A Wealth of Knowledge for Your Unanswered Questions

There is absolutely no shame in asking for financial guidance. Money can be a tricky asset, especially when you don’t have as much as you need. Allow us to help put your finances into perspective and answer all of your bankruptcy and estate planning questions, before your concerns drag you deeper in debt.

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  • what is a power of attorney?

    A power of attorney is a very powerful document. It allows someone to stand in the shoes of the person that granted a power of attorney. For example, when I was in law school I gave one of my friends with power of attorney to rent an apartment for me because I was out of the country in a school program. If I didn't have an apartment rented before I returned to Dallas at the end of the summer program, then I might not have found the best place for me to live for that school year. My friend found a great apartment she rented it with my power of attorney and it was just as if I was in Dallas making those arrangements.  She was able to legally bind me to a rental agreement because I'd given her that authority to stand in my shoes. 

    Common Uses of a Power of Attorney

    Often a power of attorney is used to help handle negotiations when the grantor of the power of attorney is not available to negotiate. For example, my foreign exchange brother is out of the country and he needs to sell his car so he granted me power of attorney to be able to sell his car. This allows me to act in his shoes as if he was here in the USA to sell his car. I am able to bind him to a legal contract to sell his car. Other people have used powers of attorney to sell their homes when they are out-of-state or out of the country.

    The power of attorney must list all of the powers granted to the person acting as the attorney-in-fact, on behalf of of the principal, the person who created the power of attorney. For example, many of that software programs that draft powers of attorney do not include the necessary power to sell a house, take care of a pet, or to get mail.  Title companies are very picky about reviewing the power of attorney to ensure that the attorney-in-fact has the necessary power to bind the principal to the contract.  More than once, we have had clients request that we prepare a new power of attorney because the out-of-the-box software did not provide a document that would be honored by the title company.

    Another use of power of attorney is by people who are elderly or ill for their family member or friend to them in handling their day-to-day affairs such as paying bills. This allows the principal to continue to solely own their property such as a bank account with the advantage that the attorney-in-fact can handle the day-to-day affairs without giving up any ownership.

    Limits of Power of Attorney

    Powers of Attorney attorneys are only good for as long as the principal is alive. The power of attorney can include a clause that says that it is good until attorney-in-fact knows that the principal is deceased.  This allows any people or companies relying upon the attorney-in-fact commitment of the principal a margin of safety. Many people are shocked that their power of attorney ends with the principal passes away. Often we receive calls requesting powers of attorney to be drafted for people who are already deceased. I believe this is because people don't understand what power of attorney are. What they understand is a power of attorney would allow them, as an attorney-in-fact, to stand in the shoes of the principal.

    Additionally, powers of attorney can be revoked at any time that the principal is competent. The attorney-in-fact must act as a fiduciary to the principal at all times. This means that whatever action the attorney-in-fact does on behalf of the principal it must be as the principal wants. 

    Another limited power of attorneys that we often use is that the power of attorney is a springing power. This means the principal does not grant the powers enumerated in the document until and unless to doctors agree that they are unable to handle their affairs.  Sometimes these powers of attorney are not used because the principal passes away before to doctors agree that they are incompetent. In that case, the power of attorney would never be valid. The attorney-in-fact would have never been given full powers under the document.

    In our comprehensive estate plans we provide two powers of attorney. One power of attorney is limited to healthcare decisions. This is because you don't always want the same person handling your financial business that is handling your healthcare business. The second power of attorney is to handle all other matters for example preparing tax returns.

    If you want to see us about preparing a power of attorney for you please schedule an appointment with us.  It is part of a life plan.  We are now calling the Family Wealth Planning Sessions Life and Legacy Planning Sessions because a comprehensive estate plan includes a plan for living when the principle is incompetent and for after the principal passes away. Do you have a plan? Has it been reviewed in the last year? If not, mention this blog to receive a free two hour Life and Legacy Planning Session! 

     

     

  • Will I Lose My Retirement Savings in Bankruptcy?

    The first day of law school, I learned that the answer to all legal questions is:  It depends.  This is very true with this question.  I have several questions that will help determine the answer to the question.  

    1.  Do you have a lien on the money?

    If you have a lien then the secured creditor is secured up to the value of their collateral.  What the heck does that mean?  If the retirement account has a loan against it then the loan must be repaid or their could be tax or other issues.  If the lien can be stripped then you need to discuss that with your attorney.

    2.  Is the account your own?

    Last year, the US Supreme Court ruled on a case that changed how inherited IRA and 401Ks are not protected under the federal exemption statutes.  However, they may still be protected under state law.  Accounts rolled over or transferred between husbands and wives were not part of the ruling.  One way that we are protecting inherited retirement accounts are with Trusts.  There are many requirements to these retirement trusts and the protections are limited.  Please let us know if you want more information.  We are often holding classes on how retirement trusts work.  

    3.  Is the account protected under State law?

    We need to review the documents to see what, if any, state statutes apply to protect these type of account.

    4.  Did you put the money in over time or did you put it in all at once just before filing?

    Timing is everything.  Judge Koger, God rest his soul, ruled that pigs get fat and hogs get slaughtered.  So the amount of money and the timing of the deposit really matters.  I will give you an example.  

    Put on the black robe, you are the judge.  If someone, who owed you money, took $1 million (not really possible) and put it into a retirement account (not a roll over, but new money). Is that fair?  NO!  On the other hand, how do you feel about $2,000?  It is not the same at all. It just feels different.  

    In general, your retirement account will likely be protected. But please discuss this matter with your attorney.  If you are my clients we will discuss it! 

  • What should I do? I can't make my house payment and I don't want to lose my house! Help!

    If you are making your house payments directly in your chapter 13 case, and you can't make a full house payment then this is our best advice.

    1. Take a deep breath!  One of my clients pointed out that the creditor can't eat you. 

    2. Don't make anything less that the full payment or the full payment plus any late fees.

    3. Call my office to make a plan.

    Why?  First, the mortgage companies will only apply payments as full payments.  Anything else just goes to an account called suspense.  Depending on your contract with the mortgage company, funds in suspense may be used to pay other things like attorney fees or other fees before the money is used to get your mortgage payment current.  

    If we need to make a plan we might suggest letting your case dismiss and start over. Or maybe we need to work on a loan modification to get you current.  Worried that you already had one modification and you can't ask apply again?  All we can do is ask.  We have had more than one client get three or more loan modifications while they were in their bankruptcy case.

     

  • What is probate?

    It is a state court-supervised process to transfer legal title from a dead person. Probate may be necessary to protect the rights of heirs, devisees and creditors. We also say that it is a law suit that you file against yourself where often creditors get the first bite of the apple. It is more complex that this but that is a good starting point. 

  • Can I protect my property for my children?

    Should I say that this is my favorite part of estate planning? Yes! Very often estate plans can protect your children from even themselves.  I love asset protection!  This is a key component of estate planning.

  • Who will pull the plug on me?

    With proper estate planning (staying current is part of that requirement) you can pick most anyone you want.  There are exceptions to this general rule.  

  • What is Estate Planning?

    It means to plan for you to have control over yourself and your property.  We work with you to help you put the right documents in the right hands to take over when you can’t.  For example, a plan will include Health Care Directives to outline what medical treatments you want or don’t want if you are unable to take care of yourself. Additionally, the plan will have a Power of Attorney which spells out who gets to stand in your shoes and speak for you. We walk you through a process to help you hone your plan to fill your wishes.

    There may be several different parts to your estate plan, but all of it boils down to you being in control even if you can’t speak for yourself.  

    Please note:  estate planning is more than just drafting documents and putting them on the shelf. Annually updates suggested. Never should your estate plan go longer than 3 years without being reviewed. So while you can pat yourself on the back for finishing your documents that is just the beginning of the on-going process. 

  • Will I have to pay back all of my creditors?

    May be you will have to pay back every one that files a claim.  It depends on a lot of factors including your income and expenses and what you want to keep.  People ask us if they will be paying the same amount as their friend or family member. Likely the answer is no. Each plan in tailor made for that household. Factors include the number of people living in the house, the income and the property that the clients want to keep. 

  • Will I be able to save my car/truck?

    If you file a chapter 7, then you really need to be current with the on-going monthly payments. You may either seek to reaffirm the debt and keep the same terms of repayments or you may want to seek a new loan under a program that makes loans to chapter 7 debtors with better terms (often either a lower interest rate or a reduced value.

    If you file a chapter 13, your plan will need to provide for the payment.  The amount owed could be lower depending on how long you have owned the vehicle, and if you purchased it for personal use or for business use.   In both Kansas and Missouri the interest rate could be much lower than the contract rate. Please ask your attorney what applies in your case.

  • Will I go to jail?

    In the United States, we don’t have debtor’s prisons. So merely being debt is not a crime.  However, lying on your bankruptcy schedules is a crime. So tell the truth please.  Then we can walk you through all of the issues that your case has. The Trustees like to say that bankruptcy is not “hide and go seek.” It is open up your records and show them to the world.