Incapacity Planning

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

Phil Fish, CFP® and Estate Planning Specialist with Sandy Spring Trust shares his over thirty years of experience as he provides a broad overview of important issues to consider in your incapacity plans. Topics will include Revocable Living Trusts, Financial and Medical Powers of Attorney, selection of decision makers, preparation of Fiduciaries for their future role during an illness, account titling, investment management during an illness, the importance of coordination between the financial and medical plans and how strong communication can help protect family members.

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    Incapacity Planning


    - 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 Sandy Spring Trust, the trust division of Sandy Spring Bank, and I've worked for the bank for over 20 years and have over 30 years of experience in the financial and estate planning industries. So thank you for joining the event today. You're joining us in one of two ways, some of you are joining the live event, so a happy Tuesday afternoon to you, and some of you have attended this program through our seminar library, so for you a good morning or good afternoon or good evening depending on the time of day, but thank you for joining us. For those of you on the live event, you'll notice that you look like you're the only person on the event, this is not like a Zoom meeting, so your video and your microphone are muted for privacy reasons so you can relax, no one's gonna hear background noise or no one can see your end of the camera, so hopefully you have the outline that was provided as part of the registration but if not, don't worry, you actually don't need that, I'll guide you through that. But I do hope that you have a pad of paper and a pen or a pencil because today's goal is to raise questions and raise awareness. Today's seminar is where they focus on incapacity planning. Within the seminar library, you will find hosted on Sandy Spring Bank's website under wealth, you will find a host of other topics such as revocable living trusts and wills and investments and taxes, so we're gonna cover kind of the same outline as I cover on all of the seminars but we're just gonna be paying particular attention to incapacity planning through the 10 items that I'll take you through. If you have questions, feel free to reach out to me afterwards, there's a contact fill button on the website, my email address and phone number are provided in various locations, or you can just contact Sandy Spring Bank and ask to speak to Phil Fish within the trust division. I'm a salaried employee of the bank and there is no cost or obligation to speak to me. I'm speaking to you today from the Sandy Spring Bank boardroom located in our main offices in Olney. And normally this room is filled with members of senior management and also members of our board of directors as they talk about the banks past, our present and our future, and we're a 153 year old financial institution. So if you bank with us, thank you so much for your decision to select Sandy Spring Bank as your partner, and if you don't bank with Sandy Spring Bank, we hope you might consider us for various services. We'd love to help you in any way that we can. So before we get underway, there is a brief disclaimer that I need to read and I'll explain why I'm reading this after I've finished, so if you'll bear with me one moment. This material is provided solely for the educational purposes by Sandy Spring Trust, a division of Sandy Spring Bank, and it's not intended to constitute tax, legal or accounting advice or recommendation for any investment strategy or transaction. You should always consult with your own tax, legal, accounting or financial advisors regarding a specific situation and needs. Sandy Spring Trust and the Sandy Spring Bank logo are registered trademarks of Sandy Spring Bank, and all rights are reserved. And I see that kind of notation is important as you go out there and you listen to different discussions and you read information online or listen to individuals, please be aware that any time that someone like me is discussing financial estate planning issues, we're gonna do it in a pretty broad spectrum, is one of the reasons we don't take questions in these formats is to be honest, if I received a question from one of the audience on the live event because I know nothing about their background, the answer that that would provide would have to be so broad and so generic, it really wouldn't have much meaning and it might be the wrong answer because I don't have the information behind that client situation. Two individuals with similar ages, similar family structures, even similar assets might ask a similar question, but because of specific nuances in their goals and objectives, the answers provided regarding their financial estate plans may can be completely different. Every individual is unique and your financial and estate plan should be tailored to your specific goals, your objectives and your needs. If you'd like help with those issues, feel free to reach out to me and I'd be happy to chat with you via phone or in person when we get to the point that we're able to meet in person. This event's being held during the transition as we kind of come out of the pandemic and we start to get back into interactions, reach out to me and we'll certainly be able to have a conversation with you in some form and I'd be happy to answer questions. So that's kind of the introduction for today's event, so please relax, hopefully have a cup of coffee or tea or a beverage, a pad of paper and a pen, and we're gonna talk today about incapacity planning. It's a difficult topic. So if you yourself are dealing with declining health or if you're dealing with a loved one who is facing a period of declining health, or you recently dealt with a situation like that, I'm so sorry. It's one of the most difficult situations we face when a loved one struggles and loses their ability to make decisions. And so it's an important topic that we're gonna talk about today but it is a difficult one, but I'm gonna have to be fairly blunt and direct about some of these issues because what we're gonna focus on is protecting the client from all types of different risks and concerns, and that means planning and being honest and being direct and trying to get ahead of this. So item number one on our agenda, our legal documents. I'm not an attorney, we have lawyers who work at Sandy Springs Trust, they're not allowed to be our client's, lawyers, they're not allowed to draft legal documents, so when we work with clients, we're gonna work with your attorney or we can give you names of local attorneys in the region. With regards to estate and incapacity planning, my strong recommendation is to work with an estate planning attorney who is familiar with the state laws where you live, Maryland, DC, Virginia, Florida, New York, California, every state has slightly different nuance, slightly different rules, and slightly different adjustments to the documents. So if you've recently moved to a different state or if you're looking to do either update your documents or create new documents, please do work with an estate planning attorney who is familiar with the laws in the state where you are resident. With regards to estate planning, there are four documents we talk about frequently, a will, a financial power of attorney, a medical advance directive, and a revocable living trust. We're gonna talk in incapacity about three of those four documents. The will deals with when someone passes away. So I do a different seminar on wills and on estate issues, and so certainly we're not gonna talk a lot about a will today because if my father, who has passed on, but if he were alive and he became sick, I couldn't use his will to access his accounts if I walked into Bank of America or Wells Fargo and I was named as his personal representative in his will and he's still alive, I wouldn't be able to access information. The way I do that on financial affairs is through two documents, a financial power of attorney and a revocable living trust. Some clients use revocable living trust as part of their estate plan. And that's the document and I have a separate seminar that talks more about revocable trust, but it helps manage assets while a client's alive, when they become sick, when they die, and can even help after they passed away to protect assets. Within a revocable living trust there are trustees name, The client many times is the original trustee, so if my father had a trust, it would be the George Roger Fish Revocable Living Trust, George Roger Fish Trustee. If he named me as his backup trustee to handle his affairs during illness or death, then I would be named as a successor trustee. I would not have any legal authority or the ability to access his accounts while he was alive and healthy, but within the trust there would be a mechanism that would stay under these conditions, Phil's gonna step into the role of trustee and manage his father's affairs. And that's something we'll talk about during today's discussion is how do we get from my father being in control to me, many times that transition is not smooth and it's very challenging. If my father had a revocable living trust, he would also have a financial power of attorney to deal with financial affairs during his illness on non-trust assets, things like retirement accounts, so it maybe an insurance policy, or maybe dealing with taxes or social security. So the financial power of attorney is a compliment to the trust during incapacity. Some of our clients don't have a revocable living trust, they have a will for when they pass away and then they use the financial power of attorney as their primary document. So no matter which path you're going down, if you have a revocable living trust, you're gonna be using the trust and the powers of attorney to deal with incapacity, if you don't have revocable living trust, you will have a will, which doesn't apply to incapacity, so your financial powers of attorney will be your primary document. And we'll talk more about those as we go through today's program. Bottom line, if you're on this call and you're an adult, doesn't matter how old you are, whether you're married or single, widowed, have children, don't have children, everyone should at least have a will, a financial power of attorney and a medical advanced directive which deals with medical decisions, and some individuals would have revocable living trust, a financial power of attorney, a will, and a medical advanced directive. If you have questions about estate planning, reach out to me or other professionals. And I hope through the series, we motivate as many people as we can to get the legal documents that you need to have in place. Part of your estate plan within your legal documents is that you're gonna name decision-makers, so I'll introduce you to two of my friends, Steve and Susie, they are hypothetical decision makers within your documents, they might be your spouse, your significant other, your partner, your son, your daughter, nephews, nieces, friends, it's an individual, it might be a bank, a corporate trust division, Sandy Spring Trust is three things, we professionally manage assets under federal fiduciary standards, we're named in legal documents as a trustee or as a personal representative, and we're hired to provide support to individuals like Steve and Susie to help them, and we're gonna talk a lot today about providing help to the people that you've named in your documents who are gonna take care of you during a period of poor health. So we have to select individuals, could be a spouse but you need to realize that as you get older your spouse gets older and/or your significant other or your partner, plus if your health declines, it's a very difficult time for that individual who is so close to you and they may be struggling health-wise, so we need to have a support system in place and you need to have a backup, you can't just name your spouse, some people name brothers and sisters, you need to keep an eye on ages though, my sister is older than I, she just celebrated her 70th birthday, so she's still fine health-wise, but I'm 15 years younger, so when I turn 75, she would be 90 years old. So we need to keep an eye on legal documents as far as who you've named in your documents, are they still able to serve in the role that you're asking them to serve in? And you need backups, you can't just name one person, so you need to have kind of a succession, this person, and if they're not available, then this person, and if they're not available, maybe a third backup. So when I talk to clients one-on-one, we talk a lot about estate planning documents, we talk about decision-makers who you've named. This leads us to item number three which is critical especially for incapacity planning which is preparing the decision makers for their future role. If you get nothing from today's discussion and this is a item I bring up in pretty much every seminar series that I host, it's communication with your decision makers, whoever you've named in your documents, your future trustee, your future agent and your powers of attorney, your finance of medicine, your personal representative, and your will, talk to them, reach out to them, make sure that they're aware that they're named, have conversations with them over a cup of coffee or a stiff drink. Make sure that they're willing to serve. Make sure they know where your documents are located, the original documents, if they're in a safe deposit box, where's the key? Are they assigner on the contract that would allow them to get access into the safe deposit box? Where are your documents kept? Passwords to computers? If you have accounts that are online, are they aware of them? Do they know how to access them? Because when you become sick, the person that you've named in these incapacity roles is gonna have to do everything you do, handle all of your finances, handle your real estate, business relationships if you have business accounts, real estate holdings, deal with taxes, insurance, manage your finances, pay your bills, everything. So they have to be prepared because if not, they're gonna get a phone call one day and it's gonna be so hard for them to step up quickly, and the thing with incapacity planning, we need to be prepared to move quickly because the decline in health can be rapid and things need to be handled quickly. So communication and preparation with your future decision makers is so important. Next up on our list is titling of assets. You might not think that's important with incapacity planning but it actually is critical. You start with a revocable living trust, you go to the lawyer, you create this wonderful revocable living trust, it's a legal agreement that states that George Roger Fish is gonna place his assets into the trust. He will be in control of the trust assets while he's alive and healthy and then Phil Fish's son will step in as the trustee If his health declines. The document itself will outline clearly when I can step in, maybe it's upon his death, his resignation, maybe one physician signing off some documents, require two physicians signing off, we'll talk about that a little bit later because that can be tricky. But a common mistake made with revocable living trust is titling of the assets. The trust document and the provisions within it control the assets that are titled in the name of the trust. If my father did not retitle his real estate or bank accounts or investment accounts into the name of the trust as directed by the estate planning attorney, the trust doesn't help me if I walk into Bank of America and the accounts are in my father's individual name, he never moved them into the trust name and I have this big thick trust document that says I have the authority to act. It only applies to assets that are titled properly. So if you are using a revocable living trust for incapacity planning issues, having the assets titled in the name of the trust is critical because then it will allow the trustee, the legal authority to act on the trust assets when that time comes. With financial powers of attorney, they generally apply to individual or joint accounts. But with that, it's a different situation with that, the key thing is to make sure your financial institution is aware of the financial power of attorney and has a copy on file. So if my father had accounts at Sandy Spring Bank and Merrill Lynch and Bank of America and Wells Fargo, if I called them up and the accounts are in his individual name, I go, hi, my name's Phil Fish, my father has accounts with you, and he's sick and I need to pay some bills, I need to check to see if a check has cleared, I need to transfer some funds, what's next? Well, they're gonna pull up the file. For me to have access to my father's account, requires one of two scenarios. One is, let's say three, I could in theory be a joint account and we'll talk about that later cause that's probably not the best solution. What he should have done is either have a revocable trust and have me as a trustee, or have accounts in his individual name, have a financial power of attorney, which is a document that names me as a decision maker, somebody with the legal authority to act on my father's assets during a period of illness, actually technically, I could act when he's out playing golf or fishing, so my father has to trust me cause he's giving me the authority to act on his behalf, in many cases, whether he's sick or not. You have questions on financial powers of attorney, you can reach out to me or your local estate planning attorney, but they are incredibly powerful documents. And because of the power they grant, the ability for me to do anything that I need to do financially, close out accounts, wire-transfer money, write checks, sell stocks, buy stocks, transfer investment accounts, I have the same power financially that my father has. Well, banks and financial institutions are gonna be very nervous about giving me that power unless they're very comfortable with the arrangements. How do they get comfortable? Well, the best way is for my father while he was alive and healthy, to have conversations with Sandy Spring Bank, Merrill Lynch, Wells Fargo, T. Rowe Price, and find out their policies and their procedures. Some would want a copy of the financial power of attorney that he created with his attorney to be shared with them. Some of the larger institutions may have their own financial power of attorney that their lawyers have created because they're so large and they have clients in all 50 jurisdictions in 50 states, they just don't wanna try and dig their way through all of these different legal documents, so the larger institutions may have their own power of attorney, and they might say to my father, rather than sharing yours, that's very important, it's good that you have it, we'd like you to fill out our form, and that's fine. The key question is when I call that financial institution and they pull up the little blue screen, is my name referenced as an agent under the financial power of attorney? Or do they have reference of me being a successor trustee in the trust? If they already are aware of my role, generally, we find that the transition is much smoother than if I walk in with a document they've never seen before that now maybe 10, 15, even 20 years old, and asked to have full access to my father's accounts and my father can not speak to them because my father is sick and can no longer communicate. And in that situation we may face delays, frustration, even the refusal to accept my authority and I have to get lawyers involved and it gets really troublesome. What's the summary of this conversation? It's communication, not only with your financial decision makers, but also with your financial locations. Also, if you can reduce the number of locations, that would be really helpful. How many phone calls am I gonna have to make on behalf of my father? How many accounts does he have? How many locations does he have? The more accounts, the more difficult it's gonna be for me to try and content all of these different locations and all of them have slightly different rules and policies and procedure. This is a tough assignment, one thing you can do to make it easier for the person you're asking to take care of you when you become sick is make sure you have the right legal documents in place, make sure you have a conversation with them about location of documents, location of accounts, passwords and then talk to your financial locations and talk to them about incapacity and be specific, if I become sick, how do things work? How do I get my son, the ability to access these accounts so that he can take care of or she can take care of my affairs? I mentioned joint ownership, if somebody called me and said, should I add my son or daughter on as a joint owner? My normal kind of feeling is no. And the reason is joint ownership is different. If my father sets me up as a trustee or as an agent, I have the authority to act, but I don't have ownership, meaning if I get in trouble financially, that trouble cannot pass upwards to my father's accounts because I'm not an owner of his accounts. I'm just authorized to act on his behalf if he has a health issue, that's a different situation. But if he asked me as a joint owner and I get divorced, sued, in a car accident, sick, financially in trouble, he's opened the door to risk that people coming after me can reach up and go after those joint assets. Also that joint ownership overrides any estate plan he has in place, any he wills or trusts, those assets are gonna flow directly to me when he dies and that may not be his intent. So generally, joint ownership with husband and wife, certainly is fine, with non spouses, with children, talk to your estate planning attorney, talk to somebody familiar with these issues and just be cautious about doing that. So on the investment side with incapacity planning, what we're talking about here is when my father becomes sick, I become legally responsible for his investments. I have to take over the role of managing his financial affairs, his retirement accounts, his investment accounts, real estate holdings, business holdings If he has businesses. A business owner needs to do some extensive financial and estate planning and really think about who is running the business, it might be somebody different than who's running their personal financial affairs and they're gonna need good deep estate planning council if they're a business owner. But even for non-business owners, if I take over my father's affairs, I'm not sure managing his assets, and managing money for somebody else is different than managing your own money, you're now a fiduciary, you're legally responsible for your actions and you're expected to manage these assets prudently. And managing funds during an illness is difficult, my father may suddenly have some very large medical bills, where do I access cash to pay those? Do I pull money out of his 401k or his IRA? Do I sell stocks and trigger capital gains? Do I cash in CDs? Do I pull money from savings? One of the role Sandy Spring Bank trust division provides is providing support and counsel to family members who are named as decision-makers because you're faced with some very difficult decisions on how to access funds and how to pay the bills and take care of the client. Real estate, my father is in the hospital or in a skilled nursing facility or an assisted living facility, what do we do with his residence? Do we sell it? Do we rent it? This is a side note, having a property vacant, can cause a lot of problems, many insurance companies will not insure a house that is empty, or they may want to increase the rates that they charge, bottom line, if the house is empty, you need to call your insurance company and tell them, because if you don't and something bad happens, and you have an informed them, you might have some issues there. And so many insurance companies are not happy because they know a vacant house is a higher risk cause if a pipe bursts and there's water leaking, no one's there to know about it, and there's more likelihood of damage and neglect. So if your house is empty, you need to think about that. Also, what about the contents of the house? Are there valuables in the house? Jewelry, cash, gold coins, stamp collections, valuable pieces of artwork, your decision-maker is gonna have to protect the assets, not just protect you, but also protect your investments, your personal belongings, how do we safeguard them? It's why this is a very, very challenging assignment. So after we deal with investments, let's talk about support. I've been doing this for over 30 years, I've been a certified financial planner for over 20 years. I'm an estate planning specialist. I'm kind of a problem-solver within the trust division. If a family member named me as a decision maker in their incapacity plans, I would need help for five reasons, one, I would need legal help, being a decision maker, there's legal issues involved. So I might need some legal assistance. Taxes, I'm now responsible for my father's tax returns, so I might need some tax help. Where are his tax records kept? Where does he have investments? So I wanna make sure I get all of the 1099 forms that I need to get. What kind of tax planning do I need to do with those stocks and charitable contributions that he used to make and all of those issues I'm now responsible for? I'm gonna need help on the tax side. On the financial side, I would need help. I'm a certified financial planner, I do not manage assets for my clients, I don't even manage assets for my wife and I, I hire professionals mainly because of time and also the professionals that I work with are much more skilled than I, they are professional portfolio managers. It's what they do. It's their career. And they have a much greater depth of knowledge in regards to investments than I do. But if I were responsible for my father or somebody else's affairs, I would want to get good investment advice to make sure that I have counsel on what options are available, what does my father currently have in place? And how am I gonna deal with these different decisions? Where do I raise funds from? Do I just keep the investments as is, should I be making adjustments to the portfolio? All of these issues are falling on the shoulders of the family member or friend that you've named in your documents. It's why we get positioned many times either as the decision maker because clients realize that they're asking too much of this individual or as a support system to that individual to help them in their role. Incapacity, so when the event occurs, we need to think about support systems. How are we gonna know that there's a problem? So if I'm my father's decision maker but let's say I'm not local, how am I gonna be aware of my father is in trouble? So we need to have a conversation about contact points, maybe I have the telephone numbers and email addresses of my father's friends, his golfing buddies, his bridge partners, his fishing friends, his neighbor, people who interact with my father on a regular basis, so if I can't get a hold of that, for some reason, I have people I can call to say, hey, I can't reach dad, he hasn't returned my call, it's a little unusual, have you seen him? Is he okay? Can you check on him? Those individuals around my father need to know that I am my father's decision maker for financial and medical affairs. You can name different people for financial and medical issues. That's done sometimes, you need to make sure those two people get along. So if my sister is the medical decision maker and I'm the financial one, we're gonna have to work closely together, so we wanna make sure that we can do so, if we don't get along very well, naming us in these separate roles is not gonna work out very well. You can name the same person in both financial and medical roles and they can then reach out to people for help. So maybe I have a strong financial background but I'm gonna lean heavily on a friend or a family member with a stronger medical background. I can be the medical decision maker but I can get counsel from others. So I'm gonna need help with legal issues, tax issues, financial issues, health issues, if my father is in a assisted living or nursing facility is he okay? Is he being given the right level of care? I could go visit him, but I don't have a medical background, so I'm not gonna know if he's in good shape. The biggest thing I'm gonna need help with though is time. I'm busy, I have a career, I'm married, I have a life, If my father is local, it would be a challenge, If he's not local, it will be incredibly challenging. So whoever you're thinking of naming in this incapacity role realize they're gonna need help, legal help, tax help financial help, healthcare help, help with time, and that's one of the roles Sandy Spring Trust provides is a support mechanism where we're either named as that decision-maker or we're positioned to provide support to the family member or friend who is named. With estate settlement when someone passes away, obviously the incapacity plan kind of comes to a close unfortunately, and the estate settlement piece begins, and sometimes trusts are established beyond the death of my father. And the only real incapacity issue we see then is one, if he's named decision-makers for saying let's set up a trust, so let's say one of the family members had a health issue and he established a trust for that individual and named me as a trustee of that trust, but what happens if I get sick, who's gonna step in to take over the role of managing the trust for the benefit of a loved one. So even with incapacity planning, we do think even after the client dies, there may be a need for a discussion on incapacity either what happens as far as taking care of the family member that the trust is established if they become sick or what happens if the trustee of that trust becomes sick? It's a lot too go over today and for some of you on the call, if you have a stronger background in financial estate planning, some of the information I shared with you will seem very fundamental and very basic and I say, I don't apologize for that because we have a wide range of audience, just understand that not everyone has your level of expertise. And for those of you who are learning about financial estate planning, it's overwhelming, and I know, we covered a lot today in the time that we had. And I probably raised a lot of questions about a lot of different areas. Feel free to reach out to me. My full-time role is I used to be a trust officer but we have full time dedicated trust offices who handle clients relationships. I do not manage assets, we have full-time portfolio managers. My role is to do this, speak publicly, share information and be a resource. So if I can answer any of your questions, just click the contact fill button on the website or reach out to Sandy Spring Bank and ask to be connected with me, and my email address and my phone number will be listed on the screen at the end of today's program. If you are dealing with the decline of your own health, I'm so sorry, it's difficult, if you need help, there are people around you who care about you and if not, give us a call, and we'll try and connect you with individuals who can help, it might be us, it might be other professionals that we work with, but I'm sorry you're going through that difficult time. If you're a family member dealing with another family member or a friend who's dealing with a declining health, if you're helping them, thank you, it is a thankless job, so on behalf of the community, on behalf of the individual who's sick, thank you for the effort that you're putting in. I know personally how much, how hard the role is and how difficult it is, and if we can help you in any way, feel free to give us a call and we'll see if we can be of assistance. For those of you who bank with us, thank you so much. I hope you enjoy today's program on incapacity planning. Please feel free to view other programs in the seminar library. I'm also the host of a professional discussion group library which is also on the website where I interview local professionals on a number of topics and some of them do involve incapacity planning. Feel free to take a look at the professional discussion library located on the Sandy Spring Bank website. And you can hear my voice again though not as much since I'll be interviewing professionals in law, tax, finance and healthcare, so I don't speak as much as I did today. Thank you for joining us. And if you bank with us, thank you, and if you don't bank with us, I hope you might consider Sandy Spring Bank for any of your financial estate planning, banking or lending needs. Give us a call, we'd love to be of service. I hope you're safe, and on behalf of Sandy Spring Bank 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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