Monday, July 27, 2009

Unraveling Powers of Attorney

Recently I challenged readers if they knew about HIPAA PR's in their POA's. Most people didn't know what I was referring to, so here's a Power of Attorney dictionary. I hope this helps you in your decisions about your Power of Attorney.

Here is a list of the abbreviations I used in my Power of Attorney (POA) challenge:

1. POA = Power of Attorney

2. DPOA = Durable Power of Attorney (these are the one's used in estate planning).

3. HIPAA = Health Information Privacy Administration Act

4. HIPAA PR = a HIPAA Personal Representative appointed in your POA.

Having a DPOA is integral to an effective estate plan. Your DPOA helps to avoid issues known as "living probate" where disputes could arise over who your decision makers are and what can be done for you during any period of your incapacity.

So having a HIPAA PR named in your DPOA is one of the more important parts of your estate planning and will help protect you, your family and your money. Make sure your DPOA appoints a HIPAA PR.

Wednesday, July 8, 2009

The Four Components of Every Estate Plan

In a recent poll, I asked readers if they knew the four components to every estate plan. There were many creative answers, but sadly, no one had the right four components. In fact, none of those answering the poll listed even two of the four components.

In this article, we will detail the four components of EVERY estate plan. If your is missing any of the four, then you know the plan is faulty and exposes you and your family to serious risk.

Component 1: A Testamentary Instrument

Every estate plan should contain a testamentary instrument. This can be a Will or Living Trust acting as a Will substitute. This component has the following purposes:

1. Nomination of executors or personal representatives and trustees and their successors.

2. Provide for care and guardianship of any minor children.

3. Provide for your desired asset and property disposition.

4. Cover any tax planning issues if your estate is large enough.

Component 2: Durable Financial Power of Attorney

Every estate plan must consist of a Durable Financial Power of Attorney. This allows your choice of decision makers for yourself in the event of mental incapacity. In other words, who do you want to make financial decisions for you if you are incapacitated and cannot make those decisions for yourself.

Note that if you do not have this component, then financial decision making for you can be problematic if you are incapacitated.

Component 3: Durable Health Care Power of Attorney

Every estate plan must consist of a Durable Health Care Power of Attorney. This allows your choice of medical decision makers for yourself in the event of mental incapacity. In other words, who do you want to make health care decisions for you if you are incapacitated and cannot make those decisions for yourself.

Note that if you do not have this component, then health care decision making for you can be problematic if you are incapacitated. Also, both types of Powers of Attorney should name a HIPAA Personal Representative for access to protected health care information, including financial health care information. This is why anyone over the age of 18 should consider these two decision making documents.

Component 4: Living Will

Life support issues should be considered and decided upon before you are in that situation, when it is normally too late. This is done through a Living Will.

Each State has its own laws about Powers of Attorney and Living Wills as well as Wills and trusts. However, it is possible for each of these four components to be created at little or no cost to you. We recommend that you consult with your own estate planning attorney to learn about these four components and to learn how each applies to you.

Wednesday, July 1, 2009

The New Colorado Designated Beneficiary Form

On July 1, 2009 the State of Colorado Designated Beneficiary law went into effect. This new law authorizes any Colorado resident to sign a Designated Beneficiary Form providing an array of legal and property rights to the other person who is party to the form.

Without understanding the law in Colorado and how this form will effect estate, legal and property rights, we recommend that no one consider signing a Designated Beneficiary Form without legal advice in advance.

The Colorado Designated Beneficiary law is Colorado's attempt to recognize domestic partnerships. However, the form authorized by this new law does something quite different. The form attempts to undo established Colorado law and property rights without clarifying how these changes work.

For example, the form permits the designated beneficiary to inherit through Colorado's law of intestacy. However, the new law does not designate in which position the designated beneficiary would be placed. Would they be in front of a spouse? In front of a child? This is not defined.

Additionally, the new law was completely unnecessary. Each of the rights that can be granted to a designated beneficiary were previously available to be provided to a domestic partner through appropriate estate planning documents such as a Will or Durable Power of Attorney. The new form even says that the form itself is superseded by ANY estate planning document created by its user.

There are other reasons to numerous to mention here about how fatally flawed the Colorado Designated Beneficiary law is. Suffice it to say, that anyone using this new form without legal advice will be subject to serious legal risk.