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Why should I update my power of attorney?

Last Fall, changes went into effect for durable powers of attorneys. Learn what the law provides, who it is designed to protect, and other valuable tips from estate planning attorney, Kari Gocha.

By: Lori T. Williams, Owner/Managing Attorney of Your Legal Resource, PLLC

Even though Michigan Public Act 0141 went into effect October 1, 2012 and requires changes to durable powers of attorneys executed after that date, there is some concern that powers of attorney executed earlier will not be accepted because they don't comply with current law. Therefore, it is wise for everyone to have their estate plan reviewed by an attorney with expertise in estate planning law, to ensure that their wishes are able to be carried out when it comes to financial matters.

Attorney Kari Gocha has been practicing law in Michigan since 1997, with an emphasis in estate planning the last 8 years.  It was a personal tragedy, losing her own father in a drowning accident when she was just 19 years old, that motivated Kari to help families protect their loved ones and their estates, whether death results from old age or unexpected events.

"My father didn't create an estate plan and held all his assets jointly with my step mother.  Fortunately for me, this wasn't problematic because I am close to my step mother.  Other families aren't always as lucky.  Family feuds can erupt and families can be torn apart absent proper planning. Additionally, much of the estate can be lost through unnecessary taxes, court proceedings or a mis-allocation of assets in the absence of an estate plan.  I counsel my clients through the maze of legal issues and help them make the tough decisions and accomplish a plan that creates and preserves harmony among families members," says Kari.

Current requirements of Public Act 0141 (Powers of Attorney):

a.  The new legislation sets forth the requirement that the Agent must sign an acknowledgement of designation or acceptance of designation prior to the Agent acting on behalf of the incapacitated individual (“Principal”).  The agent is acknowledging what their duties and restrictions are.

b.  New execution requirements.  The document must be signed before two witnesses or a notary, or both.

c.  The statute requires express language for extraordinary powers.  One in particular is gifting powers.  The document must specifically state that the agent may engage in gifting.  If the document is silent on gifting the agent is restricted unless provided for under a court order.

d.  Unless provided for in the durable power of attorney or by judicial order, the agent, while acting as an agent, is not permitted to create an account or other asset in joint tenancy between the Principal and the agent.

e.  You can now limit liability of the agent by stating such in the document.  However, you can never limit the agent’s liability for acts that are deemed to have been committed in bad faith or with reckless indifference.

 

Reason for the change in law?

Kari notes that "the changes provide another layer of protection for vulnerable adults.  With the increase of financial exploitation and other forms of abuse against the elderly it was important to make sure the agent selected to act on behalf of the incapacitated individual (“Principal”) know specifically what they can and cannot do under the Power of Attorney.  This puts potential abusers on notice and therefore takes away their ability of arguing ignorance of their responsibilities and/or restrictions while acting on behalf of the Principal."

Kari's typical client is an individual or couple between the ages of 45 – 70, with mid to high net worth. "I want to make a difference for my clients and give them peace of mind through an estate plan that makes sense and accomplishes their goals.  I have had the privilege of helping many clients make sure their wishes are followed and I have helped many families avoid the financial devastation and additional emotional strain that often occurs if someone does not have proper estate planning.  The best time to create a plan is now, before something happens that is outside your control."

 

 

 Common misconceptions about estate planning:

1.  I’m too young to worry about estate planning

Health and financial powers of attorney as well as a HIPAA release are essential documents for anyone over the age of majority (18 in Michigan).  Even students in college should obtain these documents.  These documents will give your loved ones the ability to assist with financial and medical decisions in the event you become incapacitated.

Young couples should also speak to an estate planning attorney if they have minor children in the house.  Guardianships are essential and should not be overlooked.

 

2.  I can avoid probate with a will

This could not be farther from the truth.  If a person dies with an asset titled in their sole name without a beneficiary designation, that asset will need to go through probate.  The simplest way to describe a will is that it is a set of instructions you have left for the probate court indicating who you want to act on your behalf in getting the assets through the probate process and who you want to receive the asset after the administration process is over.  The purpose of a will again is to give the probate court instructions, not to avoid probate.

 

3.  Only rich people need a revocable trust

To justify a revocable trust you should not look at the value of the assets. Instead, focus on the goals of the estate plan.  A properly structured and funded trust can be an invaluable tool to any individual or couple, regardless of the size of their estate.  The use of a trust can avoid probate, set up creditor protection trusts for their children, plan for children from a previous marriage, keep the plan confidential to preserve harmony among family members, provide incentives to beneficiaries, etc.

 

4.  There’s no downside to adding a joint owner to my bank account and/or deed to my real estate.

Many people think it is wise to add a child to their bank account so that their child can assist with paying bills should the parent become incapacitated.  While this may be true, the reality is that upon that parent’s death, that asset will automatically pass to that child regardless of the terms of the parent’s will.  The parent may also think that the passing of the asset to the child is fine because the child will distribute the asset among his/her siblings.  However, there is no legal obligation forcing the child to follow through with the parent’s wishes.

Adding a child as a joint owner on real estate poses the same problem.  In addition to the lack of obligation to “share” the asset, there are capital gains tax implications to this type of planning, as well as the possibility of the parent’s home being subjected to the creditors of the child due to lawsuits, divorce, or defaults.

 

Tips for anyone who hasn't created or updated an estate plan:

  • Speak to an experienced estate planning attorney.  Kari says, “You don’t know what you don’t know.”  There are a lot of “What If” scenarios that many people do not even realize they needed to plan for.

 

  • Most people desire creditor protection for their children.  Since we do not have a crystal ball it is reassuring to know that with a solid plan, the assets you worked hard to accumulate will not be taken from your child after your death due to the child’s creditor issues or a divorce.

 

  • Business owners need to seriously consider what will happen to their business should they become incapacitated or die.  Who will take over the business and does that individual know anything about the business?  What if it is a partnership, will the partner be able to work well with the client’s spouse and/or children?  Or, in the alternative, would the partner like to purchase the deceased owner’s interest?  If so, how will the purchase be funded?  Most importantly, how will all of this affect the business owner’s family should these questions be unanswered when the business owner dies?

 

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Kari Gocha  graduated in 1997 from Michigan State University, Detroit College of Law, with honors, and spent eight years as a top attorney in a complex corporate environment.  As a highly skilled, seasoned practitioner, she took that business experience one step further by focusing specifically on the estate planning, probate and trust administration needs of medium to high net worth clients, including   business formation and business succession planning.  Knowing that the best legal plans fit specific family and business needs, Kari makes it her goal to thoroughly understand client circumstances through careful listening to craft plans that fit the client’s unique situation.  Kari works hard to raise the bar in her field as a frequent guest speaker and educator to financial institutions and CPAs. Kari practices in Farmington Hills with the firm of Mall, Malisow & Cooney, PC.  For more information, visit her firm's website.

Lori T. Williams is a 23 year attorney based in Birmingham, MI. She owns a legal referral and legal consulting business called Your Legal Resource, PLLC. She assists individuals and small businesses in need of legal advice or representation by connecting them with the right legal specialist for their situation. She also provides consulting services for attorneys and other professional service providers on how to generate more business through effective branding, marketing, networking, and by creating strategic partnerships. For more information, visit www.bestlegalresource.com.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Lori T. Williams February 11, 2013 at 06:26 PM
Click the link Kari Gocha's LinkedIn Profile: www.linkedin.com/pub/kari-gocha/1/978/415. Above link in her bio isn't working correctly.

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