Word of the Month: Power of Attorney

Word of the Month: Power of Attorney

By Melinda Gustafson Gervasi

May 13, 2024

Power of Attorney is a legal phrase commonly known among everyday Americans. However, just because a term is familiar to you, it does not mean you actually understand the term. Case in point, recently I was reading the book Grown Woman Talk: Your Guide to Getting and Staying Healthy by Dr. Sharon Malone. I thoroughly enjoyed the book until I got to the last chapter.  Despite admonishing medical doctors who gave advice outside their area of focus (think genecology vs. allergy), she proceeds to give legal advice in the last chapter going as far as recommending someone make their Power of Attorney a joint owner on bank accounts.  Dr. Malone's goal is to prevent a financial crisis from happening during a medical event.  While her intentions are good, her advice is not sound.  Adding someone to your bank account creates ownership interest, something most people do not intend to do.  A properly written Power of Attorney for Finance allows the person you name to handle bill paying, funds allocation, and a host of other financial powers.  The POA is all that is needed in my humble opinion. 

As you educate yourself about the documents that make up an estate plan, keep in mind that a "power of attorney" is a legal document that grants power to a person you nominate to make decisions or you in either a financial capacity or health care situation.  The document means the person can make your decisions if you cannot.

When deciding who to name as your Power of Attorney, you may want to ask yourself:

• Who do I trust to make the decisions I would make if I were able;
• Who has the time and space to make decisions for me;
• Who has the skill set to dive into my healthcare situation or take control of my financial ship; and
• Who will be able to stay calm and collected when needing to act.

In the scenario described in the doctor's book, where a person adds someone to their bank account, ownership is established.  If a women adds her daughter to her bank account and then dies, generally the bank account passes directly to the daughter and becomes her sole property.  This transfer of wealth happens no matter what the will might say.  In some situations that may be fine, and in others it may be problematic.  For example, if in this situation the women had a son as well, the son would be cut out of the bank account funds.  It all went to his sister.  And even if his sister wants to share equally with him, doing so may trigger the gift tax.  In 2024 a person can gift up to $18,000 to another person before owing the gift tax. Let me illustrate my point with actual numbers. A women has $100,000 in her checking account.  She adds her daughter as an owner to "pay the bills".  Two weeks later she dies due to complications from surgery.  The daughter is now the sole owner of the $100,000 account.  If she wanted to share equally with her brother she'll need to talk with a CPA to find out how to give him his $50,000 without paying a gift tax that becomes a concern if the gift is greater than $18,000 ($50,000 is clearly greater than the $18,000 limit).  

As you can see, estate planning and probate matters become complicated quickly.  It is always in your best interest to seek the advice and counsel of an attorney licensed in your state of residence.  Do not rely on the suggestions of your best friend, a neighbor, or a well spoke doctor who wrote a book.  Also, a blog is not legal advice, but a mechanism to spark thought and reflection.  Thanks for reading and be well.

Image by M. Gustafson Gervasi -- Complicated road signs in St. Louis, Missouri

Privacy and Estate Planning: Review Outdated Documents

Privacy and Estate Planning: Review Outdated Documents

By Melinda Gustafson Gervasi

May 6, 2024

Deep in the list of an online calendar for "National" Days and Weeks of an exhaustive list of topics is a note that the first full week in May is National Choose Privacy Week.  Upon closer inspection, the week is aimed at privacy within context of public library users.  However, I'll use it as a springboard into the topic of privacy and your estate planning documents.

This time of year many people are out in their yards, pulling away dead limbs and stalks from last years garden growth.  It's a time to pull out the dated and make room for the new growth.  If you have a rainy day and are not in your yard or garden, I encourage you to apply the same spring cleaning energy to reviewing your outdated documents.  Specifically, review Power of Attorney for Finances and or a will to see if they list your Social Security Number.  It is not uncommon for documents created 15 years ago to include this sensitive information.  What was standard no longer is due to identify theft.  If found, creating new documents without sensitive information may be wise.  And be certain to shred the old documents and not simply toss them in the recycle bin.

Enjoy the warm up and explosion of color happening outside your window!  Keep in mind that a blog is not a substitute for a lawyer, but meant to spark thought and reflection.  I encourage you to seek legal advice from an attorney licensed in your home state.  Thank you for reading, and be well.