Speaking with the right person about one’s goals is imperative. An estate planning attorney will not be able to offer financial planning, and a financial planner will not be able to plan and draft an estate plan. With that being said, estate planning attorneys and financial planners work well together to ensure that they are creating comprehensive plans that will deliver the best outcome for their mutual clients.


Why Every Small Business Owner Should Have an Estate Plan



The American Dream is built on the back of small business, especially family business. In a survey by the Family Business Center, it’s estimated that family businesses account for 64% of the United States GDP, generate 62% of the country’s employment and comprise 78% of all new job creation. An overlooked reality of family businesses is that the businesses themselves often outlive their founders. Unfortunately, without proper planning, a business’s success is often derailed when the founder is no longer alive and actively engaged.


If you have successfully built a small business, chances are that you are looking forward to retirement someday and hope to pass the torch to a son, daughter, niece, nephew, or even sell to someone unrelated. Regardless of how long you plan to work, it’s important to plan for the day you can no longer handle the demands of running a business because of illness or death. Most business owners are so caught up in their day-to-day responsibilities that they do not take the time to plan for a successful exit from their business.  The idea of planning for possible incapacity can be troubling or off-putting for hard-working professionals. Illness and death, however, are real-life realities that require consideration—especially for business owners. If you still own a business when you die, it could be included in your estate and could be subject to substantial estate taxes and/or court interference. Your family may be forced to sell the business or its assets at “fire sale” prices. Without a proper plan in place, all your years of hard work could be for naught, forcing your business into the hands of Uncle Sam and preventing your family from reaping any benefits.


This can be avoided by finding an estate planning attorney who’s knowledgeable in business succession planning. Planning for how you exit from your business is an integral part of your estate and retirement planning. Proper planning now can provide you with retirement income, reduced income, and estate taxes, and can even allow you to benefit a designated charity, irrespective of whether you transfer your business to family members at discounted values, to employees, or to an outside buyer.



Now is an excellent time to consider business succession planning to ensure that your estate plan addresses your business, familial, and financial goals

5 Ways to Reduce Anxiety When Speaking with an Attorney

beard-2286440_640One of the biggest reasons people hold off on seeing an attorney, for any reason, is the intimidation factor. We understand. Nobody is starting their day with “Wow, I can’t wait to speak with my attorney!” But there comes a point in all our lives—attorneys included—where we need to consult with an attorney. Understandably, speaking with an estate planning attorney can be especially stressful or intimidating insofar as two social taboos are the key areas of discussion: Death and Taxes. When the time does come to speak to an attorney (and it should come sooner rather than later), there are strategies to make the process painless and anxiety free for both you and the attorney.


You may be wondering why you should do any work at all to ensure the process runs smoothly. Well, think of a time when you have made an appointment with your doctor about recurring headaches. The doctor will ask standard questions like “When did the headaches begin?” and “What medications have you been taking?” If your response was simply, “Oh I have no idea” to every question, the doctor would have very little to work with to provide the most accurate diagnosis. It may seem peculiar, but, attorneys are much like physicians. They want to help you help yourself, and can only do so much without adequate information or guidance. When you enter a relationship with an attorney, you are essentially joining a team: results take teamwork.


While attorneys are well-versed in their area of expertise, you need to provide necessary background information (details, documents, goals, etc.) so they can easily navigate the legal roads before them.


Are you anxious about speaking with an attorney? Here are five ways to ensure a comfortable experience and successful outcome.


  1. Be straightforward. Being honest and up front with your attorney is critical. Don’t lie, don’t exaggerate and don’t obfuscate information. Remember, by law, your attorney cannot share confidential information with anyone unless you have granted them permission to do so. When you withhold relevant facts or pad your story with fictitious information, it will only cause harm in the end. For example, when seeing an estate planning attorney, it’s important to reveal any familial tensions, as those could be potentially problematic. Be prepared to explain everything to your attorney—both the good and the bad. This ensures his or her ability to offer you the best guidance possible.
  2. Be Goal Oriented. When speaking with an attorney, especially an estate planning attorney, it’s helpful to already have a few goals in mind. What outcome would you like to result from working with the attorney? What pain points do you hope the attorney can help you resolve? By arriving to a consultation with specific goals, the attorney is better equipped to offer the most pertinent solutions and assistance.
  3. Be detailed. Although you may see certain details as irrelevant, chances are your attorney will not. Consider researching your attorney’s specialization prior to your meeting to get a feel of what information will be required of you and begin making a detailed list of concerns and questions. Having more information is always better than less.
  4. Get organized. After you’ve reflected on the details of your situation, begin logging it on paper, in Microsoft Word, or in Google Docs. Think in terms of lists and attempt to segment your information in a way that will cause the least overwhelm. This may seem tedious, but, it will save time and stress in the long run.
  5. Request clarification. If you ever find yourself confused by legal terminology, that’s okay (and 100% normal!). What isn’t okay is pretending you understand something when you don’t, or thinking you’ll save your attorney time by omitting an explanation, or because you’re embarrassed to admit your confusion. Instead, let your attorney know you need additional clarification or guidance. Getting additional information will ease up your anxiety!


You are not in the legal process by yourself. Your attorney is there to ensure the process runs smoothly and to help put any questions/issues to rest. By taking specific measures to prepare yourself for your attorney/client relationship, you can ensure the process is more enjoyable and less daunting.

Wells Fargo’s Problems Escalate with Asset Protection Blunder

wells fargo


When it comes to corporate scandal, the last few years haven’t been in Wells Fargo’s favor. From 2011 to 2016, at least two million fake deposit accounts were created, with 500,000 more unauthorized credit card applications. In total, these accounts generated over $2.6 million in fees for the bank and plenty of public scrutiny. The bank was ordered to pay $185 million in fines to City and Federal regulators and thereon had to work to rebuild customer trust and reputation.

Now the bank is facing, even more, scrutiny around its auto-insurance policies. The bank had been forcing unneeded GAP insurance on customers financing their auto purchases. GAP, an acronym for “guaranteed asset protection” helps customers pay off their auto loan balance if their car was a total loss in a car accident.

GAP is a practical investment for people interested in protecting their auto assets, in that it prevents consumers from being saddled with a loan balance after a car accident. Asset protection strategies such as investing in GAP insurance, are designed to prevent unnecessary hassle and expense. A total summary of GAP benefits include…:

  • Payable in the event of a total loss
  • Covers the difference (in most instances) between the scheduled loan pay-off amount and the asset’s actual cash value net of refunds
  • Covers a customer’s primary insurance deductible up to $1,000 (where state allowed)
  • Protection for vehicles with a loan amount of up to $100,000 at the time of purchase
  • Up to 84 months of protection available

GAP is also a wise product to be pushed by banks, as it insures the repayment of loan balances in the event consumers find themselves unable to pay. Unfortunately for Wells Fargo, many of their customers didn’t want the GAP insurance protection, or, if they did had expected to be reimbursed for the cost of the insurance after it was no longer needed by them. Laws in Alabama, Colorado, Indiana, Iowa, Maryland, Massachusetts, Oklahoma, Oregon, and South Carolina require that customers get unused insurance money back.


GAP insurance may be a sensible asset protection strategy for consumers; however, when unused, it can be an unnecessary expense.  In this case, Wells Fargo made a definite error with their customer’s policies; however, customers should remain alert about their various investments and expenditures regardless of the institution involved.


Pitfalls of DIY Estate Planning

Modern seniors


Thanks to the Internet, people have become more autonomous than ever. There is seemingly no shortage of what can be tackled on one’s own, thanks to the web. People have taken to their computers to accomplish tasks once handled by dedicated professionals, including travel planning, banking, car or real estate purchases, and even legal matters like estate planning.  The advent of LegalZoom and other “do it yourself” document preparation services provides simplified and inexpensive solutions for just about any legal filing—including trusts or wills. Although this is a fantastic advancement in technology, it gives consumers the impression that completing important legal documents is as easy as filling in the blanks of a DMV form.


The reality is the process is much more complicated than that, and consumers may skirt over important questions or choose not to pay extra money to consult with a live attorney.  On Legal Zoom, for example, it’s noted that “80% of people who fill in blank forms to create legal documents do so incorrectly.” The platform assures customers that LegalZoom professionals will make the necessary modifications to ensure accuracy of their documents.  However, LegalZoom is not a law firm, but merely a legal document assistant, and thus not a substitute for the advice of an attorney. The platform, of course, offers a disclaimer to this effect, but for individuals hoping to save money and time, this may pose little concern.


There are uncomplicated documents that people could most likely complete on Legal Zoom or with the assistance of another document assistant.  An estate plan, however, is not one of those documents. Good estate plans are nuanced and customized to the needs of an individual client. Do it yourself estate plans provide a false sense of security.


Team work process. young business managers crew working with new


Below, are just a few of the areas that can be neglected in a DIY estate plan:


·      Failure to include an alternate trustee in the event that the named trustee passes away or is unable to serve

·      Failure to include guidance about beneficiary designations

·      Failure to address issues relevant to blended families


Unfortunately, DIY platforms do not offer the customization that an in-person attorney offers a client.  Attorneys do more than draft a document. They advise on the best ways to protect one’s family and offer guidance on the preservation and distribution of assets according to personal wishes. Quality estate planning attorneys CARE about their clients! Yes, the advice of an attorney can come with a much higher price tag than a document service. But as a reminder, eighty percent of people who fill in blank forms to create legal documents do so incorrectly. Do you want to be part of that statistic?  Or would you rather be the 20% minority who gets his/her estate plan done properly and with care? Now, not tomorrow, next week, next month, or next year, is the optimal time to seek the guidance of an experienced estate planning attorney—not a document assistant.

3 Money Problems from Inherited Wealth



Many people fantasize about inheriting a huge sum of money, under the assumption that it will solve all of their financial problems, or at least set them on the path to comfortable living. Even for those accustomed to having money, such as people who grew up in wealthy families, the idea of receiving additional income may set off dreams of luxurious lifestyles.


Unfortunately, an inheritance can often cause more problems than it solves. Therefore, preventative measures should always be taken to prepare the heirs.


Barbara Blouin, the Founder of the Inheritance Project, found receiving a sudden inheritance presented a conflicted sense of identity as well as other issues. To raise awareness around the issues surrounding inheritances, she established The Inheritance Project. Blouin founded the organization in 1992 to “explore the emotional and social impact of inherited wealth and to show heirs how to claim their personal power and use it to bring meaning to their lives and benefit others.”


Below are three common issues new heirs have with receiving a sudden inheritance.


1. Lack of Money Understanding

Younger heirs, especially those in their late teens or early twenties, may not have a fully formed concept of money. In other words, a 19-year-old may perceive $100,000 to have the same spending power as $1 million, especially if they grew up having a lot of innate privileges. The solution here is financial education. If parents intend on giving their children inheritances in early adulthood, it’s important to address these issues through preparation.




2. Adopting a Celebrity Lifestyle

There is no stop to the social media images of celebrities flaunting their enormous wealth. Reality TV shows like Keeping Up with the Kardashians idealize wealth, making it seem that wealthy people by default should have multiple luxury cars and a jet-setting lifestyle. For new heirs, especially younger ones, the desire to replicate a “celebrity lifestyle” through frivolous purchases is incredibly tempting. The key is to not let celebrity images direct the spending of newly inherited money. Inheritors need to sit down with an estate planning attorney to identify goals and create a strategic plan (that doesn’t include buying up the entire Dior Fall Collection).


3. Sudden Guilt

Some inheritors are overwhelmed with guilt when they receive an inheritance, especially those who have already been hard at work building their careers, or people trying to separate themselves from wealthy families. Even though images of wealth are widely celebrated in American culture, nepotism and acquiring sudden wealth can be cause for jealousy and resentment by peers or work colleagues.  Dealing with these issues can often be too much to bear, so inheritors may opt to donate a large portion—or even all—of their inheritance to charity.


Finding an estate planner who is familiar with the psychological impacts of wealth transfer can be helpful in preventing impulsive behavior, and creating a purposeful money management plan. Preventing money issues from inherited wealth begins with preparation, proper planning, and education. The easiest preventative step is to find a sophisticated estate planning attorney familiar with the psychological impacts of large amounts of wealth within families.