Updating your Planning Documents
Clients frequently ask how often they should update their Power of Attorney, Wills, and other important documents. While there is no fixed “rule” regarding this issue, I believe that it imperative to review and update your estate planning documents on a regular basis due to changing laws, as well as changing personal and financial circumstances. Following are a few examples relating to your Durable Power of Attorney:
- When was your Durable Power of Attorney executed? According to New Jersey law, banks should honor a Durable Power of Attorney for at least 10 years after its execution. The problem is that many banks and other financial institutions are increasingly reluctant to honor POAs that are more than a few years old. For this reason, I recommend that your General Durable Power of Attorney, Living Will and other relevant documents be reviewed every 2 to 5 years.
- Does your Durable Power of Attorney allow for Medicaid planning, Estate planning, disclaimers or gifting? Asset protection planning (especially in light of high nursing home costs) is of great importance to many clients, but gifting powers should be drafted with much caution to prevent abuse or mistakes. While you may wish for your agent to engage in this type of planning, you may also want to ensure that he or she will consult with a professional regarding Medicaid’s 5 year “look back” rule and the like before giving any gifts. I would highly recommend that everyone with a Durable Power of Attorney carefully review its Gifting clause to ensure that it accurately reflects your intent and takes into account current Medicaid and Estate tax laws.
- Are the agents (also known as “attorneys-in-fact”) that you named in your Durable Power of Attorney still the people you would choose to handle important banking, legal, tax and financial matters on your behalf? Has any agent or substitute agent moved or become disabled themselves since your POA was signed? Have you come to rely more upon others for your day to day assistance?
- While reviewing the people you have selected as your agents, you may also wish to reconsider naming joint agents or co-agents. I generally recommend naming one agent, followed by a substitute and second substitute, but each client’s circumstances are unique and your POA should reflect your personal circumstances, goals and objectives. If you name two or more agents to act simultaneously, you should state expressly if they must act in concert with one another, or severally with each agent having the ability to act separately and independently of the other(s).
- Have you provided copies of your Durable Power of Attorney to your bank, stock broker, benefits coordinator, insurance agent, financial advisor and/or account manager? This has become increasingly important in recent years. I recommend that you check with each of them periodically to ensure that they still have your POA on file, and do not require any modifications or updates.
- Do you travel frequently or own a home in more than one state? If so, you may wish to review your options regarding choosing your state of “domicile”. It may also be advisable to update your POA to ensure that it will be viable in all applicable jurisdictions.
- Does your Durable Power of Attorney require your agent to prove that you are disabled before it can be used? In other words, is it a “springing” Power of Attorney? This may be highly significant if your spouse or other first named agent has passed away or become disabled. Most clients do not wish to require their spouse to go through the trouble of getting a doctor’s certification proving that they are disabled in order to use their POA. You may feel differently, however, if it is now your second or third choice of agent who could be using the broad powers granted in your POA.
- In light of the growing reluctance on the part of many banks and other financial institutions to honor POAs, as well as increasing concerns regarding privacy and identity theft, many more New Jersey residents now consider it prudent to supplement their Durable Power of Attorney with a Revocable Living Trust (“RLT”). While updating your POA, we can help you determine whether establishing an RLT is right for you.