With the estate tax laws changing it’s time for everyone to rethink their Power of Attorney documents. When the estate tax exemption was $600,000, there was a real sensitivity to putting certain powers in a Power of Attorney that could trigger significant estate tax consequences. With the estate tax exemption now over $5 million, those sensitivities, while still present in the very large estates, are no longer a factor in most estate planning situations.
Does that make the old Powers of Attorney invalid? Absolutely not. But, it does let us rethink and rebalance the planning we attorneys offer to our clients.
The balance has always been between restricting powers of an Attorney-in-Fact and not running the risk of unforeseen estate tax consequences with much broader powers granted to the Attorney-in-Fact to allow for elder law planning including Medicaid planning and VA Aid and Attendance planning.
When the exemption was smaller we would almost always err on the side of being overly cautious with our documents so as to not run any risk in any situation of triggering unforeseen estate taxes. With the estate tax exemption now at over $5 million, that balance needs to shift.
The shift is now toward greater rights granted to the Attorney-in-Fact to make gifts, set up trusts and perform other tasks that are consistent with elder law planning opportunities that may arise.
While none of us know what the future holds, we do know that as we get older we are more susceptible to long-term care issues and problems along with other related matters. The Power of Attorney, if designed right, can be a very effective tool at preserving an estate and protecting governmental benefits that otherwise would be lost and potentially allow an estate to be wasted away.
So if you have not updated your Power of Attorney in the last couple of years, now is the time to do it.