Empower Your Loved Ones with a Power of Attorney for Dementia

Few things are more difficult than watching illness progress in a parent or other loved one who has been diagnosed with dementia or Alzheimer’s. It’s important, however, to take care of legal and financial planning while your loved one is still able to engage in the process. A good place to start is looking at the different types of Power of Attorney documents, which allow a designated person to make certain decisions should a loved one become incapacitated and unable to make decisions themselves. Here we discuss the details of making a Power of Attorney for someone with dementia.

Is it legal to make a Power of Attorney for someone with dementia or Alzheimer’s?

The answer to this question depends on mental competency. A person is required to be mentally competent to execute a Power of Attorney, which means they have to be able to understand what they are signing and the effects of doing so in order to legally enter into such an arrangement. In some cases, a physician may be able to sign off on declaring a person mentally competent to sign. Alternatively, a person may execute a combined Mental Health Declaration and Power of Attorney in order to decide beforehand that a Power of Attorney would go into effect when certain conditions are met. 

Another option is a Durable Power of Attorney. A Durable Power of Attorney goes into effect immediately upon signing it and terminates only upon death. Your loved one may decide instead to create a Springing Power of Attorney, a variation of the Durable Power of Attorney, which goes into effect only when they can no longer demonstrate the ability to make important decisions on their own behalf. The person to whom they grant authority to make these decisions can do so only when the grantor’s own abilities come into question.

What happens if a Power of Attorney is not made?

If you do not have a Medical Power of Attorney, hospitals or physicians may have to make medical decisions on your behalf in an emergency. When it comes to finances, issues may arise if no one is authorized to make key decisions, such as those surrounding modifying a loan or accessing funds in a bank account to pay bills. Without a Power of Attorney, no one other than a court can decide to appoint someone to manage your loved one’s affairs. You would not be able to step in to help your loved one without a court interfering, and the court could appoint someone your loved one would never have personally chosen. This would mean that a hospital or physician may have to make medical decisions on their behalf in an emergency without any input from a trusted party. Similarly, when it comes to finances, issues may arise if no one is authorized to make key decisions, such as those surrounding modifying a loan or accessing funds in a bank account to pay bills.

What happens if my loved one cannot sign the Power of Attorney?

If your loved one is not deemed mentally competent to sign a Power of Attorney, you may have to seek conservatorship through a court to obtain the same type of authority to make decisions on their behalf. A conservatorship usually entails a costly and time-consuming judicial process. Typically, the court appoints your loved one’s next of kin to oversee medical and financial decisions. Keep in mind that although the court is likely to appoint a close family member, it may not be the person most up to the task, which could create friction among adult siblings.

How can I discuss making a Power of Attorney with a parent or loved one?

If your parent or other loved one discloses a diagnosis that may impact their decision-making ability, it may be best to initiate a conversation regarding a Power of Attorney as soon as possible. A Durable Power of Attorney for medical and financial issues can provide peace of mind in case their condition progresses quickly. Alternatively, you can set up a Springing Power of Attorney to take effect only when they can no longer make decisions on their own behalf. This decision can be part of a larger estate planning conversation, where an Advance Directive or Living Will may also be considered to ensure you understand their wishes for medical care.

Overall, it’s important to emphasize to your loved one that Powers of Attorney are the best way for them to ensure their wishes are carried out if they become incapacitated. Many people find comfort or security knowing that these decisions are in good hands. 

Most states require that a Power of Attorney be written, witnessed, and notarized. For this reason, it is often convenient to grant a Power of Attorney while finalizing a comprehensive estate plan. You can also reassure them that they can change the person named in the Power of Attorney (the “agent”) at any time as long as they are mentally competent when they do so. 

If you have any questions regarding how to get started creating a Power of Attorney or which type might be best for your loved one, contact a Oakland Prime Mobile Notary today for direction and guidance to affordable service. 

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What Happens When You Don’t Do Your Taxes?

There are a number of negative consequences for not doing your taxes when you’re supposed to. Let’s go over what can happen and how to dig out.

Tax day can be stressful for many people but even more so for a person who hasn’t filed their taxes in a few years. The longer you go without filing your taxes, the more stressful your situation will become, so you may as well try to fix it. Especially when you start thinking about the penalty charges that may be accumulating.

What happens if you don’t do your taxes?

Not filing your tax return or paying your taxes on time or at all can lead to serious consequences, including:

  • Penalties for late filing: The IRS will issue a Failure to File Penalty of 5% of the unpaid taxes you owe for each month or partial month that your tax return is late, unless you are also issued a Failure to Pay Penalty in the same month. In that case, the Failure to File Penalty may be reduced by the amount of the Failure to Pay Penalty for that month. The penalty will not, however, exceed 25% of the taxes you owe. 
  • Penalties for late payment: The IRS will issue a Failure to Pay Penalty of 0.5% of the amount of tax owed after the due date and for each month or partial month the tax remains unpaid. The penalty will not, however exceed 25% of the taxes you owe.
  • Interest charges: Not paying your taxes on time can lead to penalties and interest charges on the amount owed. Interest may accrue on the unpaid tax owed up until the date of payment in full. The interest rate is based on the federal short-term rate plus 3% and is adjusted quarterly.
  • Legal consequences: Continuing to ignore your tax responsibilities can lead to wage garnishments, tax liens and levies, and even imprisonment.

The good news is that the IRS actually does try to help those who come forward on their own and, in many cases, is willing to work something out.

What happens if you are late paying your taxes?

You may be subject to penalties and interest charges if you are late paying taxes that you owe. The penalty amount will depend on how late you are and how much you owe. The IRS can take legal action against you in order to collect late tax payments. These actions may include wage garnishment or seizure of assets. 

There is a separate penalty for failure to file your tax return on time. If you think you will owe taxes and not have enough money to pay them, you might consider filing your return on time and working out a payment plan with the IRS. Working with a tax pro can give you peace of mind that your return will be done professionally and with your specific situation in mind. In many cases, returns can be done quickly as well, and filed electroncially to make sure they are filed on time.

What can be done to catch up when you haven’t done your taxes?

One way to catch up with your taxes is to file late tax returns. Here are the general steps:

  • Gather your tax documents and file your tax returns. For each of the years you have not filed your taxes, you are going to need your W-2’s and/or 1099’s. If you are unable to locate these documents, you can request them from the IRS using a Form 4506-T. You will need to file a return for each year you missed. Most companies that provide e-filing services have forms for the past two years. If you need to go back further than that, you will have to request the forms from the IRS and submit your returns by mail.
  • Pay taxes that you owe. Once you have submitted your tax returns to the IRS and your state, you will want to pay any taxes that you owe along with penalties that have accumulated. You can check out the list of penalties on the IRS website. If you cannot pay your entire balance, you will be charged interest until you can. If you are expecting a refund or ended up not owing any taxes, there is no penalty.
  • Work out a payment plan with the IRS. If you are unable to make a payment in full for what is owed, you could be eligible for a payment plan. If you are currently low-income, they may have additional options for you. You can apply for a payment plan on their website or by calling the IRS at (800) 829-1040.

Going through the steps of carefully gathering information and then preparing and filing the correct documents and working out the correct fees can be overwhelming and very time consuming. You don’t have to do this on your own. You can work with a tax pro who will help you file on time.

Do you need a tax professional and how do you find one?

In most cases, simply filing your tax returns and paying your taxes will get you out of tax trouble. However, it might be a good idea to meet with a tax attorney or tax filing professional to make sure you are handling things correctly and to learn about any other options that might be available to you. Rocket Lawyer now offers affordable and convenient help for tax prep, filing, and attorney advice. Get matched with a tax pro, scan and upload your documents, and rest easy knowing you have professional help on your side.  

While it may be stressful, it will serve you better in the long run to address your IRS issues now. File your tax returns and pay your back taxes to get in good standing with the IRS and your state tax agency.

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Authorize a Trusted Adult To Care for Your Child

What is a Child Care Authorization Form?

A Child Care Authorization is a form that allows someone to temporarily care for or make decisions about your child, such as allowing your nanny to pick up your child from daycare. Child Care Authorizations help document that you are entrusting your children to a childcare provider and gives them limited powers to make decisions in regards to your children.

Create a Child Care Authorization to define the terms when another person can make decisions about your child. 

If you want to grant legal authority to make major decisions, create a Power of Attorney for Child instead.

When to use a Child Care Authorization:

  • You would like to authorize your child’s school to release your child to another individual.
  • You would like to give authorization for another individual to make decisions regarding your child in your unexpected absence.

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Transferring Mortgaged Property into a Revocable Living Trust

Mortgaged property may be transferred into a revocable living trust as a measure to avoid probate and provide greater control over how the property is distributed to beneficiaries. Unlike property which the grantor owns free and clear of encumbrances, mortgaged property requires additional considerations prior to placing it in a trust.

The process for funding (i.e., transferring assets into the trust) a mortgaged property to a revocable trust can be confusing, as the process depends on the type of property being transferred. Funding a primary residence can be very different from funding a rental property. One of the reasons for the difference is the Garn–St. Germain Depository Institutions Act of 1982 (the “Act”) and its effect on the “due-on-sale” provision found in most mortgages.

The “due-on-sale” (aka “acceleration clause”) is a provision in a mortgage document that gives the lender the right to demand payment of the remaining balance of the loan when the property is sold. It is a contractual right, not a law. This means that if title to the property is transferred, the lender may (or may not), at its option, decide to “call the loan due.”

However, when the property is transferred into a living trust, homeowners whose mortgage contains a due-on-sale provision receive protection from the Act, which is a federal law that creates several exceptions in which a lender may not enforce the due-on-sale provision. Certain limitations are imposed by the Act on the validity of a due-on-sale provision found in many mortgage contracts; no lender may accelerate in the event of any of the following transfers, regardless of what the particular due-on-sale provision states, whenever the loan is secured by residential real property containing less than five dwelling units:

(1) a junior lien is created on the property.
(2) a purchase-money lien is created for household appliances.
(3) a transfer occurs by devise, descent, or on the death of a joint tenant.
(4) a leasehold is created for a term of three years or less not containing a purchase option.
(5) a transfer to a relative resulting from the death of a borrower.
(6) a transfer where the spouse or children of the borrower become an owner of the property.
(7) a transfer resulting from a decree of dissolution of marriage, a legal separation agreement, or an incidental property settlement agreement by which the spouse of the borrower becomes an owner of the property.
(8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.
(9) any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank Board.

Transfers of Commercial or Investment Property

The ability of a lender to enforce a due-on-sale provision for transfers to a revocable living trust becomes more unclear when the property transferred is not the borrower/beneficiary’s personal residence. California law does not contain the same requirements as the Act – that the borrower must remain the occupant of the property in order to prevent enforcement of the due-on-sale provision. On the other hand, the Act expressly states that it was intended to override state law. In general, when federal and state laws conflict, the federal law controls. Thus, the Act appears to allow for the enforcement of a due-on-sale provision when the borrower/beneficiary does not occupy the property.

In light of this uncertainty and the potentially high stakes involved, if the property transferred to the trust is not occupied by the borrower/beneficiary, the best course seems to be to get the lender’s written permission before transferring the property. A lender typically charges a modest fee for this consideration, but there is no guarantee – especially if the interest rate on the loan is significantly lower than the current market rate. At any rate, while funding your revocable trust with real property is critical to avoiding probate and making the most of a revocable trust, transfers of commercial and non-owner-occupied residential property must be handled with care.

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Power of Attorney: What You Need to Know

General and Special Powers of Attorney

A General Power of Attorney is a document under which you authorize another person to act on your behalf in a variety of situations. In contrast, a Special Power of Attorney is a document under which you authorize another person to act on your behalf in specific situations only.

A General Power of Attorney is very broad and provides extensive powers. A general statement is included which gives the Agent “full power and authority” to act on your behalf. The document then lists certain powers to make it clear that you intended to grant such broad powers. For a list, see General Powers, below.

A Special Power of Attorney document provides the Agent with only those powers that are listed in the document. For a list, see Special Powers, below.

General Powers

Broad powers granted in a General Power of Attorney can include authority to act with respect to the following subjects:

  • Real Property.
  • Tangible Personal Property.
  • Stocks and bonds.
  • Commodities and options.
  • Banks and other financial institutions.
  • Operation of entity or business.
  • Estates, trusts, and other beneficial interests.
  • Claims and litigation.
  • Personal and family maintenance.
  • Benefits from governmental programs or civil or military service.
  • Retirement plans.
  • Taxes.

In addition, optional powers include powers to:

  • Maintain and operate business interests.
  • Employ professional assistance.
  • Make gifts.
  • Make transfers to revocable (“living”) trusts.
  • “Disclaim interests” (this power can be an important estate planning tool that helps avoid estate taxes).

If providing broad powers is not desirable, a Special Power of Attorney, which can be limited in scope, may be more appropriate.

Special Powers

A Special Power of Attorney document provides the Agent with only those powers that are listed in the document, which may include the following special powers:

  • Create, amend, revoke, or terminate an inter vivos trust.
  • Make a gift.
  • Create or change rights of survivorship.
  • Create or change a beneficiary designation.
  • Authorize another person to exercise the authority granted under this power of attorney.
  • Waive the principal’s right to be a beneficiary of a joint and survivor annuity.
  • Access the content of electronic communications.
  • Exercise the fiduciary powers that the principal has authority to delegate.
  • Disclaim or refuse an interest in property, including a power of appointment.

If limiting the Agent’s power to this list is not desirable, a General Power of Attorney, which is broader in scope, may be more appropriate.

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