What Is A Durable Power of Attorney For?

A durable power of attorney is used to give another person certain legal powers to manage your assets. It can give someone all powers to do everything you could do if you were able or it can give limited powers. Oftentimes we use a general power of attorney that gives someone complete power over our assets but it does not become effective until and unless we become incapacitated. This kind of power of attorney is part of your complete estate plan. See article below for definition of “incapacity.”

Even if you have a trust you will need a power of attorney to give someone control over basic things such as, changing your mailing address, transferring money from accounts that are not in your trust, talking to an institution regarding your affairs, like, the IRS, Social Security Administration, Veteran’s Administration, life insurance company, pension plan administrator, etc. Because of the privacy laws, if you don’t have the power of attorney for someone, like your parents, none of these institutions will divulge any information to you. Even your parents’ doctors cannot give you any information unless you have this document. This power is not always included in a medical power of attorney or “advance health care directive.”

Many times we see an elderly person, whose son or daughter helps with paying their bills and checking their bank balances. The son or daughter can do this because they sign on the bank account. But if they need to help with anything else not in the bank account they can’t. Many times the parent gets dementia or Alzheimer’s, becomes incapacitated and then it’s too late to have them sign a power of attorney form. At this point the child will have to go through the probate court process of getting a conservatorship for their parent, which takes many months and costs anywhere from $ 3,000 to $ 6,000. Again, with a little planning you can avoid this by getting a durable power of attorney now before your parent becomes incapacitated.

3 Reasons Why You Need a Trustee

1. To Take Care of Your Assets for Your Children- If you have minor children they will need someone to manage your assets for them. Even if you only have a house and a few investments, if both you & your spouse die in a car accident, say, your children will probably have to go live with someone else. In that case your house will have to be sold and the money will have to be reinvested in stocks, bonds, cd’s, etc.

Who will do that for them? You will need someone to deal with a real estate agent, sign a listing agreement, decide on a listing price, negotiate with buyers, sign the sales contract, perform all the tasks that a seller must do to complete a sale. So even if you have children who are no longer minors, would they be able to do all that? Probably not- many adults can’t do it. So if you haven’t appointed a trustee (by writing it in your trust document) the court will appoint a stranger to do it for your family.

After the house is sold the trustee will have to manage the investments of the trust to get the highest rate of return (income) possible while keeping the assets safe. That’s the main job of a trustee, to safeguard the assets for the beneficiaries of the trust (usually, the kids) and make distributions according to the trust document.

2. To Provide Flexibility in Making Decisions- If your children are young the trust will have to be managed for many years. Oftentimes parents will set up the trust to give discretion to the trustee regarding how much to distribute to each child each year, that is, the trustee decides. If children are young that would mean giving living expenses or a monthly allowance to the guardians of the children, the people who are taking care of them. If kids are going to college, they might need money to buy a car, for example. That would be an extra distribution that the trustee would have to decide on. Most trustees may give $ 12,000 to buy a used Honda but would not give $ 100,000 for a Lamborghini.

Even if your children are in their twenties, oftentimes, clients set up a time schedule for distributions of principal, that is, all of the assets that went from you or your estate to your trust. Usually if there are no problems with, say, drug or alcohol abuse, parents will write in their trust that the trustee should distribute one third of the principal when a child reaches age 25, one half when they reach age 30 and the balance when they reach age 35. This helps to give out the assets when the children become a little more mature. You must have a trust to do this.

3. To Give the Trustor (You) More Flexibility in Describing How To Distribute the Assets- You can also describe in your trust other reasons you would want your children to receive distributions, such as, for education. Your trust document can include a definition of education. You may not want to pay for basket weaving school but you may have a child or grandchild who you know will never go to college. However, if they were interested in a trade school, you would probably want the trustee to pay for that as well.

You can describe other things you would want your trust to pay for, such as, giving a child money to start or buy a business, or for the down payment on a house.

If you have a child who has a drug or alcohol abuse problem, you can provide that they must be clean and sober for one year subject to testing before they receive any distributions.


These are only three reasons to have a trust. There are many more. Stayed tuned for future blog postings! Or subscribe to our RSS feed. You can get more trust and tax tips from our monthly newsletter. Just subscribe below! Or you can always call us at the Law Offices of Patricia Rowe 925-256-1000. Or you can visit my website at www.PatriciaRowe.com !

What Is Estate Planning?

Estate planning is the process of analyzing your family dynamics, your assets and liabilities, what you wish to happen after your death and creating documents to ensure Remember, you are planning for the next three years only. It’s too hard to plan for contingencies and possibilities much further out into the future than three years. Therefore, you should plan to review your estate planning documents every three years.

What Is A Trust?

A Trust is a way to ensure that your family is cared for if you die or become disabled. You transfer your money and property to a trust, designate trustees and specify the terms of the distribution of your property. The trustee then has fiduciary duties to preserve and safeguard the assets of the trust, ensure that they earn a sufficient rate of return and make distributions when and to whom you indicate in the trust.

One of the most important things is that under the law the money or property in the trust can only be used for the benefit of the beneficiaries.

How Does A Trust Work?

Create the Trust-

You create the trust by writing the trust document. You sign it, notarize it then you must fund it. That means you must transfer some money or property to the trust. This is a revocable grantor trust that becomes effective immediately. You are the trustor, settlor and grantor- person who creates the trust.

Revocable Trust:

· A revocable trust can be changed during your lifetime.
· You can change the beneficiaries
· You can put money and property into and take it out of the trust at any time (subject to community property rules)
· Community property remains community property- either spouse can take it out
· Separate property remains separate property- only the owner of the separate property can take it out
· You are the initial trustee and beneficiary of the trust (both spouses, if married)
· You can change the distributions rules
· The trust becomes irrevocable on your death (50% of it if a married couple)

Grantor Trust:

Creator of the trust retains incidents of ownership over assets, receives benefits of assets
· Creator handles all investment decisions, takes all income, can take property out & put property into the trust at will
· Creator reports all income and expenses on his or her income tax returns
· Trust uses creator’s social security number

Or you can put a provision in your will or your living trust to create the trust on your death. This is also an irrevocable trust that only comes into being when you die.

Name the Trustee-

If you are creating the trust and funding it now, you (both of you, for a married couple) can be the trustee and name someone as the alternate trustee to serve when you can no longer do it. It should be someone who can manage money and invest it properly.

The trustee will be responsible for:
· investing funds to get a good rate of return
· perhaps selling assets, especially real estate
· transferring money and assets
· ensuring the validity of and paying debts
· making sure all distributions are made on time
· responding to requests for additional distributions from beneficiaries
· completing all required accountings on a timely basis
· making sure all income tax returns are filed and taxes are paid timely

If you think about it, this is too much for many adult children to handle, especially if they are young adults eighteen to twenty five years old. The trustee does not have to be the same person as the executor of your will, but oftentimes is.

You should ask this person if they are willing to do it and ask him or her to sign the trust document accepting the job.

You should name as many alternate trustees as you can in case those persons named can no longer do it. If you don’t have any alternates you can appoint a bank, such as Wells Fargo, or a professional trustee. Remember, you are planning for the next three years only.

Give the Specifics of the Distributions to Beneficiaries-

What will your children need after you’re gone? Here’s a list of considerations for child beneficiaries:

· Are they minors who will need someone to care of them?
· How much will they need for their own support per month?
· How much income will your assets generate per month?
· Will they remain in your current residence or live some where else?
· Do they have private school tuition?
· Will they be attending college soon?
· Do they have any special medical or other needs?
· Are they mature enough to manage their own assets?
· Could they be a cotrustee?
· Are there any drug or alcohol abuse problems?
· Do they have good relations with their siblings?

This is not a complete list. You also want to consider if there are services, such as a nanny, that would have to be hired out when one spouse dies.

Describe How the Trustee Will Make Distributions-

You can give the trustee discretion to decide what the reasonable distributions to the beneficiaries are for the trust or you can give specific instructions and require the payment of a certain set monthly amount to be paid or require that all income be paid out to the beneficiaries each month. Likewise, for the principal of the trust you can decide whether the principal of the trust must be paid out to the beneficiaries at certain times or whether to leave it to the discretion of the trustee to decide. Oftentimes trust distributions are required to be made as follows:

One-third of trust principal is distributed when the children reach age 25
One-half of trust principal is distributed when the children reach age 30
The balance of trust principal is distributed when the children reach age 35

Morre to come in my next post! Please leave a comment and forward this to Twitter, Facebook, etc.