Planning Your Future - Part 1 | Tax Tip of the Week | No. 204

You Really Need to Plan for This - Part 1

Our death and possibility of developing an incapacitating illness are not pleasant things to think about.  But planning for them, however, must be addressed.We are going to run a four part series of Tax Tips that will highlight some of the primary legal steps you should consider. NOTE: We are NOT attorneys.  Please consult with an attorney before following any of these suggestions.Should you develop a chronic illness, you will need to care both for your person and for your property.   With a chronic illness, you may have a higher probability that you will not be able to manage your property and will need assistance during your lifetime. In addition, there will be a need to make sure that your testamentary transfers are upheld if a relative questions your ability or your capacity to make those decisions.Power of AttorneyThere are several types of powers of attorney for managing your property. With a chronic illness, you may not have the physical or mental capability to manage your property. A designated person can be of great assistance to you in making sure that your property is managed and used for your best care.A general power of attorney will permit your selected representatives to have complete control over all of your financial affairs. It is quite powerful, but must also be granted carefully so that the person uses that broad power appropriately. You must have a very high level of trust in the person to give him or her general power of attorney.A special power of attorney is a grant of limited rights. For example, a person may have the right to lease or sell your principal residence. If you are transferred to a care facility and will no longer be able to return home, it may be good to give a person the legal right to sell your residence.A "springing" power of attorney can be particularly useful if you have a chronic illness. In the event that you are incapacitated or unable to function effectively, then your selected agent may assume the rights under your power of attorney. With a springing power, there can be difficulty in determining whether the lower level of incapacity is sufficient to trigger the power. For this reason, some states have specific requirements and restrictions on springing powers.If your designated agent for the power of attorney has fairly broad power, you may wish to include the ability for that person to make gifts to family or gifts to charity. Typically, the right to make gifts enables your agent to continue your current pattern of gifts to family or to charity. Your agent will decide if the resources in your estate allow both the making of gifts and providing for your care.More on this subject next week…..

As always, give us a call with any questions or concerns you may have.You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.Rick Prewitt - the guy behind TTW...until next week.