Why Won’t IRS and Social Security Administration Like My Power of Attorney?

The IRS and the Social Security Administration (SSA) don’t recognize traditional powers of attorneys (POAs). Forbes’s recent article entitled “Two Times When Your Power of Attorney Isn’t Going to Work” explains why.

The IRS says that you must use Form 2848, “Power of Attorney and Declaration of Representative” to allow anyone to act on your behalf. This form requires you to state the tax matters and years for which the agent is authorized to act. That’s different from a traditional POA for financial matters, which usually has blanket statements allowing the agent to take any or a broad range of actions on your behalf in certain matters.

A married couple that files joint tax returns must also have each spouse separately complete and sign a form. There is no joint form.

Technically, the IRS might accept other POAs as the instructions to Form 2848 indicate this. However, the POA must meet the requirements of Form 2848 to be accepted as a substitute. That can be a tall order.

The Social Security Administration is similar. It says on its web site that it doesn’t recognize POAs. When you need someone to manage your Social Security benefits, you contact the SSA and make an advance designation of a representative payee.

A 2018 law created this feature that lets you name one or more individuals to manage your Social Security benefits. The Social Security Administration must usually work with the named individual or individuals. You can rank up to three people as advance designees. Therefore, if the first one isn’t available or is unable to perform the role, the SSA will move to the next person on your list.

Someone who already is receiving Social Security benefits can designate an advance designee at any point, and a person claiming benefits for the first time can name the designee during the claiming process. The designation can be made using your “my Social Security” account on the Social Security web site or by contacting the Social Security Administration by phone (800-772-1213) or at the local field office. A designee can also be named through the mail by using Form SSA-4547 – Advance Designation of Representative Payee.

Representative payees generally must be individuals, but it also can be a social service agency, nursing home, or one of a number of other organizations recognized by the SSA to serve as payees. If you don’t name any representatives, the SSA will name a representative payee for you, if it decides you need help managing your money. A relative or friend can apply to be representative payees, or the SSA can make the selection.

Reference: Forbes (Jan. 28, 2021) “Two Times When Your Power Of Attorney Isn’t Going To Work”

 

Just What Does an Executor Do?

Spending the least amount of time possible contemplating your death is what most people try to do. However, one part of the estate planning process needs time and reflection: deciding who should serve in important roles, including executor. Whatever the size of your estate, the people you name have jobs that will impact your life and your family’s future, says a recent article “How to get it right when naming an executor and filling other key roles in your estate plan” from CNBC. A quick decision now might have a bad outcome later.

First, let’s look at the executor. They are responsible for everything from filing your last will with the court to paying off debts, closing accounts and making sure that assets in your probate estate are distributed according to the directions in your last will. They need to be trustworthy, organized and able to manage financial decisions. They also need to be available to handle your estate, in addition to their other responsibilities.

Note that some of your assets, including retirement tax deferred accounts, life insurance proceeds and any other assets with a named beneficiary, will pass outside of your probate estate. These assets need to be identified and the custodian needs to be notified so the heir can receive the asset.

Settling an estate takes an average of 16 months, with smaller estates being settled more quickly. Larger estates, worth more than $5 million and up, can take as long as four years to settle.

Some people prefer to name co-executors as a means of spreading out the responsibilities. That ix fine, unless the two people have a history of not getting along, as is the case with many siblings. Sharing the duties sounds like a good idea, but it can lead to delays if the two don’t agree or can’t coordinate their estate tasks. Many estate planning attorneys recommend naming one person as the executor and a second as the contingency executor, in case the first cannot serve or decides he or she does not want to take on the responsibilities. The same applies to any trustees, if your estate plan includes a trust.

Make sure the people you are considering as executor, contingent executor, trustee or success or trustee are willing to take on these roles. If there is no one in your life who can take on these tasks, an option is to name an estate planning attorney, accountant, or trust company.

Another important role in your estate plan is the Power of Attorney. You’ll want one for financial decisions and another for healthcare decisions. They can be the same person or different people. Understand that the financial Power of Attorney will have complete control over your assets, including accounts, real estate, and personal property, if you are too incapacitated to make decisions or to communicate your wishes.

The healthcare Power of Attorney will be making medical decisions on your behalf. You will want to name a person you trust to carry out your wishes—even if they are not the same ones they would want, or if your family opposes your wishes. It’s not an easy task, so be sure to create a Living Will to express your wishes, if you are placed on life support or suffer from a terminal condition. This will help your healthcare Power of Attorney follow your wishes.

Finally, revisit your estate plan every three to five years. Life changes, laws change and your estate plan should continue to reflect your wishes. The lives of the people in key roles change, so the same person who was ready to serve as your executor today may not be five years from now. Confirm their willingness to serve every time you review your last will, just to be sure.

Reference: CNBC (March 5, 2021) “How to get it right when naming an executor and filling other key roles in your estate plan”

 

The Difference between Power of Attorney and Guardianship for Elderly Parents

The primary difference between guardianship and a power of attorney is in the level of decision-making power, although there are many intricacies specific to each appointment, explains Presswire’s recent article entitled “Power of Attorney and Guardianship of an Elderly Parent.”

The interactions with adult protective services, the probate court, elder law attorneys and healthcare providers can create a huge task for an agent under a power of attorney or court-appointed guardian/conservator.  Children acting as agents for a parent under a durable power of attorney or appointed as guardians or conservators by a court may be surprised about the degree of interference by other family members who disagree with their decisions for a loved one.     In addition to interference from siblings, family members and well-meaning neighbors and friends, a guardian, conservator, or attorney-in-fact that is named in a durable power of attorney may also encounter problems with health care providers who may be hesitant to recognize the need for an agent.

There are two types of durable powers of attorney.   One type of DPOA is called a springing durable power of attorney.   There are condition precedents in the document that must be satisfied before the DPOA and the attorney-in-fact named in the document have the authority to act on behalf of the principal.   For example, the document may require that one or two physicians provide a letter that state that the principal is unable to manage his or her financial affairs.    Another type of DPOA is effective immediately upon signing.     The latter is more common in older clients, as the chances of having health issues that render them incapacitated and the need to have agent “on board” without the impediment of securing letters to “push” a DPOA into effect more likely than with, for example, a healthy middle-aged individual that would prefer to have additional steps completed before access is granted to financial accounts.

In Massachusetts, a guardian has control over the person and can make decisions about the Protected Person’s living arrangements and health care decisions.   A conservator has control over the Incapacitated Person’s assets, such as bank accounts, investments, etc.     The equivalent of a conservator is the attorney-in-fact under a durable power of attorney.   Whether appointed by a court to take care of financial affairs of a person who did not execute a durable power of attorney prior to becoming incapacitated or the person named under a durable power of attorney to do everything that the principal could financially, the choice of this individual for an elder who no longer has the legal capacity to make medical or financial decisions is an important role.

Unlike the attorney-in-fact named in a durable power of attorney, court-appointed guardians and conservators are required to deliver regular reports to the court detailing the activities they have completed for the Protected Person or Incapacitated Person, as the case may be.    Regardless, however, both roles, DPOA or guardian/conservator must work in the best interest of the individual.

Some popular misperceptions about power of attorney and guardianship of an elderly parent include:

  • An agent under power of attorney can make decisions that go against the wishes of the principal
  • An agent cannot be removed or fired by the principal for abuse

Agents under a medical power of attorney, that is, health care proxy, and court-appointed guardians and conservators have a duty to go beyond normal efforts in caring for an elderly parent or adult.   They must understand the aspects of the health conditions and daily needs of the parent, as well as learning advocacy and other skills to ensure that the care provided is appropriate.

Ask an experienced elder law attorney about your family’s situation and your need for power of attorney documents with a provision for guardianship.

Reference: Presswire (Jan. 14, 2021) “Power of Attorney and Guardianship of an Elderly Parent”