Do You Have a Power of Attorney? Is it up-to-date?

A financial power of attorney is a document which allows someone else to act on your behalf if you are sick or out of the country. This power can be used to pay your bills and access your bank account, for instance. When you hear the term “attorney”, you probably think of a lawyer (also known as an attorney at law). The term actually means “representative” and the power of attorney document allows you to select people of your choice to make decisions for you. If you don’t have a “power of attorney” document and necessary financial decisions must be made when you are unable to make them yourself, your loved ones or others will need to go to court to have a guardian appointed. That will result in needless expense, aggravation and delay.

Is a Living Trust better than a Will?

Some people think that a living trust saves taxes. Not so. The tax man is not dumb. Both probate and non-probate assets (controlled by the decedent) are subject to taxation if they exceed applicable tax thresholds ($5M, federal; $1M, Maryland).

A living trust is a lengthy and complicated document which is expensive to prepare, certainly, much more than the typical will. In contrast, probate fees are paid after one’s death; attorney’s fees for preparation of a living trust are paid up front. Further, a living trust is of no use unless an individual goes to the trouble and expense of changing the names on real estate and car titles as well as various bank and other financial institution holdings.

WARNING:  Many people incur the expense of having a living trust prepared and then do not follow through in changing the title (ownership) of their assets. Without the follow through, the trust in that situation is worthless. A trust without assets is like an empty glass -- there is nothing in it to pour out.