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Estate Planning: Six Mistakes to Avoid

You can protect your assets, interests, and the people you love if you plan ahead. Sadly, many individuals make costly mistakes without proper advice and guidance from a qualified estate planning attorney. Beyond undermining your intent and diminishing your financial legacy, poor planning can create additional stress to your heirs in their time of grief.

Six common errors frequently happen during the estate planning process. These mistakes often occur because the complete financial picture was not fully considered. It is easiest to avoid estate planning mishaps by knowing what they are before you begin or looking for these errors when reviewing and updating your plan.

Financial procrastination causes problems. While examining your mortality and making end-of-life preparations is not a particularly fun activity, try viewing it as helping and enhancing your loved ones’ future lives while creating a sense of peace during your own.

The need to protect your finances using wills, trusts, and power of attorney (POA) documents is not solely the domain of the elderly. Putting off the drafting of legal documents necessary to protect yourself and your inheritors can lead to disastrous outcomes.

By far, failing to create an estate plan is the most common mistake. Even if you do not have a lot of money, you need a will to protect any minor children you have by naming their guardians. Your will also ensures your asset distribution to heirs is carried out according to your intentions when you die and names a representative to handle debt obligations, final taxes, and other estate administrative duties. Dying without a will or “intestate” can lead to dire consequences.

Outdated wills, forms, and POAs create problems. If you made a will twenty years ago and have not reviewed and updated its contents, chances are many of the details no longer reflect current assets or beneficiaries. Estate planning is not a “set it and forget it” proposition. Reviewing estate planning documents and beneficiary forms every two years is generally adequate, barring a major life change such as divorce, birth, death, remarriage, or relocation to another state.

Beneficiaries without coordination can create expensive oversight. Beneficiary forms for retirement accounts like 401(k)s and IRAs, annuities, and life insurance policies may constitute a significant portion of your estate’s assets. These beneficiary forms are legally binding and will supersede the contents of your will. Failure to update beneficiary forms can lead to an ex-spouse receiving assets that preferably would go to your heirs. Routine checks of all beneficiary designations are best practices for estate planning.

Failing to title trust assets properly can lead to probate. While not everyone requires a trust, those who do must carefully retitle their assets into the name of the trust. Forgetting to add more recently purchased property or opening a new account requires you to title them into the trust to receive trust benefits. Whether real estate, cash, mutual funds, or stocks, if you fail to move the asset into the trust, they become subject to the probate court, possible tax consequences (depending on the trust type), and a public record of these assets.

Life insurance can trigger estate tax. Life insurance can provide heirs with liquidity without the sale of assets and tax consequences when handled correctly. However, if a wealthy individual dies while maintaining ownership of their life insurance policy, they may inadvertently create a tax event for their heirs. Although life insurance death benefits are not subject to state or federal income taxes, any “incident” of ownership by the decedent can create an inheritance tax.

An estate planning attorney can help shelter life insurance proceeds from high-value estates by gifting the policy to an Irrevocable Life Insurance Trust (ILIT) or draft a new trust to purchase a new policy where the trust is the owner and beneficiary. A policy owned by the trust does not create a taxable situation to death benefits. Your attorney’s careful structuring of this trust type is complex but can provide proper protection.

Joint ownership of assets with your children can lead to disastrous consequences. Naming your children as co-owners of assets, even digital, permits their creditors to access your money. The better way to address the situation is to give your adult child power of attorney and assign them as a beneficiary to a payable on death bank or brokerage account. This tactic permits them to access your funds if required during your lifetime. However, it keeps your assets from your child’s estate and away from their potential creditors.

Ultimately the biggest error you can make is not finding the right estate planning attorney to guide you. This specialized attorney receives training on avoiding probate, tax implications, and asset protection if you require long-term care. Proper planning with the right guidance will help you avoid costly estate planning mistakes and protect your family’s future financial well-being. If you have questions or would like to discuss your personal situation, please contact our Ruston, LA office by calling us at (318) 255-1760.

 

Estate Planning is Also Important for Young Adults

It is a common belief among young adults, even those with professional careers aged thirty or more, that they are too young to be concerned with estate planning. Young adults in their twenties and thirties often think they don’t own enough to constitute an estate. However, an estate is the total of all you own – money, investments, real estate, vehicles, business interests, digital assets (including cryptocurrency), and other personal belongings. No matter how much or minor, you own your possessions need to go somewhere after you die. You may not think you will die young, but if the coronavirus pandemic has taught us anything, it is that life is uncertain. It is a myth that estate planning is just for the rich and the old.

What legal documents constitute an estate plan?

Some documents may vary depending on your wealth or financial structure; however, everyone should have a will. At the time of your death, everything you own becomes your estate. Your estate will go through a probate process where the court will determine what happens to you everything you own that doesn’t have a beneficiary. Because the probate court will inventory your assets and notify and pay creditors, your will is a public record. If you have a will, the probate court will use it as a guide. In the absence of a will (dying intestate), the court will use state intestacy laws to determine who inherits your assets.

What does a will establish in an estate plan?

A will designates two critical things. The first is the naming of your executor. An executor is responsible for carrying out the instructions in your will, making payments on any outstanding debts and distributing assets to named heirs. Second, if you have dependents, your will can name a the guardian (tutor, in Louisiana) and backup guardian to provide care for them.

The value of establishing an advance healthcare directive for young adults

All young adults should have an advance healthcare directive, also known as a living will, as well as a durable healthcare power of attorney. These legal documents specify your healthcare wishes if you are permanently incapacitated or for end-of-life healthcare and designate who will make those decisions on your behalf according to your instructions. In addition, it is imperative to include a HIPAA privacy authorization form for your durable healthcare power of attorney or trustee. The form permits medical and healthcare professionals to disclose pertinent health information and medical records to your healthcare proxy.

While it may be uncomfortable to contemplate being unable to make decisions for yourself as a young adult, accidental injuries, heart disease, cancer, and strokes, to name a few, are becoming all too prevalent in young American adults. Making plans while you are competent and able is a prudent course of action and can bring you a sense of calm, knowing you have confronted the possibility and have a plan in place.

The value of a revocable living trust for young adults

Some young adults will have enough assets, real estate, or business interests to make a revocable living trust worthwhile. This trust type can often avoid or minimize the probate process, ensuring privacy. There is no limit to the number of times you can amend a living trust. You may change asset distribution or add assets as you acquire more throughout your life. An estate planning attorney can help you determine if your financial situation and age warrant the setting up of this type of trust.

You probably have more assets than you realize. To assess your situation, inventory all of your belongings which typically includes but is not limited to:

  • All bank accounts in your name and their approximate balances
  • All investments you own
  • Any property or real estate you own
  • Any retirement plans you have, including pensions
  • Any insurance policies you carry
  • Any retirement plans, including pensions, you own
  • Businesses you own, whether in part or whole
  • Valuable personal property such as your grandmother’s wedding ring, a collection of trading cards, or a grandfather clock
  • Digital assets such as cryptocurrency, income-generating online storefronts, influencer accounts, or income-producing subscription accounts like TwitchTV
  • Include all email accounts, login URL’s including user names and passwords where you receive critical communications
  • All outstanding debts

Once you realize the scope of your belongings and assets, you can begin formulating your estate plan. First, consider who you want to receive your possessions and think about secondary beneficiaries, especially over time, as early estate planning requires frequent reviews and updates in the event of deaths, marriage, divorce, or the birth of a child.

Once you have an inventory and have begun thinking about who should handle things upon your passing and who you want as beneficiaries, it’s time to sit down with an estate planning attorney. Working with an estate planning attorney is easier than ever now, as COVID-19 increases the use of video and smartphone conferencing that streamlines legal planning. Estate planning attorneys like us can create a plan that best suits your situation, even if you aren’t sure what to do. Proper legal documents can save your loved ones from an expensive probate trial should someone contest your will. Even as a young adult, it is best to start planning now, even if it is just with some primary documents.

We would be happy to discuss your needs in a confidential setting that you are comfortable with – by video, over the phone, or in person.  Please contact our Ruston, LA office by calling us at (318) 255-1760 or schedule an appointment to discuss how we can help with your estate planning needs.

Appointing a Power of Attorney to Manage Your Affairs

A power of attorney comes in different forms and is an important tool when planning for when you may become incapacitated and require a trusted agent to manage your affairs. These legal documents can grant broad authority to one or more power of attorney agents to transact business or make medical decisions based on your behalf.

What are the different forms of a Power of Attorney?

A “power of attorney” and “limited power of attorney” may manage your affairs until you are legally considered incapacitated or incompetent. In Louisisana, the term Mandate or Procuration is technically correct, but seldom used. The word “limited” narrows a power of attorney’s authority to transact business only to a specific property or with an agent’s limited access to funds. A “durable power of attorney” remains in effect until the principal revokes the document or upon their death. A “springing” durable power of attorney will not go into effect until a doctor certifies the principal incapacitated, allowing you to keep control over your affairs until you are unable. A “medical power of attorney” permits healthcare decisions on behalf of the principal. The document often includes sections similar to a living will, guiding the agent and doctors’ medical decisions to the principal’s wishes.

Like your will, durable power of attorney documents requires drafting according to the state laws you live in and some forethought of your selection of agents. Every state has laws governing the creation and use of valid power of attorney documents. Louisiana law is different from every other state. Internet forms often are not adequate, particularly for elder law planning and Medicaid long-term care planning. Residents of multiple states and snowbirds who routinely travel and transact business in other states may benefit from creating a valid durable power of attorney documents in both states.

Take note that if your spouse is your power of attorney, this designation may not automatically end when you finalize a divorce between you unless you live in these twelve states: Alabama, California, Colorado, Illinois, Indiana, Kansas, Minnesota, Missouri, Ohio, Pennsylvania, Texas, Washington, or Wisconsin.

What to Consider when Appointing a Power of Attorney

When appointing a power of attorney, the agent you select is a personal decision. There are things to consider, such as if your adult children are trustworthy and mature in handling finances and medical decisions on your behalf. Some adult children move away or lose touch and are not necessarily suitable candidates simply because they are your children. You may select a contemporary friend who becomes disabled themselves or pre-deceases you, so you must have a backup agent in the documentation. Always make the decisions regarding your power of attorney selection while you are in good mental and physical health.

What Role Does Your Financial Power of Attorney Play?

A financial power of attorney can have the authority to perform some or all of these tasks:

  • Pay everyday expenses for you and your family with your assets
  • Maintain, pay taxes on, sell, buy, and mortgage real estate and other property
  • Collect government benefits including Medicare, Social Security, Disability, and more
  • Invest your money in mutual funds, stocks, and bonds
  • Transact with banks and other financial institutions
  • Buy and sell annuities and insurance policies on your behalf
  • File and pay your taxes
  • Operate your small business
  • Claim inheritance or other property to which you are entitled
  • Transfer property to a trust you created
  • Hire someone to represent you in court
  • Manage your retirement accounts

There may be other actions necessary to perform; however, the above list constitutes significant duties. Your agent must act in your best interest, keeping accurate records and avoiding conflicts of interest.

What Role Does Your Medical Power of Attorney Play?

Your medical power of attorney is one type of health care directive that can outline your healthcare preferences if you are too ill or injured to do so. The agent you select must be trustworthy and mature in overseeing your medical care and healthcare decision-making. Your healthcare agent will coordinate with doctors and other healthcare providers, ensuring you receive the medical care you prefer. To make these preferences clear, you may choose to use the second type of healthcare directive known as a “living will” or “advanced medical declaration.” In this document, you can make clear your healthcare preferences regarding termination of life support.

Choosing your agent well, appointing backup agents, and tailoring your documents to your needs and specifications can take away a lot of worry about your future care and well-being. Having valid power of attorney documents avoids most guardianship (interdiction) issues, which are time-consuming, stressful, expensive, and limit freedoms. Contact our Ruston, LA office at (318) 255-1760 to address any questions or concerns you may have about establishing power of attorney documents for your particular needs.

End of Life Planning: Safeguarding Current Comforts & Future Quality of Life

Powers-of-attorney documents will convey on other trusted people the authority to act on your behalf.

But when it comes to actually using those documents at the time of a health-care crisis, clear and powerful documents are just the beginning. The decision-points can (and must) be put down on paper in advance, but when it comes to end-of-life situations, the clarity on which we lawyers thrive can be very hard to find.

Sitting in her lawyer’s office, the client may have been quite certain about health-care decisions. She does not want her life prolonged by a battery of aggressive treatments, where these would not preserve her quality of life. She does not want blood transfusions, dialysis, repeated courses of antibiotics and chemotherapy, cardiopulmonary resuscitation, or breathing and feeding tubes. She does not want to die inert in the ICU, surrounded by machines and strangers. She wants to die at home, surrounded by loved ones, at a time when she retains presence of mind to make her peace.

But that goal doesn’t just happen from wishing it and stating it. It happens with additional careful preparation for the realities. As the end of life approaches, the clarity we lawyers enjoy can be elusive. When a person gets a prognosis of two to five years (maybe), where, along that continuum, would be the time to start declining aggressive treatment? When there’s always one more intervention that may (or may not) produce a good result? When one decision could create an ever-widening array of complications? When, step by step, the patient becomes less and less able to exercise autonomy, and where treatment decisions by caregivers are not in line with the care the patient was clear about when she was sitting in the lawyer’s office?

No matter how clear the powers-of-attorney documents, with all these imponderables, the patient can end up in a situation many miles away from what she wanted. And there’s no possible do-over.

Powerful and clear power-of-attorney documents are an essential first step and we lawyers are glad to take care of that part. Beyond that, though, thorough preparation is essential.

Consider that the best result may be one that cares for comfort right now, in the moment. The question is not necessarily about how long life can be prolonged. The question may be, rather, how comfort can be maintained – in this moment, and then the next moment, and the next. The question is how life can be made better right now. Watch a video by palliative-care physician B.J. Miller, on why this is so important, here.

Make concrete plans. These include specifying what you want to happen if you’re no longer able to live independently; choosing wisely whom you want to act for you, to make sure your plans will be followed; being ready with your health-care documents before you find yourself deposited in the emergency room or ICU; and seeking the reassurance that your loved ones will be cared-for when you’re no longer there. Judy MacDonald Johnson has prepared simple, forthright worksheets to help with this process, here.  She speaks about these worksheets in this moving video.

There is no doubt that the process in safeguarding quality of life at the end of it is possibly the most challenging of all. But if that process can create as much pleasure as possible through an extremely difficult time of life, and if forthrightly engaging in that process would facilitate a passing more in line with what we would envision, the worth of the process will be felt. The transition will be smoother and more meaningful for the dying person, and a kinder legacy will be left behind for those who accompany us on this journey.

Please contact our Ruston, LA office by calling us at (318) 255-1760 or schedule an appointment to discuss how we can help with your future planning.

Your Estate Plan Need to Include These 5 Components

The need for estate planning becomes more and more critical as we age. Many people avoid estate planning because they do not want to think about the end of life, failing health, or disability. Others believe that an estate plan is only for rich people. However, an estate plan is helpful for the senior adult and their families regardless of overall wealth.

The estate is all the property owned both individually and jointly, including bank accounts, real estate, jewelry, etc., and what is owed. Without an estate plan, it is very difficult to carry out a person’s wishes and can bring on a long, drawn-out probate that can be very expensive for the family. If an estate plan is in place, it can provide peace of mind for the senior adult and their family, as well as protection for the wishes of the senior.

Below are some basic guidelines for what should be included in an estate plan.

  1. Will. A will provides for an executor of the estate, who will take care of managing the estate, paying debts, and distributing property as specified. The distribution of assets can be outlined in the will. This can be as broad or detailed as a person wishes. In a will, beneficiaries and guardians for minor children should be assigned. It may not seem necessary to discuss minor children when discussing seniors and estate planning, but with the rise of grandparents raising grandchildren, this may indeed be an important part of the will. A senior adult can spell out, in the will, how they want their funeral and burial to be carried out as well.
  1. Living Will. A living will outlines a senior’s wishes for end-of-life medical care. It can include, in as much detail as the senior wishes, what medical treatments the senior would or would not like to have in specific situations. A living will takes the stress of making those decisions off of family members and helps to keep peace in families during times that can be difficult and emotional.
  1. Healthcare Power of Attorney. A healthcare power of attorney is also a key part of an estate plan. This legal document provides for someone to legally make healthcare decisions for a senior adult. A durable power of attorney will remain in effect for the senior if the senior becomes unable to make decisions.
  1. Financial Power of Attorney. A financial power of attorney names an agent who has the power to act in the place of the senior adult for matters relating to finances. The durable financial power of attorney stays in effect if the senior adult becomes unable to handle their affairs. By having a financial power of attorney in place, the stress and expense of a guardianship can be avoided, and the senior has the final say in who will make decisions relating to finances.
  1. Trust. Setting up a trust can be beneficial for the distribution of specific assets or pieces of property. The benefit of a trust is that it does not go through probate, as compared to a will. Property is still distributed at the death of the trustmaker, but it is done without the need of a court. This also allows for privacy of the trustmaker, where with a will and a probate, all of the deceased person’s assets and the terms of their will is made public.

Having an estate plan is necessary if you or your senior loved one wishes to have a say in what happens at the end of life and with assets after death. Consulting and planning with an elder law attorney will help to ensure that all options are explored and the best possible solution is utilized. The elder law attorney can walk you through all of the necessary parts of the estate plan, provide an explanation, and prepare the paperwork. Elder law attorneys will help take the guesswork out of estate planning.

If you have any questions about something you have read or would like additional information, please feel free to contact us. Please contact our Ruston, LA office by calling us at (318) 255-1760 or schedule an appointment to discuss how we can help with your long-term care needs.

How to Discuss Finances and Estate Planning with Your Aging Loved Ones

It is essential that as your parents’ age, you have conversations with them about their finances. To broach the topic, you might bring up current events like the coronavirus pandemic, its effect on economic conditions, and how it relates to the security of their financial future. The conversation should come from a calming place of love and concern. Speak to them respectfully about how the coronavirus pandemic has you thinking about the importance of their planning and preparedness.

Once you begin the conversation, move away from the pandemic as your introductory technique as you do not want to create a sense of panic or fear.  Instead, delve into legal and financial reviews, processes, and parameters. US News reports that your parents’ financial analysis should include essential legal documents, financial accounts, and associated vital contacts, long-term care decisions, and claims. If you live apart, lay the groundwork to help them with their finances remotely.

It is generally most comfortable to begin your conversation with legal documents that hopefully your parents already have in place like a will, trust, living will, and a health care proxy. If your parents do not have these documents, they must retain an attorney and create the ones that best suit their needs. If you need to help your parents manage their finances, you must have a durable power of attorney. A durable power of attorney allows you to make financial decisions for your parents in the event they become incapacitated. This is an essential estate planning document. In the absence of a durable power of attorney, the courts become involved, and solving health or financial issues becomes a lengthy, expensive process over which you have little control. If your parents already have their legal documents drawn up, find out where they keep them and review them carefully. If any documents need to be amended, suggest that your parents meet with an attorney to make the relevant changes. Be sure their documents reflect the state law in which they reside.

Once you have assessed your parents’ legal documents, it is time for some financial discovery. Even if your parents do not currently need help, having an overview of their finances and a durable power of attorney to help them in the future is crucial to their aging success. Begin by listing all of their accounts, account numbers, usernames, and passwords as well as employee contact names. Include insurance policies, the agent’s name, and where the policy is, as well as how they pay their premiums. Include any online medical accounts or list their doctors’ names and office numbers. The idea is to create a comprehensive list of all of these accounts. Gather your parents’ Medicare and Social Security numbers and their drivers’ license numbers. Know where they keep this information so that in the future you will know where to look. Also, learn about any online bill paying or automated, re-occurring activity. These usually include monthly bills like electricity, natural gas, water, etc. but may also include quarterly payments or annual subscriptions.

If your parents still live in their long-time home, discuss if it is viable that they live out their days there, or if downsizing to a retirement community or moving closer to where you live appeals to them. Help them come to a decision that is best for their set of circumstances.  If they do not have long-term care insurance or some other mechanism to aid them in times of need, talk about the topic, and try to come up with a solution. If they do have long-term care, be sure you have a copy of the policy, contact information, and the name of the insurer and agent. Review the requirements for receiving benefits so you can help them when they need to file a claim as most policies have a waiting period of 30 to 90 days before benefits begin. Know what to expect.

Digital technology has made oversight of parents and their finances easier than ever as long as you have a durable power of attorney and access to their account information. If they do not yet pay their bills online, or use auto payment, help them set up this option for their monthly bills. Remind them you will provide oversight to ensure proper billing. Offer to help them with their annual tax filings. Your help relieves some pressure on them and provides you with information about the goings-on in your parents’ accounts. For your parents’ peace of mind, you can establish a monthly video chat to let them know their bill payments are progressing normally. Your involvement will allow you to identify any abnormalities in account activity, which may indicate scam attempts.

Having these financial and planning conversations with your parents today can help them live more securely and with less stress as they age. Most parents will try to avoid these discussions with their children because they may not be adequately prepared for what can lie ahead. Conversations that focus on proper legal documents and gathering financial account information will give you the data you need to help protect your parents.

We would be happy to help you and your parents with critical planning documents. We are open and taking new clients, and we hope to talk with you soon about your particular needs. Please contact our Ruston, LA office by calling us at (318) 255-1760 or schedule an appointment to discuss how we can help with your estate planning goals.

7 Negative Effects of putting off your Estate Plan

  1. My family and I don’t own much. Can’t we put off planning until we can afford it?

You shouldn’t. It is crucial to give legal authority to a person of your choice, to care for your children if anything should happen to you. You don’t want your children to become wards of the court, or to be delivered to a family member you don’t like. Second, the cost to you at the front end (now) is much less than it could be later when you might face steep legal fees to get the job done. We’re all in favor of lawyers earning a living. We just never want any of our clients to have to pay for costs that are unnecessary or avoidable.

  1. My son just graduated from high school. He owns nothing but an autographed baseball and a 1997 Chevy pickup. Surely I don’t have to worry about an estate plan for him?

You should. Estate planning isn’t just about owning property. Life needs protecting, too. If your child should lose consciousness in an accident, and he or she is over the age of 18, you as a parent will no longer have the legal authority to decide what medical treatment he should receive.  Insurance companies might refuse to deal with you.

Just imagine the stress of it. You’d be there to help, but nobody would be legally required to listen to you. You would have to go to court and get guardianship – over your own child.

Instead, just think how much easier (and less expensive) it would be to get your adult child to come in to see us, while all is OK now, to make out powers of attorney. Those are documents that convey legal authority onto you, or on people of your adult child’s choice, to act on your child’s behalf if he or she becomes unable

  1. Our kids are grown and married. Can’t my spouse and I postpone planning?

You shouldn’t. First, you can never tell when disaster might strike. Second, your kids may seem happily married now, but there’s no telling how long for – and you don’t want to see their, and possibly your, money and property lost in bitter divorce proceedings or lawsuits or bankruptcies.

  1. Our kids are able-bodied, thank goodness. Why should we worry about protecting disability benefits for them if they don’t need them?

They might not need those benefits now. But if they become disabled in the future, and if they inherit money from you, inherited money could cost them thousands of dollars a year in benefits. We will help you to take simple steps to protect that money if your children do become disabled.

  1. My doctors know best. I’m not going to tell them how to do their jobs, and I don’t want anyone else doing that either. What’s wrong with that?

Do you want to be kept alive on machines, possibly for years, when you no longer can care for yourself, recognize loved ones, converse, or even swallow? These days, medical machines can breathe for you through a tube in your throat, keep your heart beating, and deliver food and fluids through a tube in your stomach. Many who are on these machines die in the hospital, their arms tied down to prevent dislodging the tubes. Health-care providers are ethically obligated to keep you alive to the bitter end. Few of us want that. You can decline those extreme measures with our carefully crafted legal documents.

  1. Can’t I just grab a will off the internet, do a transfer-on-death deed for my land, put my kids on my bank account, and call it done?

Just look at some of the complications, in the above answers. An estate plan should protect disabled children’s inheritances from the loss of valuable government benefits. It should avoid probate court. It should protect money from creditors or divorce or remarriage. It should avoid disputes between children as joint owners.

Even a relatively simple situation contains many moving parts. It takes expertise to coordinate the various strategies. Don’t risk a result you wouldn’t want. Call us to create a plan that harmonizes the moving parts, so the gears will work together and you will leave the legacy you intended.

  1. Can’t I just forget the whole thing and let my kids deal with it after I’m gone?

Sure you can. But your kids will not thank you for leaving a disorganized mess behind, and that may be how they remember you.

Here’s one good idea:

Come see us now. The documents we create for you might be “just pieces of paper,” but they are worth a great deal more than that. At a stressful time when additional hurdles are the last thing you need, powers of attorney and other estate planning options could save you and your family delay, expense, and heartache. Please contact our Ruston, LA office by calling us at (318) 255-1760 or schedule an appointment to discuss how we can help with your estate planning needs.

The Duties of a “Fiduciary”

You may be asked to be the agent under a power of attorney for a family member or friend. Your fiduciary may be planning for when they might become unable to take care of their affairs. For example, they might become disabled or incapacitated, and they would need a trusted person to step in and manage for them. This is also necessary if the person is writing a will, and his or her estate must go through the probate process.

If you are named as a guardian, curator, executor of a person’s will, trustee, or agent under a power of attorney, the law calls you a “fiduciary.” You must act in the best interests of the person who has named you – “selflessly,” in other words. You must act loyally and in good faith.

You are not allowed to use the person’s property for your own profit. You cannot give gifts to yourself or others if the person has not authorized you to do that. You cannot mingle your person’s property with your own. If you spend the person’s money, you must carefully document the amount you spend and for what purpose.

What is a Fiduciary Relationship?

The “fiduciary” relationship imposes the highest duty in law. If you violate that duty, you may become personally liable.

Or, if you are the one who is thinking about whom you would like to name as your power of attorney (or the like), you must be sure you trust that person absolutely.

A recent New Jersey probate case shows what can go wrong. Mother Christine named Patricia, one of her daughters, to be the executor of Christine’s will. On Christine’s death, her other daughter, Diane, received a check from Christine’s estate for $10,000.00 – yet Christine’s house had sold for nearly $230,000.00.

The judge ordered Patricia to produce an “accounting” of where all that money had gone. Accounting is an inventory of estate assets and a record of all income and expenses. Patricia would not do so. Examination of the estate’s inheritance tax return revealed that despite a gross estate value of $319,368.00, the estate bank account contained only $6,886.00.

Patricia had spent $40,000.00 on what she claimed were home repair expenses, but she could produce no building permits. She had also given herself $110,000.00 as “fees” for her executor duties, plus a “gift” to herself of $27,000.00. No wonder she pled the Fifth Amendment.

The judge entered a judgment against her of $200,422.00. The judgment was affirmed on appeal, but with the requirement that the trial judge calculates the damages more specifically.

The case is In re Cenaffra, and can be found here:

https://law.justia.com/cases/new-jersey/appellate-division-unpublished/2020/a5731-17.html

Most people are not like Patricia. If you are named as guardian, curator, agent under a power of attorney, or executor, follow a few simple principles. Make sure you don’t personally benefit from what you do with the other person’s property. You might be able to be compensated fairly for your work, but refrain from doing anything that might look like a conflict of interest. If there are other beneficiaries waiting to receive their inheritances, be transparent. Keep the beneficiaries informed. Write down why you acted as you did, at the time you acted. Document everything. Keep receipts. (If you are the executor / executrix or administrator / administratrix for someone’s succession, then you also owe a fiduciary relationship to the creditors of the deceased.)

If you have questions or would like to discuss your particular situation, please don’t hesitate to reach out. We help people determine who should act in their best interests, and we can help those who are already named. Please contact our Ruston, LA office by calling us at (318) 255-1760 and schedule an appointment to discuss how we can help. We welcome the opportunity to speak to you.