Financial and Medical Powers of Attorney

Philip Fish, CFP<sup>®</sup> and Estate Planning Specialist with Sandy Spring Trust

Phil Fish, CFP® and Estate Planning Specialist with Sandy Spring Trust, discusses two of the estate planning documents that are used for incapacity planning:  A Financial and Medical Power of Attorney. He outlines how the documents work, how you create them, how to prepare the individuals named within the documents for their future role and other critical information.

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    Financial and Medical Powers of Attorney


    - Hello everyone, and welcome to Sandy Spring Bank's real life matters seminar series. My name is Phil Fish. I'm a certified financial planner and an estate planning specialist with our trust division. I've been with the bank for 21 years, and I've worked in the industry for over 30 years. Now, I'm the host of our seminar library, which you'll find on the Sandy Spring Bank website. I'm also a host of our professional discussion series library where I interview local professionals in the areas of law, tax, finance and health care. I hope you enjoy today's program on financial and medical powers of attorney, and that you also peruse the different seminars that we've established on our website, and share this information with friends, family, neighbors, and coworkers. It's an educational format. It's open to the general public and you do not need to bank with us to enjoy these programs. On the seminars, we do ask for you to provide your name and how you heard about the event, but no one will contact you unless you ask for a call, and on the professional discussion series, we don't even ask for your name when you register. So on behalf of Sandy Spring Bank, thank you. If you bank with us, we appreciate your business. Sandy Spring Bank was founded in 1868 as a local community bank after the civil war, and we've grown and prospered during 150 years of our history. And we're now the largest independent bank headquartered in the local greater Washington region community. If you don't bank with us, I hope you might consider Sandy Spring Bank for your banking, business, lending, insurance, investment of trust needs. If you have any questions, feel free to reach out to myself or any of our staff. So with that in mind, we're gonna cover today's topic of financial and medical powers of attorney. And this is just part of an estate plan. And if you look at the other seminars on the library, we talk about revocable living trusts and wills, and overall financial and estate planning. But for the next 20 to 30 minutes, I'm just gonna talk specifically about financial and medical powers of attorney, which are two incredibly important pieces to your overall estate plan. I'm not an attorney. I was formerly a trust officer, and I help clients navigate. And I'm a salary officer of the bank. So if after today's discussion, you have any questions, there's a content fill button that you can press. My contact information is provided on the exit screen, or you can simply just call me. My telephone number is 3017854112. Leave your name and a message. And I'll get back in touch with you and we'll have a chat. Maybe we don't help you directly, but maybe we point you in the right direction. Sandy Spring trust has been a trust division as part of the bank for over 30 years, we professionally manage assets under federal fiduciary standards with no commissions or products or conflicts of interest. We also serve in legal documents as a trustee and as a personal representative. And we provide support to individuals who are named in powers of attorney. So, although the bank is not named in these documents, we certainly help families coordinate. And sometimes we'll work with professionals who are willing to be named in these roles if a family doesn't have anyone they're comfortable naming. So, we've got a lot to cover today. I hope you have a pad of paper and a pen. Feel free to jot down any questions. And at the end, if you'd like me to delve a little deeper into your specific situation, give me a call or send me an email, and I'll be happy to answer questions as best as I can. So, we're gonna run through 10 kind of core areas that is kind of the basis of all of the seminars. So we'll start with item one, which is having the right legal documents. When it comes to estate planning, even though in the bank, we have estate planning attorneys who work on our staff, they can never be your attorney. We're not allowed to draft legal documents. So we're either gonna work with your estate planning attorney or recommend that you go to one of the many in the area. And we suggest that you work with an attorney who specializes in estate planning and is licensed to do business in the state where you reside, because the laws are slightly different in Maryland and DC and Virginia and other states. With regards to these documents, the financial power of attorney is designed to allow somebody who's not you the authority to step into your shoes and act on financial affairs during your lifetime if you're unable to make decisions yourself. So, they might handle paying bills, managing assets, handling your retirement accounts. If you have a revocable living trust, which is another legal document, and the financial power of attorney is gonna compliment that document and deal with non-trust assets, any assets that are in your revocable living trust will be handled by the trustee named within your document to step in when you can no longer be the trustee. The agent sometimes called an attorney in fat, which is the designation of the people named in your powers of attorney with handle non-trust assets. If you don't have revocable living trust and you're using a will as your primary document, then the financial power of attorney becomes the primary document to handle financial affairs during a period of poor health. These documents need to be well-written and carefully thought out. And so we are gonna recommend that you work with a local estate planning attorney who's knowledgeable and can guide you through the specifics of your plan and your wishes. On the medical side, the medical powers of attorney are generally part of a medical advanced directive, which might compose of a medical power of attorney that would designate somebody to handle medical decisions on your behalf if you are unable to communicate with the doctors or the hospital, as long as they can speak to you, you'll be the, obviously the primary decision maker. But what if you're unable to share your wishes and your thoughts? Well, then the medical power of attorney will step in where you clearly designate who you would like to represent your medical wishes. It deals with the authority for medical professionals to release medical information to that third party. And so it's a very important document. And again, your estate planning attorney can help you create these documents. They also include a living will, which is end of life document where you state clearly your end of life wishes. So, these documents are designed to deal with a period of time when you lose the ability to make decisions yourself, but you're still alive. Both of these documents, the medical and the financial powers of attorney will come to an end when you pass away. And at that point, your will or your revocable living trust, or your beneficiary designations will kick in and start releasing funds to your selected beneficiaries. So, once you have these documents in place, and they should be reviewed every three to five years, making sure, taking a look at who you've named, a very important question is, who do you name in these roles? Well, if you're married or in a relationship, or you have a partner, that significant other, your spouse or significant other or partner may well be the person that you name, but you're going to need a backup in case that primary person is unable to serve. As you get older together, maybe unfortunately your spouse or significant other has passed away, or maybe they're having their own health issues. So in these documents, you may well have two or three people named in succession, a primary decision maker for finance, a primary for medical issues, a secondary and a tertiary. Can you name the same person in both roles? Absolutely. Can you name different people for finance and for medical issues? Absolutely. If you're naming different people, it's important that they work well together, because the medical and financial worlds do crossover when somebody becomes sick. Bills need to be paid, financial decisions related to medical issues need to be made. So, if you're naming one person for finance and one for medical issues, they are going to need to work well together and to coordinate and communicate well. And if not, that becomes an issue. Can you name two or more people in these roles? Yes. We would recommend that you talk to your estate planning attorney about this. On the financial side, you can name two or more. You can name with them with an end designation where they both have to sign on every transaction. They may run into challenges there 'cause some financial institutions might be uncomfortable handling a relationship where two signatures are required on every single transaction. So if you're gonna name two or more decision-makers, check with your bank and financial locations and see how they feel about that. Because if they're not comfortable honoring that arrangement, then we end up getting stuck. On the medical side, same situation, you could name two or more people as joint decision-making. The problem is what if they're not agreeing on both sides, financial, and medical. And if you have a disagreement between two or more decision-makers who have equal powers, then things can get stuck and become very problematic. Selection of the decision maker is difficult. You have significant others, spouses, partners, you have brothers, sisters, children, sons, daughters. And so one of the roles I serve is just kind of a general counselor talking to clients about who are you thinking about naming and the pros and cons. Sandy Spring Banks trust division could not be named in these roles. We can provide support to individuals who are named, and we can work with the outside professionals who sometimes are positioned to be named. Our role is generally to manage assets and to serve as a trustee, and to serve as a personal representative. And then do most of the heavy lifting through those documents and provide support to the outside assets outside of the trust. If you have questions about the bank role, reach out to me and I'd be happy to answer those questions. So, once you select your decision-makers, be it a spouse, significant other, brother, sister, keep an eye on brothers and sisters, because as you get older, they get older. So we have to be careful about that. Children, once you get outside of the immediate family and you start looking at cousins and nephews and nieces and friends, you need to realize this is a lot of work and a lot of responsibility. So you need to think carefully about who you're naming, and the burden that you're gonna be placing on their shoulders. And hopefully, today we'll talk about ways to reduce that burden and make things a little less challenging if possible. Once you have your documents and you've selected your decision-makers, item three is critical. Preparing the decision makers for their future role. Having a conversation with them. Give them a heads up. They need to know that they're named in these documents. They need to know where the originals are kept. In certain states, copies of the medical documents are accepted. In most states, originals of the financial powers of attorney are gonna be needed. So if you have your documents hidden in a safe place in your house, and no one knows where they're located or in a safe deposit box and the key is hidden and no one knows about the safe deposit box, and they don't know where the key is located, and then not a sign around the box to get into the box. We're gonna have delays and frustration. So if you've named somebody, open the door to communication, call them, tell them that they've been named, share with them the location of the documents. On the financial side, they're going to need to know where your assets are located, where are documents located? What type of insurance do you carry? Do you have long-term care insurance, life insurance, because they're gonna need to know the location of different assets, retirement accounts, investment accounts. You'll need to make sure that the financial locations are aware of your arrangements. You don't want your son, the door that knocking on the door of Merrill Lynch or Bank of America or Wells Fargo with a document they've never seen before that now might be five, 10, 15 years old. They may run into delays, problems, even a rejection of that arrangement. So, proactive discussions with both the people you've named in the document and your financial and medical locations is very important. On the medical side, your medical decision makers should know who they are and who your doctor is and have contact information. And your primary physician should know who your medical decision makers are. And how to get ahold of them if they need to. We're trying to plan for a difficult time. The time when you're unable to make decisions. And the people you've named in these documents along with maybe a trustee of a trust are gonna have to step in and take care of you financially and medically during a difficult time. Sandy Spring Trust can many times be positioned to provide support and help to these individuals. And we do a lot of proactive work where we'll have group discussions, where we make sure everyone's kind of aware of the roles and where things are located, and how we can prepare for this future event. And if we're prepared, it doesn't make it easy, but it might make it less challenging. And our goal is to protect your assets and to protect your wishes and make sure your financial and medical wishes are honored as you go through this difficult transition. Next item is account titling, which is very important. With the financial powers of attorney, you're designating somebody. If you have a revocable trust and the assets are in the trust, then the trustee named in the trust document is going to handle those financial decisions. It might well be the same person as the person who's named in the financial power of attorney, might be different. And again, they'll have to coordinate. The joint ownership. Sometimes clients will use joint ownership and then the joint owner has powers. And so we need to be careful about how we're setting up joint accounts. So, if a client sets up a joint account with a son, but names the daughter as the power of attorney on all assets, it can get a little tricky. So we just have to be careful about designations. On retirement accounts, many times clients get confused, because they have an assumption that the beneficiary on the retirement account will be able to take care of things if they go into a period of poor health, that's not the case. A beneficiary designation even if it's a spouse will get involved when the client passes away. They can't move up to a position of authority while the client's alive. A beneficiary has no authority until the client passes away. So, we need to have the powers of attorney on file with 401k locations, 403b, IRA account locations, annuities, all of your financial locations, life insurance that may be decisions needed to be made on life insurance. And again, the person with the financial power of attorney is gonna be the one making those decisions, but does the life insurance company recognize that person's authority? Next step is managing assets. The person named in your financial power of attorney is a fiduciary. They are legally responsible when they step into that role for managing assets on your behalf for your benefit. And they can be held liable if they violate their fiduciary duty. So, many times we are hired by fiduciaries individuals who are named in different legal roles to help them serve as a trustee, as an agent under a power of attorney, as a personal representative. In Sandy Springs Trust, because we are corporate trust division are very familiar with some of the issues. Managing assets for somebody else is different than managing assets on your own. And when somebody's sick, it gets very challenging because you have assets in bank accounts and CDs and investment accounts and retirement accounts. And you have tax considerations of where do you pull money from to pay bills? Do you cash in a CD early? Do you sell a stock triggering maybe a capital gain? Do you pull money out of a retirement account triggering an income tax consequence. Many times the bank can be hired to help counsel the individual to give them guidance as far as where to pull funds that would be most efficient from a tax and an investment standpoint. This can be overwhelming for whoever's named. They have their life. They might have their own issues regarding health, or they might have family or a job, and they're busy. They may not even be local. And now they're thrust into the role of taking care of a client during a period of poor health, which is such a difficult time for individuals. So, we can help clients figure out how to manage assets, because these investments may have been managed by the client. And now they're a little adrift because maybe the client can no longer keep an eye on them the way that they used to. When a client passes away, the role of the financial and medical powers of attorney kind of come to an end. And so then the role passes on to the trustee and the revocable trust, may be the personal representative. It might be the same person in different roles. So if my father named me as his agent within his financial power of attorney, he might also have named me as the backup trustee of his revocable trust. He might've also named me as his medical agent for medical decisions and as his personal representative. And then that one person is simply taking off different hats and serving in different roles using different documents as a document of authority and coordinating everything. One thing we stressed individuals is the people you name in your legal documents are gonna need help and support. I've been doing this for over 30 years. I'm an estate planning specialist. I'm a certified financial planner, but that would need help if I were trying to help somebody during a period of poor health. I'm not a lawyer, so I would need legal help. I'm not an accountant, I would need tax help. I'm not a portfolio manager, I would need help managing assets. And I don't have a medical background, so I would need medical support. We did a lot of work with local care managers who can be brought in to provide medical advocacy for families to help guide the families as far as tough decisions, does the client stay at home? Do we move them? Where do we move them? What type of care do they need? If they've been moved to a facility, are they getting the care they need? Are they being taken care of? So, sometimes we might have a care manager do spot checks and just go visit the client periodically and make sure the bedsheets are clean and the medication is being delivered properly. And that the client's doing okay. And having that second set of eyes can really improve the level of care that's being provided. The loss of capacity is such a difficult time for the client, obviously, but also for the loved ones around the client. And the people named in the documents can fill a huge burden and level of stress and level of responsibility. Sandy Spring Trust can be positioned to ease that burden and help guide the individuals through our own services, but also by coordinating with outside professionals in law, tax and healthcare. When the client passes away, a trust may be established for the benefit of a beneficiary. And the only area I would discuss here regarding financial and medical powers of attorney is that individual is going to need that documents to be in place. So, if you're a client and you're working on your estate plan and you have adult children, even if they're in their 20s or 30s, now it's a wonderful time to reach out to them and maybe help them get their estate plan in order, because yes, a 25 year old should have a financial power of attorney in place and a medical power of attorney in place. Because if they fall ill or have a period of time when they can't handle their affairs, somebody is gonna have to do that. And the parent does not have the legal right to step into the financial role when their son or daughter is an adult. They can if the individual is a minor, but if they're 25 years old, it'd be like the son trying to step into the bank and take care of the parents' affairs without the proper documentation. A parent can't step into a bank or financial location and take care of that son or daughter's affairs without the proper documentation. I know this whole process is complicated and confusing, but estate planning and financial planning is about protecting your affairs, protecting your world, your loved ones and yourself, and making sure your wishes are honored. Through these educational programs, we hope that some individuals watching might make the decision to review that document. So create new documents or create communication with the people that they've named. Take a look at their account titling, talk to that doctor and share a medical document with them to make sure that the doctor knows who to call if something occurs. Thank you for joining us today for our discussion of financial and medical powers of attorney. My name is Phil Fish. If you have questions you can call me at 3017854112. My email address is pfish, [email protected], and that information is provided at the end of today's discussion. Also there's a content fill button on the website if you wish to reach out to me, and I'd be happy to have a conversation with you and answer your questions and help in any way that I can. You bank with us, thank you for doing so. If you don't bank with us, I hope you might consider Sandy Spring Bank to be your financial partner in any way that we can serve. I hope you're safe during these difficult times. On behalf of Sandy Spring Bank, my name is Phil Fish. Thank you for joining us today. Be safe. And have a wonderful day.

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    This material is provided solely for educational purposes by Sandy Spring Trust, a division of Sandy Spring Bank, and is not intended to constitute tax, legal or accounting advice, or a recommendation for any investment strategy or transaction. You should consult your own tax, legal, accounting or financial advisors regarding your specific situation and needs. Our staff will work closely with your advisors to coordinate your overall plan. 

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