Powers of Attorney are essential tools for any estate planning. Powers of attorney allow individuals to deal with incapacity without having to go through the expensive and complicated process of placing someone under guardianship. The commonly used Minnesota Statutory Short Form Power of attorney may not provide enough “power” for estate planning. In order to combat this weakness, it’s advisable to create both a Statutory Short Form and a General Durable power of attorney. This will boost the clients’ estate planning.
Minnesota Statutes SS523 provides a simple way for individuals to grant powers. This so-called Statutory Short form Power of Attorney is commonly used by estate planning attorneys because it’s widely accepted in the state. The Statutory Short Form Power of Attorney has many advantages, including allowing attorneys-in-facts to manage a principal’s basic assets. It also offers the additional statutory benefits that require financial institutions, other entities, and individuals to accept the power-of-attorney’s authority or else be liable for damages to the principal.
One part of the Statutory Power of Attorney Short Form can complicate your estate planning. The Statutory Short Form Power of Attorney permits gift transactions, but these are limited to the federal exclusion from gift taxes (currently $17,000.00 per year). The ability to give enough money to an estate is limited in situations where clients want to preserve assets for the future. The ability of an attorney-in fact to give themselves an unlimited amount if a client becomes incapacitated can be an effective tool to balance the estate’s resources.
When a principal is rendered incompetent, estate planning attorneys are better able to meet their clients’ wishes regarding capital gains and estate taxes if they can freely reallocate assets among principals and attorneys. The untethered gifting ability may also allow assets to be preserved when a spouse is incapacitated or requires long-term care.
A second power of attorneys, also known as a General Durable Power of Agent (or a common law power of agent), can be incredibly useful in the toolbox of seasoned power of attorneys. It is common to use the General Durable Power Of Attorney solely to plan an estate, as it gives the attorney-in fact unlimited gifting powers. This makes it easier to reduce taxable estates before the principal’s death. This additional power of attorneys may allow spouses or children to transfer assets and make gifts to themselves.
In practice, the spouse is the best choice for the attorney-in-fact. Then, the children are the next-best option. This designation gives the attorneys-in fact the ability to take individual actions in relation to ministerial asset-management functions (e.g., paying real estate and bills). This power of attorney is used to transfer major gifts to individuals including the attorney-in fact.
It is important to be cautious when appointing attorneys-in-fact. This is especially true when multiple children are involved. To ensure that the gifts given to each child are equal, it’s best to have all children agree on any gift. The General Durable Power Of Attorney does not fit into more complex situations such as second marriages, or estates where children receive unequal distributions.
This additional power of attorneys can be beneficial to many estate planning strategies.
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