What responsibilities will I have as an Agent?

The most important thing to remember when you step in as Agent is that the assets you control are not your assets. You are safeguarding them for the principal for whom you are the agent under the power of attorney and for the beneficiaries of the principal’s estate.

As an Agent, you have certain responsibilities. For example:
• You must follow the instructions in the power of attorney document.
• You cannot mix the principal’s assets with your own. You must keep separate checking accounts and investments in the name of the principal but with you as agent. Use the social security number of the principal for the account to assure that any tax documents like Form 1099s bear the name of the principal and not your name.
• You cannot use the principal’s assets for your own benefit (unless the power of attorney authorizes it).
• You must treat the descendants of the principal the same; you cannot favor one over another (unless the power of attorney says you can).
• The principal’s assets must be invested in a prudent (conservative) manner, in a way that will result in reasonable growth with minimum risk.
• You are responsible for keeping accurate records, filing tax returns and reporting to the probate court if a petition is filed requesting an accounting.

Make a preliminary list of the principal’s assets and their estimated values. You'll need exact values later. If the principal has a spouse or dependent children, the Agent may need to do some tax planning right away. Be sure that you have the principal’s social security number and date of birth because you will need them for many transactions.

Collect all checks payable to the principal and put them in an interest bearing account. If a spouse or a dependent child of the principal needs money to live on, you can probably make some partial distributions. But do not make any distributions until after you have determined there is enough money to pay all expenses for the principal, including taxes.

Notify the bank, brokerage firm and others that you are now acting as Agent of the principal under a Durable Power of Attorney. They will probably want to see an original or certified copy of the power of attorney and your personal identification such as a driver’s license.

Keep careful records of medical and household expenses and file medical claims promptly. Keep a ledger of all bills and income received. Contact an accountant to prepare income tax returns, if you will not prepare them yourself. Verify and pay all bills and taxes. Make an accounting of assets and bills paid and give it to the principal at least quarterly if the principal can review them.

Do I have to do all of this myself?

No, of course not. Once you have custody of the principal’s assets, you can have professionals help you.  You can hire an accountant to prepare tax returns and answer income tax questions.  You will also need to consult with an attorney from time to time to help interpret the power of attorney and answer legal questions. You may want investment counsel to provide portfolio management. However, as Agent, you are ultimately responsible to the principal and the beneficiaries of the principal’s estate for prudent management of the principal’s assets.

What do I do when the principal dies?

Your power as Agent ends when the principal dies.  If you know that the principal will die relatively soon make sure all of the paperwork is in order to turn over the finances to the Executor of the principal’s estate.

Inform the family of your position and offer to assist with the funeral. Read the principal’s estate planning documents and look for specific instructions on whom will take over your duties as Agent.  Is there an Executor?  Is a Trustee named as beneficiary of any assets?  Prepare a report of what you have done as well as any final invoice for your services if you were being paid for them.

Once you turn over control of the assets to the Executor, you're finished and your responsibilities end.  As Agent, you have the power to file an accounting in the probate court. The court decree approving the accounting will release you from liability as Agent under the Durable Power of Attorney.

Should I be paid for all this work?

Agents are entitled to reasonable compensation for their services. The power of attorney document may give guidelines on your compensation.  Look at local corporate Agent fee schedules to help determine what you think would be reasonable compensation and make sure that the beneficiaries of the principal’s estate understand how you will charge.  Beneficiaries hate surprises. Remember that you will have to pay income tax on the compensation you receive as Agent.

What if the responsibilities are too much for me?

Consider hiring an attorney, bookkeeper, accountant or corporate Trustee to help you once you have custody of enough assets to pay them. For instance, a corporate Trustee can manage the investments and do all of the recordkeeping for a fee. If you feel you cannot handle any of the responsibilities due to work, family demands or any other reason, you can always resign and let the successor Agent step in. If no other successor Agent has been named, or none is willing or able to serve, a probate court can always appoint a voluntary conservator to succeed you.

Springtime after a long, cold winter means it is time to discard unwanted papers and clutter.  As we age, we tend to hold onto things longer and the piles multiply.  It is difficult to decide what to discard.  Although you may have other reasons for holding onto certain items, in the spirit of spring cleaning, we offer the following guidance on what to keep and what to discard from an estate planning perspective:

1. Tax Records:  Keep income tax returns and backup documentations for at least three years after filing, preferably six years because of the risk of an audit  uncovering a substantial error.  Keep records of contributions to nontaxable traditional IRAs until the assets are sold.  Keep gift tax returns and your parents’ estate tax returns indefinitely because they can be crucial documents in future income and estate tax planning.

2. Cost Information:  For assets subject to capital gains or losses such as your home or your investments, keep cost data until the asset is sold and the income or estate tax return reporting the sale is no longer subject to audit.

3. Vehicle Information:  Keep records of the purchase, registration, title and lien release for as long as you own your vehicle; discard information on cars you have sold or donated.

4. Loan Documents:  Keep the Note, Mortgage or Security Agreement and the last annual statement until the loan is paid off and the mortgage or financing statement is released; if the loan is from a family member, keep the amortization schedule and your record of payments made; keep any copy of liens on your home or business real estate until the lien is released.

5. Warranties:  Keep them as long as the warranty is in effect; discard old warranties and warranties of products you no longer own.

6. Estate Planning Documents:  Keep a copy of your Will, Trusts, Durable Power of Attorney, Appointment of Health Care Representative, and Living Will with a note on where the originals are located.  Discard superseded estate planning documents. Put the original Will and Trusts in your safe deposit box or a fire-proof safe at home.  Put more than one person on the safe deposit box so a court order isn’t needed after you die to get into the box.  Let your attorney know the location of the documents and the safe key or combination to get access to them.

7. Real Estate Documents:  Housing, land and cemetery deeds, time share deeds, easements, and road maintenance agreements should be kept with copies of any title insurance and surveys.  Discard paid off mortgages and liens.  Keep real estate appraisals completed at the time of any gift or any death.

8. Bank and Credit Card Records:  Keep recent bank account statements, credit card statements, safe deposit box inventory and location.  Discard bank statements, credit card statements, pay stubs and receipts after one year unless needed as part of tax records or to resolve a disputed item.

9. Investment Accounts:  Keep brokerage statements, mutual funds, IRA statements for one year.  Discard them after one year unless needed as part of tax records.  Keep savings bonds either in the safe deposit box or at home with your important papers.

10. Health Care:  Keep your personal and family medical history, Appointment of Health Care Representative, authorization to release health care information, Living Will or DNR order. Discard Explanation of Benefits from Medicare or other health insurance providers after filing your income tax return.

11. Life Insurance and Retirement:  Save life insurance policies, annuity contracts, 401(k) accounts and Summary Plan Descriptions, and pension documents.   Discard the policies and account statements for those that have been sold or closed.

12. Marriage and Divorce:  Do not discard your marriage license or, if applicable, divorce decrees or property settlement agreements.  Keep your premarital agreement unless revoked by written agreement.

Springtime is a great time to organize and clean your home.  Make this spring the time you discard what is unnecessary and keep those important documents listed above.

For many people, the decision to prepare a Will is easy, but the motivation to follow through is missing. The thinking goes something like this:

What’s the rush?  I am in good health.  There are more pressing matters.  I’ll get to it eventually.  I plan on being around for a long time.  Right now, I need to focus on supporting my family, saving for college and retirement, and paying for health care.  I’ll prepare a Will at the end of the year when things slow down.

The problem is most people repeat this thinking year after year… Things never seem to slow down.  Juggling time between work, family, and social events is difficult.  Who has time to plan an exit strategy?

As estate planning attorneys, we can’t imagine why people aren’t lined up at our office door every morning like Apple customers waiting for the release of the next iPhone.  Death and taxes – everyone’s favorite topics, right?

All kidding aside, preparing a Will is very important for the future of your family.  If you unexpectedly pass away, your family must deal with the great emotional void created by your absence.  They also must find a way to manage without your financial support.  One can ease this burden by proper planning.  So, why doesn’t everyone prepare an estate plan?

Recent surveys find that only about 50% of American adults have prepared a Will.  According to one Gallup Poll, 71% of respondents aged 50 and older had a Will. That percentage fell to 37% for people under 50.

Why don’t people prepare an estate plan?  Many people just haven’t gotten around to it.  Others don’t believe they own enough assets to worry about estate planning.  Still others believe that state laws mirror the wishes they would express in a Will or Trust.  Are they right?  Let’s take a look.

If you die without a Will in Connecticut, the laws of intestacy become your estate plan and determine who gets your probate property.  If you think you don’t have a Will, think again.  Did you know state law requires if you don’t have a Will and  you are survived by children, your spouse gets the first one hundred thousand dollars, plus one-half of the balance of your estate, and the remainder is divided among your children (regardless of their age)?  If any of your children are from a prior marriage, your spouse only gets one-half of your estate and the remainder is divided among your children.  If you are married but have no children, the first $100,000 goes to your spouse, but after that your spouse gets 3/4 of the remainder and your parent(s) gets the remaining 1/4 . You would be hard pressed to find anyone who has prepared a Will intentionally dividing their assets in that manner, but that is what would happen without a Will. A Will ensures your property goes to the people you choose as you desire, not according to state law.

So, all I need is a simple will, right?  No!  A proper estate plan should address more than just the final distribution of your property.  What about the important question of who will care for  your kids if you die?  Certainly, if you have children under 18, you owe it to them to choose a proper Guardian to take care of them. If you do not make a written nomination of guardians for your children, a judge will choose the guardians.  Do you really want a judge to make that choice without your input?

A comprehensive plan should also cover the potential for physical or mental incapacity.  Who will manage your assets if you become incapable?  Who will make your healthcare decisions if you are unable?  To address these concerns, your plan should include a Durable Power of Attorney to designate a person to manage your assets and an Appointment of Health Care Representative to designate a person to manage your health care.

What about your cherished pet?  Will someone take care of Fluffy or will she spend her final days in an animal shelter waiting to be euthanized?  A thorough estate plan will also cover the care of your pets when you are gone.

You should also consider the benefits of a trust.  If you have children who haven’t reached 22, or adult children who are either disabled, owe a lot of debt, or are in the middle of divorce, including a trust in your estate plan gives you an opportunity to choose a person who will manage your child’s funds and assure the funds are not squandered or distributed outside the family to creditors or an ex-spouse.  You can name a trusted friend, family member or professional to serve as trustee and oversee the trust investments and distributions.  You can also avoid the need to probate the assets held in the trust at your death, which is desirable for out-of-state real estate.

Most conversations about estate planning begin with a client’s desire for a “simple Will.”  However, a will is only one of many important documents that should be part of every estate plan.  A proper estate plan addresses all of these issues and often more.  Will 2014 be the year you finally prepare a thoughtful estate plan?

1. Failure to Plan for Incapacity. This mistake can cause your family great stress and acrimony, and leave your finances in disarray. You should have a financial Durable Power Of Attorney, an Appointment of Health Care Representative and a Living Will. You should not solely rely on joint bank accounts with children to manage incapacity.
2. Failure to Plan for Long-Term Care Expenses. If you can afford it, you should purchase and maintain a long-term care insurance policy. Long-term care costs pose a great threat to your financial future. If you are not financially able to pay for long-term care insurance, you should make sure you will qualify for Medicaid. Only those most fortunate with over $1,000,000 in liquid, non-retirement assets need not be concerned about long-term care expenses.
3. Outdated Wills, Trusts and Beneficiary Designations. You should review your wills, Trusts and beneficiary designations at least every five years and whenever there is a major change in your family circumstances (e.g., onset of dementia, death of a parent, marriage, divorce, birth of first child, moving to another state) or financial circumstances (e.g. – purchase or sale of a business or real estate, theft by family members).  Laws can change and people can change.
4. Poor Choice of Agent, Trustee or Personal Representative. Appointing a family member or the child who lives closest is not always best. It is important to pick a person respected by other family members who has the time, ability, and willingness to serve. Often, appointing co-fiduciaries makes sense. In cases where members of the family seldom agree with each other, are scattered geographically, or the assets are complex, appointing a professional trustee may be best.
5. Lack of Adequate Records. You should keep good records. If you don’t, it can lead to missed assets, unpaid bills, and extra work for your Executor or Trustee.  It can also mean that your probate attorney has to spend more time on your estate which leads to greater expenses for your family.
6. Overuse of Wills. Probate can be expensive. Your executor is required to file an Inventory of assets, and account for funds that came into, and went out of, the estate.  For a married couple of modest means, other devices such as life insurance beneficiary designations, joint ownership, and payable on death arrangements can often avoid probate at considerably less expense than using a Will for those purposes. A Revocable Trust can also avoid probate while saving taxes and keeping assets in the family.
7. Failing to Use Trusts to Keep Assets in the Family.  Most people who have children and grandchildren want to keep their inheritance in the family. Yet, they often just give their property outright to children and grandchildren.  It is simple and clean.  But it also means that your child can spend it unwisely, his or her spouse could take it all in a divorce or at your child’s death, or creditors could seize it.  Your child’s spouse could remarry and all of the inheritance you left to your child goes to the spouse’s new mate. With an outright distribution to your children, your grandchildren may never receive anything from your estate.  By using a trust, you can control who receives it and when.  You can protect it for your grandchildren.
8. Failure to Communicate. Although you may wish to keep your estate plan confidential, disclosure is often wise. Named executors and trustees are more likely to accept the office and family disputes can be avoided or minimized by discussing your estate plan with your children.
9. Inadequate Financial Planning. Estate planning involves more than the preparation of a will and trust. Cash flow is so important after someone dies.  How will your heirs pay for the funeral, administration expenses, and estate or income taxes? You may own residential real estate or a retirement plan with designated beneficiaries. But the real estate cannot pay bills and the retirement plan distributions are subject to income taxes upon distribution.  A small joint account with a trusted family member who knows the purpose of the account can help ease the early administration expenses of an estate. Life insurance can provide needed liquidity to pay larger administration expenses, court costs, and taxes.
10. Using Attorneys with Little Experience in Estate Planning or Elder Law.  Estate planning can be quite complex. It involves understanding estate and gift tax laws, income tax laws, probate procedure, financial planning, and long-term care planning. The strategies taken can lead to vastly different results.  Seeing experienced estate planning attorneys with substantial experience can make a difference.

Let’s face it – those of us who have pets consider them to be members of the family. My wife and I refer to our daughter’s boxer, Rocky, as our Granddog. He brings the whole family great joy and companionship. It is inconceivable to us that our pet wouldn’t be taken care of after we’re gone. Yet, an estimated half million dogs and cats are euthanized each year after their owners pass away without making provisions for them. Have you considered taking care of your pet or pets in your estate planning?

Historically, there have been many ways to care for your pet after you become incapacitated or die. You could make informal, and unenforceable, financial arrangements for the care and support of your pet. You could ask a friend or family member to take care of your pet. You could enter into a lifetime care contract with a company that provides care for animals. These options are all still viable in the right circumstances. In recent years, some states have begun to allow pet owners to establish "pet trusts," which gives you the ability to include the care of your pet as part of your overall estate planning.

Pet Trusts

In 2009, Connecticut passed a law entitled “An Act Concerning the Creation of a Trust for the Care of an Animal” which became Connecticut General Statutes § 45a-489a. This law formally recognizes the creation of “Pet Trusts,” dedicated to the care of your pet. Prior to this law, Pet Trusts were neither recognized nor enforceable in Connecticut Courts.

Pet Trusts are designed to work just like any other trust, and in general, the same laws apply. They can be created during your life (inter vivos) or in your Will (testamentary). They must be for the benefit of pets that are alive at the time of the creation of the trust, and the trust will terminate after the death of its last beneficiary.

However, unlike other trusts, where the beneficiaries are people, the beneficiary of a Pet Trust is the pet. Because pets are considered animals, they cannot, themselves, exercise any of the rights that beneficiaries have under the law. Therefore, to assure that your wishes regarding the care of your pet, and other trust provisions are followed, the law requires the appointment of a Trust Protector.

A Trust Protector is a person designated to act on behalf of the beneficiaries of a trust (in this case, your pet), and to hold the Trustee’s feet to the fire when it comes to carrying out the terms of the trust. The Trustee is required to give the Trust Protector an annual accounting of the trust funds.

Although not required, many people appoint a separate caregiver for their pet who is not the Trustee or Trust Protector. This person actually takes care of your pet. In the absence of a separate caregiver, the Trustee could fill that role or appoint someone else.

Factors to Consider

In addition to drafting the Pet Trust to comply with the statute, your estate planning attorney can help you understand what other factors you will need to consider, such as:

• What pet or pets should be included as beneficiaries of your Pet Trust?
• What amount of money should you contribute to your Pet Trust?
• Who should be the Trustee?
• Who should be the Trust Protector?
• Should there be a separate caregiver for your pet, and if so, who?
• What specific or general guidance regarding the care of your pet would be helpful to the Trustee and caregiver?
• What should be done with your pet after your pet dies?
• Who should receive any remaining funds in your Pet Trust?

Don’t let your pet become a statistic. Contact an estate planning attorney to help you set up a Pet Trust as part of your overall estate plan.

Owning a vacation home can create cherished memories for you and your family.  For many, these are thoughts of times together, playing in the sand at the beach, running after seagulls and the ringing bell of the ice cream truck.  For some it is the memories of carving fresh snow, gathering rosy cheeked around a crackling fireplace at the ski lodge to enjoy a warm beverage.  Whether yours is a beach front cottage or a ski cabin, the sentiments are likely the same.  The place holds sentimental value that is passed down from one generation to the next.

Unfortunately for some, a family cottage can also be the source of great conflict and hostility for successive generations.  When the two parents own the home, the chances for disagreement are minimal.  However, what happens when the two parents pass the house on to their seven children?  Suddenly, the house has seven owners instead of two.  If the house is ultimately passed down to the grandchildren, you may end up with twenty co-owners.  Can you think of any problems this might cause?

When multiple people inherit a home, they typically take the property as Tenants in Common.  This means that each owner has an undivided interest in the whole of the entire property so that even a 1% owner has the same right to occupy the entire property as a 99% owner.  Also, a tenant in common can sell, give or loan her interest to anyone she chooses.  If irretrievably upset about the management of the cottage or wishing the property was sold to pay his or her debts or pursue other dreams, an owner can file a partition action in court to force the sale of the cottage. Outright ownership by multiple family member is not ideal when the goal is to keep the cottage in the family as a source of happy memories.  Fortunately, most conflict can be easily avoided through use of an appropriately structured Limited Liability Company (“LLC”).

First, let me explain briefly some of the relevant background of LLCs.  The owners of an LLC are referred to as members.  The members can control the governing of an LLC by entering into an operating agreement, with written rules, obligations, restrictions and conflict resolution procedures.  LLC members can also appoint a manager of the LLC to centralize decision making and operating control in one person.

Let’s look at a few issues that arise with multiple owners of real estate and how using an LLC can resolve those issues.

Capital contributions

A house comes with recurring expenses, such as mortgage payments, maintenance costs, real estate taxes, and insurance.  What remedy is there when a co-owner refuses to contribute toward these costs?  Under a Tenancy in Common, you have little remedy if a co-owner decides not to pay an expense.  You cannot lawfully exclude a co-owner from use of the property for not contributing.  With an LLC, you can create rules that require a member to be current on capital contributions in order to enjoy use of the property and cause forfeiture of a member’s share for extreme delinquency after notice and a period of time to contribute.

Management

Who will be responsible for monitoring, cleaning and maintaining the house and yard?  Will that person be compensated?  A tenant in common owner cannot force other co-owners to do these tasks, and is not automatically entitled to compensation for performing them herself.  LLC members can assign responsibility for these tasks and decide in advance on a method to compensate the member coordinating these services.

Prime Time Use

What happens when all twenty co-owners show up to the cottage on the 4^th of July?  Under a tenancy in common, all owners have the legal right to use the cottage at all times.  By using an LLC, the members can spell out a fair method for dividing up and alternating use of the prime vacation times and prohibiting members from using the cottage outside of their allotted times.

Squatting owner

What can you do when a drug addicted co-owner loses his job, takes up permanent residence in the home with his destructive dog, and throws wild parties at the cottage?  You can do nothing under a tenancy in common.  All owners have the right to use the property at any time.  An LLC can restrict the length of time an owner can reside in the home and can also place restriction on pets, substance abuse and the number of guests allowed.

How can you keep the cottage in the family?  - What happens if a co-owner sells or gifts her interest to a non-family member?  What happens when a widowed in-law inherits the property then remarries, or worse, a disgruntled ex-spouse takes ownership through a divorce proceeding then remarries?  What happens if a judgment creditor takes possession of a co-owner’s share of the property?  Under a simple tenancy in common, these are common scenarios.  An LLC operating agreement can limit the transferability of a member’s interest to the other LLC members to prevent these occurrences.

Cashing out

What if a co-owner who wants to cash out her share?  What is the value?  Will there be liquidity to pay for the buyout?  What if the co-owners refuse?  A tenant in common owner can force the division and/or sale of the property in a legal partition action, which can be an expensive proceeding that often results in less than a fair market value return.  However, an LLC operating agreement can prevent a partition of the property and devise a fair way to value the interest of a member and compensate that member who wishes to cash out. The LLC operating agreement can discount the purchase price for family members who want to remain owners and keep the property in the family.

Discussing these issues with family members while the parents are alive can make it easier to resolve them before any conflict arises.  Ensure the future of your family cottage by contacting us to help you create an LLC today.

We have clients who come to us saying that they want the option of taking medication to end their life if they become terminally ill.  They do not want extraordinary measures used to keep them alive to the bitter end. Unfortunately, I have to tell them that Connecticut does not allow a physician to assist in taking medication to end a life. They ask “Why do Oregon, Washington, and Vermont allow people to die with dignity but not Connecticut?”  They want to retain control over their body and end life when they know they will die soon. 

We try to accommodate those individuals by stating in their Living Will that if they are in a terminal condition, they wish to be moved to a state or country that allows terminally ill patients to take medication to end their life, such as Oregon, Washington or Vermont.  Those states allow a person with a terminal illness to receive medication for the purpose of ending their life in a humane and dignified manner.

On February 24, 2014, Representative Elizabeth Ritter of Connecticut’s 38^th District representing Waterford and Montville introduced House Bill 5326 in the Connecticut General Assembly.  Click here to see a copy of the raised bill.  The Bill was referred to the Committee on Public Health. 

The proposed legislation allows an adult who resides in Connecticut, is competent and has a terminal illness, to voluntarily request medication to end his or her life.  A terminal illness is defined as the final stage of an incurable and irreversible medical condition that a physician anticipates will lead to death within 6 months.

HB 5326 contains many safeguards to assure that no one dies without thorough thought by the patient and examination by physicians including:

     1.  Requiring that the person make a first written request for aid in dying before two witnesses and then at least 15 days later make a second written request for such aid;

     2.  At least one of the witnesses must be a person who is not (i) a relative by blood or marriage, (ii) who is not entitled to any portion of the person’s estate under any will or by operation of law, (iii) the attending physician, or (iv) an employee of the health care facility in which the person resides;

     3.  The attending physician must refer the patient to a consulting physician for medical confirmation of the terminal illness and for a determination that the patient is competent and acting voluntarily;

     4.  If either physician believes the patient may be suffering from depression, or a psychiatric condition causing impaired judgment, the patient must be referred to counselling to determine whether the patient is competent to request aid in dying;

     5.  The attending physician must tell the patient of the feasible alternatives and health care treatment options including palliative care such as hospice care and comprehensive pain and symptom management; and,

     6.  The patient must self-administer the medication (no one can help them to take the medication). 

The proposed legislation makes it completely voluntary not only for the patient but also health care providers.  Each health care provider can individually and affirmatively determine whether to participate in the provision of medication to a patient for aid in dying. A health care facility cannot require a health care provider to participate in the provision of medication to a qualified patient for aid in dying, but it also may prohibit such participation.  Thus, religiously-affiliated hospitals are not required to aid a patient in dying.           

HB 5326 deserves serious consideration and debate.  Most articles discussing such legislation dismiss it without ever analyzing the merits of the legislation.  See for example, Assisted Suicide Bill Deserves a Speedy Demise, The Day, 3/2/14 (Editorial by Paul Choiniere). Representative Ritter has considerable courage to open discussion of this important legislation.  We hope Committee on Public Health studies the experience in Oregon and Washington to determine if initial fears of their laws were well founded.  Given the interest of some of our clients in having this choice at the end of life, the Connecticut General Assembly and the public ought to have a full discussion of the proposed legislation.