Blogs from May, 2021

Naming a person as your financial power of attorney (agent) is an integral part of a comprehensive estate plan. This selection allows the agent to make important financial decisions on your behalf during times of potential incapacity. But what does it mean FOR the person named? There are certain duties and obligations assigned to your agent, and it is important that both parties understand these duties and obligations.

DUTIES AND RESPONSIBILITIES OF A FINANCIAL POWER OF ATTORNEY (AGENT)

When accepting the authority granted under a financial power of attorney, a fiduciary relationship is established with the principal (the person represented) and the agent. This is a special legal relationship that imposes duties which continue until the agent resigns or the power of attorney is terminated, suspended, or revoked by the principal or by operation of law.

The agent generally has the responsibility to:

1. act in good faith;
2. do nothing beyond the authority granted in the power of attorney;
3. act loyally for the principal’s benefit;
4. avoid conflicts that would impair the ability to act in the principal’s best interest; and
5. disclose your identity as an agent when you act for the principal by writing or printing the name of the principal and signing your own name as “agent” for that person.

In short, you are being named to stand in the shoes of the principal to act as they would act if they were able.

The Estates Code further enumerates the responsibilities of a financial agent. The Durable Power of Attorney Act (Subtitle P, Title 2, Estates Code) lays out specific instructions for agents:

1. maintain records of each action taken or decision made on behalf of the principal;
2. maintain all records until delivered to the principal, released by the principal, or discharged by a court; and
3. if requested by the principal, provide an accounting to the principal that, unless otherwise directed by the principal or otherwise provided in the Special Instructions, must include:
   • the property belonging to the principal that has come to your knowledge or into your possession;
   • each action taken or decision made by you as agent;
   • a complete account of receipts, disbursements, and other actions of you as agent that includes the source and nature of each receipt, disbursement, or action, with receipts of principal and income shown separately;
   • a listing of all property over which you have exercised control that includes an adequate description of each asset and the asset’s current value, if known to you;
   • the cash balance on hand and the name and location of the depository at which the cash balance is kept;
   • each known liability;
   • any other information and facts known to you as necessary for a full and definite understanding of the exact condition of the property belonging to the principal; and
   • all documentation regarding the principal’s property.

Serving as a financial power of attorney (agent) is a serious responsibility. It is important to keep great records, and to make sure each transaction you make on behalf of the principal is in line with the fiduciary duty you have been granted.

Naming an agent before times of crisis is very important. By doing so it is possible to avoid long drawn-out court processes when it comes time to pay bills, access bank accounts, etc. during times of emergency. Just remember – power of attorney documents CEASE to have power when the principal passes away. Contact Crain & Wooley if you have questions or concerns regarding naming an agent or being named AS an agent.

The housing market in DFW is HOT right now. My friend Shelley Nunley’s real estate blogs come through my email every week talking about increasing home prices and decreasing inventory. Exciting for homeowners, right?

Let’s say you’re reading this and thinking, “Well, my husband died 3 years ago, and I don’t need this big house. I could easily sell my house for a great price and move closer to friends and family.” Wonderful. That sounds like a great idea. Win/win/win.

What if you find a buyer willing to pay top dollar and then the night before closing, the title company tells you that you don’t have the right to sell the house? This recently happened to a (now) client of ours who was unable to complete the home sale.

We get calls like this almost every single week. If I’ve said it once, I’ve said it a thousand times: under Texas law, your spouse’s assets do not automatically transfer to you when they die. We often have clients that come to us years and even decades after their spouse has passed because they’ve hit a wall in trying to sell a house. Most couples have joint bank and investment accounts that can sometimes be accessed after one spouse’s death, so it’s possible (rare but possible) that a spouse can go for years without officially settling the deceased spouse’s estate. However, title to real property is almost never passed without going through 1 of the 10-12 different types of probate.

 Don’t let this happen to you. Don’t let an opportunity to take advantage of this a booming real estate market pass you by because you don’t have full ownership rights and can’t sell without going through a probate case.

Crain & Wooley is here to help you plan, in advance, for the distribution of all assets as well as assist in the probate process to clear title to assets as necessary. Contact us to schedule a complimentary consultation to learn more.

After creating a living trust for clients, we have an educational meeting to ensure that assets are properly integrated with the trust. We also talk about how their living trust operates for the rest of their lives.

I usually share this analogy: “Think of being trustees of your trust like being CEOs of your own little company.” Trustees buy and sell in the name of the trust, not in their own names. Trustees open new accounts in the name of the trust, not in their own names. (NOTE: a typical revocable living trust is NOT a business. Your tax rate does not increase; you pay taxes as you have previously, and you do not need an EIN.)

After establishing your living trust, make these slight adjustments when organizing your assets:

• Real Estate: we probably helped you retitle your current house into the name of your trust, but what happens if you sell that house? The title company will know that the house is owned by a trust and will likely just ask to see a copy of the trust to confirm that you have the authority to sell property. Then you’ll simply sign “Jane Doe, Trustee of the Doe Living Trust” in the paperwork. The important thing, though, is that you need to buy your next house in the name of the trust. Again, you’ll show your trust to the title company to show authority to buy property in the name of the trust and will sign your name “Jane Doe, Trustee of the Doe Living Trust”. To gain the full benefits of a living trust, real estate needs to be titled in the name of the trust.

• Bank Accounts: you might choose to change banks for a variety of reasons. When opening a new bank account, open it in the name of your trust. Yes, your checking account will be “owned” by your trust, but you can still pay bills, get cash, and receive deposits like before the trust existed. It might seem scary, but you’re not losing control of your money because you’re the trustee in charge of the trust.

• Vehicles: title your new car in the name of the trust. While vehicles are, arguably, the easiest asset to transfer after death, you can save a few steps for your successor trustee if you’ll ask the car dealership to put the title in the name of the trust. The trust will own the car, but you control the trust as Trustee.

As life changes happen, take a few moments to review your assets and coordinate them with your trust. A funded trust is a trust that works!

Contact us today!