Can a Power of Attorney Withdraw Money from Bank Account?

A power of attorney, or POA, is a legal document giving another person the legal authority to make financial and legal decisions on your behalf. Known as an agent or attorney-in-fact, you should only name someone to be your POA, if you trust them implicitly and believe they will always manage your affairs with your best interest in mind, according to the recent article titled “Can A Power Of Attorney Transfer Money To Themselves?” from Washington Independent.

There are different types of power of attorney and ethical and legal considerations surrounding the transfer of money. The two main types of POA are general POA and durable POA. A general POA gives the agent broad authority to handle financial and other matters on your behalf, and the power ends if you become incapacitated. A durable POA remains in effect, if you become incapacitated and continues until your death or until it is revoked.

The powers given to an agent vary widely depending on the state laws governing the document, and also vary depending on the specific document. In general, an agent can use the POA to handle a wide range of financial matters, including paying bills, managing investments, buying and selling real property and signing legal documents.

Using non-state specific blank forms downloaded from the web leads almost always leads to complicated (read: costly and time-consuming) problems for an agent. The specific powers granted to the agent need to be spelled out in the document. For example, you may wish for your POA to manage paying household bills, but not to sell the house.

There are also ethical considerations. While the POA gives the agent the authority to transfer money on your behalf, they are fiduciaries and are held to a higher standard of ethics. They must act in your best interest at all times.

Transferring money from your account to the agent’s account for their benefit would be a clear violation and could result in legal consequences, including criminal charges. The transfer could be challenged in court and the agent could be held accountable for any damages.

If you are concerned about a person abusing this role, there are steps to take to minimize the risk.

Chose a trustworthy and reliable person to serve as your agent.
Limit the powers granted by having a customized Power of Attorney drafted by an experienced estate planning attorney. The document could specify that the agent is not permitted to transfer money to themselves or use your funds for their personal benefit.
Monitoring the action of the agent. If you are incapacitated, name a person to monitor the agent and provide them with contact information for your estate planning attorney if there are any questions.

Reference: Washington Independent (Feb. 7, 2023) “Can A Power Of Attorney Transfer Money To Themselves?”

What Is Included in an Estate Inventory?

The executor’s job includes gathering all of the assets, determining the value and ownership of real estate, securities, bank accounts and any other assets and filing a formal inventory with the probate court. Every state has its own rules, forms and deadline for the process, says a recent article from yahoo! Finance titled “What Do I Need to Do to Prepare an Estate Inventory for Probate,” which recommends contacting a local estate planning attorney to get it right.

The inventory is used to determine the overall value of the estate. It’s also used to determine whether the estate is solvent, when compared to any claims of creditors for taxes, mortgages, or other debts. The inventory will also be used to calculate any estate or inheritance taxes owed by the estate to the state or federal government.

What is an estate asset? Anything anyone owned at the time of their death is the short answer. This includes:

Real estate: houses, condos, apartments, investment properties
Financial accounts: checking, savings, money market accounts
Investments: brokerage accounts, certificates of deposits, stocks, bonds
Retirement accounts: 401(k)s, HSAs, traditional IRAs, Roth IRAs, pensions
Wages: Unpaid wages, unpaid commissions, un-exercised stock options
Insurance policies: life insurance or annuities
Vehicles: cars, trucks, motorcycles, boats
Business interests: any business holdings or partnerships
Debts/judgments: any personal loans to people or money received through court judgments

Preparing an inventory for probate may take some time. If the decedent hasn’t created an inventory and shared it with the executor, which would be the ideal situation, the executor may spend a great deal of time searching through desk drawers and filing cabinets and going through the mail for paper financial statements, if they exist.

If the estate includes real property owned in several states, this process becomes even more complex, as each state will require a separate probate process.

The court will not accept a simple list of items. For example, an inventory entry for real property will need to include the address, legal description of the property, copy of the deed and a fair market appraisal of the property by a professional appraiser.

Once all the assets are identified, the executor may need to use a state-specific inventory form for probate inventories. When completed, the executor files it with the probate court. An experienced estate planning attorney will be familiar with the process and be able to speed the process along without the learning curve needed by an inexperienced layperson.

Deadlines for filing the inventory also vary by state. Some probate judges may allow extensions, while other may not.

The executor has a fiduciary responsibility to the beneficiaries of the estate to file the inventory without delay. The executor is also responsible for paying off any debts or taxes and overseeing the distribution of any remaining assets to beneficiaries. It’s a large task, and one that will benefit from the help of an experienced estate planning attorney.

Reference: yahoo! finance (Dec. 3, 2022) “What Do I Need to Do to Prepare an Estate Inventory for Probate”

What Happens to Investment Accounts when Someone Dies?

Taking responsibility for a decedent’s probate or trust estate often involves managing significant amounts of wealth, whether they are brokerage accounts or cash assets. Today’s volatile markets add another level of complexity to this responsibility. The article “Estate Planning: Investments during administration of decedent’s estate” from Lake County News explains what estate administrators, executors and trustees need to know as they take on these tasks.

Investment account values are in a constant state of change and may include assets now considered too risky because they are owned by the estate and not the individual. The administrator will need to evaluate the accounts in light of debts owed by the decedent, the costs in administering the estate and any gifts to be made before the estate will be closed.

At the same time, too much cash on hand could mean unproductive assets earning less than they could, losing value to inflation. If there is a long time between the death of the owner and the date of distribution, depending on markets and interest rates, having too much cash could be detrimental to the beneficiaries.

The personal representative or trustee, as relevant, may determine that the cash should be invested, shift how existing investments are managed, or decide to sell investments to generate cash needed for debts, expenses and distributions to beneficiaries.

A personal representative is not expected or required to be a stock market expert. Their duties are to manage estate assets as a person making prudent decisions for the betterment of the estate and heirs. They must put the interest of the estate above their own and not make any speculative investments. With the exception of checking accounts, the expectation is for estate accounts to earn something, even if it is only interest.

If the personal representative has the authority to do so, they may invest in very low-risk debt assets. If the will includes investment powers and if certain conditions safeguarding payment of the decedent’s debts and expenses are satisfied, the personal representatives may invest using those powers. In some instances, a court order may be needed. An estate planning attorney will be able to advise based on the laws of the state in which the decedent resided.

For a trust, the trustee has a fiduciary duty to invest and manage trust assets for beneficiaries. Assets should be made productive, unless the trust includes specific directions for the use of assets prior to distribution. The longer the trust administration takes and the larger the value of the trust, the more important this becomes.

In all scenarios, investment decisions, including balancing risk and reward, must be made in the context of an overall investment strategy for the benefit of heirs. Investments may be delegated to a professional investment advisor, but the selection of the advisor must be made cautiously. The advisor must be selected prudently and the scope and terms of the selection of the advisor must be consistent with the purposes and terms of the trust. The trustee or executor must personally monitor the advisor’s performance and compliance with the overall strategy.

Reference: Lake County News (June 11, 2022) “Estate Planning: Investments during administration of decedent’s estate”

Your Cryptocurrency and NFTs Need to Be Included in Your Estate Plan

As more people continue to purchase cryptocurrencies and non-fungible tokens (NFTs), digital assets are becoming a bigger part of the investment world and of people’s estate plans. If you want to pass these assets to loved ones upon death, you’ll need to plan for it, says the article “Got Cryptocurrency or NFTs? They Need to Be in Your Estate Plan” from Kiplinger. Otherwise, securing, transferring and gifting crypto and NFTs can create unsolvable problems and lost assets.

There are many different kinds of crypto and NFTs, with Bitcoin, Ethereum, Binance Coin, Thether among them. An NFT is a unique, collectable, and tradable digital asset, like digital art or a photo. NFTs are purchased through a bidding process in this universe and in the metaverse, an online world where people are buying homes, real estate and more in the shape of NFTs. Sales of NFTs are estimated to have reached more than $17 billion in 2021. For better or worse, the future is here.

Cryptocurrency is accessed through a private key. This is a series of alphanumeric characters known only to the owner and stored in cold storage or a digital wallet. Whoever has possession of the key can buy, sell and spend the digital currency. If you have crypto, your family or fiduciary needs to know what you have, where to find the assets and what to do with them.

One option is to share the private key or place crypto assets and NFTs in custody, using a software application or a hardware wallet. There are a number of companies now offering these services. An old-school option for this new world asset is to create a secure spreadsheet of your digital assets and list the login protocols for each account.

For now, it is difficult to open crypto accounts and NFTs in the name of a revocable or irrevocable trust. However, digital wallets allowing you to open an account in the name of a trust do exist, if the company handling the digital asset permits. This is a very new, rapidly evolving asset class. Beneficiaries may not yet be named for crypto accounts. However, this may change in the future.

With no trust account and no named beneficiary, what happens to your crypto and NFTs when you die? For now, they must pass through your probate estate under the will. Your estate planning attorney will make sure your estate plan includes the correct way to give digital asset powers for the fiduciary handling your estate and include digital asset powers in your will, trust, and durable power of attorney.

If your state has adopted the Uniform Fiduciary Access to Digital Assets Act (UFADAA) or the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA)—46 states have—then it will be easier for loved ones to manage digital assets in case of incapacity or when you pass, as long as your estate plan addresses them.

Reference: Kiplinger (May 23, 2022) “Got Cryptocurrency or NFTs? They Need to Be in Your Estate Plan”

How to Handle Digital Assets in a Will

Now that cryptocurrency has become almost commonplace, it is necessary to incorporate it into estate plans and their administration, according to the article “Estate planners want to keep the crypt out of cryptocurrency” from Roll Call.

One advantage of using cryptocurrencies in estate planning is the ease of transference—if all parties know how crypto works. Unlike a traditional bank, which typically requires executors to produce an original death certificate and other documents to take control of accounts in the estate, cryptocurrency only requires the fiduciary to have passcodes to gain access to accounts.

The passcode is a complex, multicharacter code appearing to be a long string of unrelated numbers and letters. It is stored in a digital wallet, which can only be accessed through the use of the 64-digit passcode, also known as a key.

While the passcode is simple, it is also very vulnerable. If the key is lost, there is no way to retrieve it. The executor must know not just where the key is physically located if it has been written down on paper, or if it is kept in a digital wallet, but how to access the digital wallet. There are also different kinds of digital wallets.

People do not usually share their passwords with others. However, in the case of crypto, consider storing it in a safe but accessible location and telling a trusted person where it may be found.

People who own cryptocurrency need to give someone access info. If someone is named an executor at one point in your life and they have the information about digital assets, then at some point you change the executor, there is no way to guarantee the former executor might not access the account.

How do you protect digital assets? Using “cold storage,” an account passcode is stored and concealed on a USB drive or similar device, allowing the information to be shared without the user needing to learn the passcode to access the account. The cold storage USB drive can be given from one fiduciary to the successor fiduciary without either knowing the passcode.

Many bills have been introduced in Congress addressing cryptocurrency and blockchain policies. The IRS has issued a number of notices and publications regarding taxes on digital currency transactions. Crypto is no longer an “invisible” asset.

In addition to policies and regulations, litigation concerning estates and cryptocurrency is still relatively new to the judiciary. Planning for these assets to ensure they are passed to the next generation securely is very important as their use and value continues to grow.

Reference: Roll Call (Feb. 22, 2022) “Estate planners want to keep the crypt out of cryptocurrency”

Who Is the Best Choice for Power of Attorney?

Picking a person to serve as your Power of Attorney is an extremely important part of your estate plan, although it is often treated like an afterthought once the will and trust documents are completed. Naming a POA needs to be given the same serious consideration as creating a will, as discussed in this recent article “Avoid powers of attorney mistakes” from Medical Economics.

Choosing the wrong person to act on your behalf as your Power of Attorney (POA) could lead to a host of unintended consequences, leading to financial disaster. If the same person has been named your POA for healthcare, you and your family could be looking at a double-disaster. What’s more, if the same person is also a beneficiary, the potential for conflict and self-dealing gets even worse.

The Power of Attorney is a fiduciary, meaning they are required to put your interests and the interest of the estate ahead of their own. To select a POA to manage your financial life, it should be someone who you trust will always put your interests first, is good at managing money and has a track record of being responsible. Spouses are typically chosen for POAs, but if your spouse is poor at money management, or if your marriage is new or on shaky ground, it may be better to consider an alternate person.

If the wrong person is named a POA, a self-dealing agent could change beneficiaries, redirect portfolio income to themselves, or completely undo your investment portfolio.

The person you name as a healthcare POA could protect the quality of your life and ensure that your remaining years are spent with good care and in comfort. However, the opposite could also occur. Your healthcare POA is responsible for arranging for your healthcare. If the healthcare POA is a beneficiary, could they hasten your demise by choosing a substandard nursing facility or failing to take you to medical appointments to get their inheritance? It has happened.

Most POAs, both healthcare and financial, are not evil characters like we see in the movies, but often incompetence alone can lead to a negative outcome.

How can you protect yourself? First, know what you are empowering your POAs to do. A boilerplate POA limits your ability to make decisions about who may do what tasks on your behalf. Work with your estate planning attorney to create a POA for your needs. Do you want one person to manage your day-to-day personal finances, while another is in charge of your investment portfolio? Perhaps you want a third person to be in charge of selling your home and distributing your personal possessions, if you have to move into a nursing home.

If someone, a family member, or a spouse, simply presents you with POA documents and demands you sign them, be suspicious. Your POA should be created by you and your estate planning attorney to achieve your wishes for care in case of incapacity.

Different grown children might do better with different tasks. If your trusted, beloved daughter is a nurse, she may be in a better position to manage your healthcare than another sibling. If you have two adult children who work together well and are respected and trusted, you might want to make them co-agents to take care of you.

Your estate planning attorney has seen all kinds of family situations concerning POAs for finances and healthcare. Ask their advice and don’t hesitate to share your concerns. They will be able to help you come up with a solution to protect you, your estate and your family.

Reference: Medical Economics (Feb. 3, 2022) “Avoid powers of attorney mistakes”

What Power Does an Executor Have?

Being asked to serve as an executor is a big compliment with potential pitfalls, advises the recent article “How to Prepare to Be an Executor of an Estate” from U.S. News & World Report. You are being asked because you are considered trustworthy and able to handle complex tasks. That’s flattering, of course, but there’s a lot to know before making a final decision about taking on the job.

An executor of an estate helps file paperwork, close accounts, distribute assets of the deceased, deal with probate and any court filings and navigate family dynamics. Some of the tasks include:

Locating critical documents, like the will, any trusts, deeds, vehicle titles, etc.
Obtaining death certificates.
Overseeing funeral arrangements and memorial services, if any.
Filing the will in probate court.
Creating an estate bank account, after obtaining an estate tax number (EIN).
Notifying organizations, including Social Security, pension accounts, etc.
Paying creditors.
Distributing assets.
Overseeing the sale or transfer of real estate
Filing estate tax returns and final tax returns.

If you are asked to become the executor of an estate for a loved one, it’s a good idea to gather as much information as possible while the person is still living. It will be far easier to tackle the tasks, if you have been set up to succeed. Find out where their estate planning documents are and read the documents to make sure you understand them. If you don’t understand, ask, and keep asking until you do. Similarly, obtain information about all assets, including joint assets. Find out if there are any family members who may pose a challenge to the estate.

Today’s assets include digital assets. Ask for a complete list of the person’s online accounts, usernames and passwords. You will also need access to their devices: desktop computer, laptop, tablet, phone and smart watch. Discuss what they want to happen to each account and see if there is an option for you to become a co-owner of the account or a legacy contact.

Many opt to have an estate planning attorney manage some or all of these tasks, as they can be very overwhelming. Frankly, it’s hard to administer an estate at the same time you’re grieving the loss of a loved one.

As executor, you are a fiduciary, meaning you’re legally required to put the deceased’s interests above your own. This includes managing the estate’s assets. If the person owned a home, you would need to secure the property, pay the mortgage and/or property taxes and maintain the property until it is sold or transferred to an heir. Financial accounts need to be managed, including investment accounts.

The amount of time this process will take, depends on the complexity and size of the estate. Most estates take at least twelve months to complete all of the administrative work. It is a big commitment and can feel like a second job.

A few things vary by state. Convicted felons are never permitted to serve as executors, regardless of what the will says. A sole executor must be a U.S. citizen, although a non-citizen can be a co-executor, if the other co-executor is a citizen. Rules also vary from state to state regarding being paid for your time. Most states permit a percentage of the size of the estate, which must be considered earned income and reported on tax returns.

Be very thorough and careful in documenting every decision made as the executor to protect yourself from any future challenges. This is one job where trying to do it on your own could have long-term effects on your relationship with the family and financial liability, so take it seriously. If it’s too much, an estate planning attorney can help.

Reference: U.S. News & World Report (Dec. 22, 2021) “How to Prepare to Be an Executor of an Estate”

What are Digital Assets in a Will?

Most of us overlook the amount of information and assets we have online, from social media to networking websites, frequent flier miles, online bank accounts, subscriptions, photos, websites, etc. The list of most people’s digital assets has grown considerably in recent years, and yet most have no plan for what should happen to those assets when their owner dies.

This is a growing problem, says msn money, in an article making the case clear: “From Facebook to iTunes to Amazon, You Need A Digital Will!” Every website has its own legal requirements for dealing with the original owner’s death, almost aways hidden deep within the Terms of Service Agreement we all click on without reading. Some have created processes for executors, while others have not. What can you do to make it easier for your executor?

Make a list of everything you access online. Be prepared to be surprised at just how much your life occurs online. Compile a list of all online accounts, usernames and passwords. You probably have to do this bit by bit, as a marathon session might take a long time. Use either a password manager with top-notch security or a password-protected spreadsheet you update around once every three months.

This is especially important for accounts with monetary value. But sentimental value counts too. A side note: all those playlists you’ve created on iTunes? They are non-transferrable and when you die, they are deleted.

What do you want to have happen to each account? You’ll need to decide what you want to happen to each account and, depending on the account, state it clearly in what’s known as a directive. You may want to preserve some, or you may want to shut down others. Some free email accounts are automatically shut down, if they are not used for a certain period of time. Others should be down immediately to prevent fraud. Scammers prefer accounts where the owners have died, since they are often an easy entry to the person’s online identity.

Facebook is one of the platforms allowing you to designate a Legacy contact, so the person can memorialize the account, allowing only friends to see the page and removing some information. If you want to have the page deleted on death, Facebook provides directions.

Each platform has its own rules. Most rely on provisions regarding privacy protection: only the original owner is authorized to access the account. There are now federal and state laws prohibiting accessing private online data, which have created significant obstacles for loved ones to access digital assets. Don’t expect anyone to resolve your digital accounts after you pass, unless you have a digital will. Even with one, there might be issues.

Your estate planning attorney will help you add the correct language to your estate documents as to what you want to happen to each account. It’s important to ensure that your estate plan gives your executor or other fiduciary authorization to access your digital assets and what you want to happen to them. Remember—don’t put account names, usernames, or passwords in a will, as it becomes a public document during the probate process.

Without an inventory of digital assets, it may be simply impossible to ascertain where digital assets are located and how to access them. Looking at credit card statements for autopayments may be a place to start, or at least to stop the autopayments.

This is a relatively new asset class, with laws varying from state to state. Speak with your estate planning attorney to ensure your digital assets are protected, as well as traditional assets when creating or reviewing your estate plan.

Reference: msn money (Dec. 19, 2021) “From Facebook to iTunes to Amazon, You Need A Digital Will!”

Do You Need Power of Attorney If You Have a Joint Account?

A person with Power of Attorney for their parents can’t actually “add” the POA to their bank accounts. However, they may change bank accounts to be jointly owned. There are some pros and cons of doing this, as discussed in the article “POAs vs. joint ownership” from NWI.com.

The POA permits the agent to access their parent’s bank accounts, make deposits and write checks. However, it doesn’t create any ownership interest in the bank accounts. It allows access and signing authority.

If the person’s parent wants to add them to the account, they become a joint owner of the account. When this happens, the person has the same authority as the parent, accessing the account and making deposits and withdrawals.

However, there are downsides. Once the person is added to the account as a joint owner, their relationship changes. As a POA, they are a fiduciary, which means they have a legally enforceable responsibility to put their parent’s benefits above their own.

As an owner, they can treat the accounts as if they were their own and there’s no requirement to be held to a higher standard of financial care.

Because the POA does not create an ownership interest in the account, when the owner dies, the account passes to the surviving joint owners, Payable on Death (POD) beneficiaries or beneficiaries under the parent’s estate plan.

If the account is owned jointly, when one of the joint owners dies, the other person becomes the sole owner.

Another issue to consider is that becoming a joint owner means the account could be vulnerable to creditors for all owners. If the adult child has any debt issues, the parent’s account could be attached by creditors, before or after their passing.

Most estate planning attorneys recommend the use of a POA rather than adding an owner to a joint account. If the intent of the owners is to give the child the proceeds of the bank account, they can name the child a POD on the account for when they pass and use a POA, so the child can access the account while they are living.

One last point: while the parent is still living, the child should contact the bank and provide them with a copy of the POA. This, allows the bank to enter the POA into the system and add the child as a signatory on the account. If there are any issues, they are best resolved before while the parent is still living.

Reference: NWI.com (Aug. 15, 2021) “POAs vs. joint ownership”

What Happens when Homeowner Dies without Will?

When parents die suddenly, in this case due to COVID-19, and there is no will and no discussions have taken place, siblings are placed in an awkward, expensive and emotionally fraught situation. The article titled “My parents died of COVID-19 and left no will. My brother lives rent-free in their home and borrowed $35,000. What now?” from MarketWatch sums up the situation, but the answer is complicated.

When there is no will, or “intestacy,” there aren’t a lot of choices.

These parents had a few bank accounts, owned their home outright and left no debts. They had six adult children, including one that died and is survived by two living sons. None of the siblings agrees upon anything, so nothing has been done.

One of the siblings lives in the house rent free. Another brother was loaned $35,000 for a down payment on a mobile home. He now claims that the loan was a gift and does not have to pay it back. There are receipts, but the money was paid directly to the escrow company from the mother’s bank account.

How do you determine if this brother received a loan or a gift? What do you do about the brother who lives rent-free in the family home? How does the family now move the estate into probate without losing the house and the bank accounts, while maintaining a sense of family?

For starters, an administrator needs to be appointed to begin the probate process and act as a mediator among the siblings. In some states, the administrator also requires a family tree, so they can know who the descendants are. Barring some huge change of heart among the siblings, this is the only option.

If the parents failed to name a personal representative and the siblings cannot agree on who should serve, an estate administration lawyer is the sensible choice. The court may name someone, if there is concern about possible conflicts of interests or the rights of creditors or other beneficiaries.

A warning to all concerned about how the appointment of an administrator works, or sometimes, does not work. Working with an estate planning attorney that the siblings can agree upon is better, as the attorney has a fiduciary and ethical obligation to the estate. While state laws usually hold the administrator responsible to the standard of care of a “reasonable, prudent” individual, not all will agree what is reasonable and prudent.

One note about the loan/gift: if the mother helped a brother to qualify for a mortgage, it is possible that a “Gift Letter” was created to satisfy the bank or the resident’s association. Assuming this was not a notarized loan agreement, the administrator may rule that the $35,000 was a gift. Personal loans should always be recorded in a notarized agreement.

This family’s disaster serves as a good lesson for anyone who does not have an estate plan. Siblings rarely agree, and a properly prepared estate plan protects more than your assets. It also protects your children from losing each other in a fight over your property.

Reference: MarketWatch (April 4, 2021) “My parents died of COVID-19 and left no will. My brother lives rent-free in their home and borrowed $35,000. What now?”

Estate Planning Blog Articles

Estate & Business Planning Law Firm Serving the Providence & Cranston, RI Areas

Can a Power of Attorney Withdraw Money from Bank Account?

What Is Included in an Estate Inventory?

What Happens to Investment Accounts when Someone Dies?

Your Cryptocurrency and NFTs Need to Be Included in Your Estate Plan

How to Handle Digital Assets in a Will

Who Is the Best Choice for Power of Attorney?

Do You Need Power of Attorney If You Have a Joint Account?

What Happens when Homeowner Dies without Will?

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Can a Power of Attorney Withdraw Money from Bank Account?

What Is Included in an Estate Inventory?

What Happens to Investment Accounts when Someone Dies?

Your Cryptocurrency and NFTs Need to Be Included in Your Estate Plan

How to Handle Digital Assets in a Will

Who Is the Best Choice for Power of Attorney?

Do You Need Power of Attorney If You Have a Joint Account?

What Happens when Homeowner Dies without Will?

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