Are Online, Inexpensive, Estate Planning Documents Worth it?

Dear Mr. Miller:

A number of years ago my Dad bought a Living Trust bundle from one of the online companies. It included a Living Trust, Pour Over Will, and a Power of Attorney for financial matters. Last year he slipped out of reality. He talks, but it has nothing to do with any subject anyone else is discussing. It’s just babbling.

He now resides in an Assisted Living Facility (ALF). Because I am named on the primary savings account with him, I have had no problem withdrawing money to pay his bills. But the costs of the ALF are eating up that bank account rapidly. There is only $10,000 left and the monthly drain is about $8000. We are going to need to start taking money out of the other savings account ($250,000 balance) in a very few months. I am not named on that bank account and neither is my brother.

I had hoped that the Power of Attorney would allow us to withdraw from that second account. When I inquired at the bank a few weeks ago I was told that the document would need to be sent to the bank’s legal department to determine if I could withdraw the money. The answer came back that I could not and there was no further explanation. What can we do? The money situation is going to be critical in about 6 weeks!

Distressed Daughter

Power of Attorney Requirements
Living Trust Successor Trustee
Attorney Letter to the Bank
Gifting for Medi-Cal and Veterans Benefits
Why an Attorney Can Be Worth His Weight in Gold

Dear Distressed:

Of course, without seeing the documents I can only speculate on the reason for what the bank has said. Nevertheless, I have seen a number of do it yourself and online estate planning documents. Let’s see what we can figure out. The second bank account is probably titled either in the name of your Dad or his Living Trust.

Power of Attorney Requirements: Let’s first assume that the second bank account is titled only in your Dad’s name and not titled in the name of the Living Trust. That problem can often be resolved with the Power of Attorney (PoA) document. That is, unless there is something defective with the (PoA). California law indicates that, to be effective, this document must be either notarized or witnessed by two people. It is possible that neither of those formalities took place. Another possibility is that you are not the named individual and that someone else is. A third possibility is that the document may require a triggering event such as a letter from a physician indicating that your Dad can no longer handle his financial affairs. And the fourth is that the account is titled in the name of the Trust, and not your Dad–in which case the PoA would have no control over it. Obviously, there could be other problems, too.

Living Trust Successor Trustee: If the account is titled in the name of the Living Trust then that, instead, is the document you need to show the Bank. Are you the first named successor? If not, who is as that would be the person with the necessary authority. Of course, it will probably still be necessary to show a physician’s letter declaring the incapacity.

Attorney Letter to the Bank: I usually handle these situations by writing a letter to the bank, indicating why I think the PoA or Successor Trustee to the Trust is authorized, referencing the various relevant powers in the document (by page number and paragraph number) that allow my client to do what we are requesting. That letter cites a specific California code section that allows my client to collect attorney fees from the Bank if the Bank has no solid reason for rejecting my client’s request. That almost always resolves the matter quickly. But if the document is truly invalid for any of the reasons I mentioned above or any others, then you are in a difficult situation and may have to go to court (that can get expensive).

Gifting for Medi-Cal and Veterans Benefits: One other strategy that you did not mention is to apply for Medi-Cal or VA benefits to help pay for the ALF. That approach often involves making gifts of the assets to the various children in order to bring down the net worth and qualify. (There are a number of complicated rules here so don’t try this yourself without calling us first.) Unfortunately, many PoA’s do not specifically indicate that the holder of the power can gift to themselves. California law prevents such gifts without this authorization. In such cases, the power holder can only gift to his/her siblings and not himself—probably not what Dad would have wanted and a sore point giving rise to many disputes between siblings. Further, most PoA documents that I see do not have what we call extraordinary powers in them. These powers allow unlimited gifts for Medi-Cal qualification purposes. Without such a power, it is usually very difficult to do what is needed to be done.

Why an Attorney Can Be Worth His Weight in Gold: So if you want to do it yourself or get the dirt cheap documents on line (or even use the low cost attorney or paralegal) remember that what you wind up with is pretty looking paper. No one cares what it says until one of two things occur: you die or you lose mental competence. It is then that the rubber meets the road and the document better perform as planned or you could well have a financial disaster. If you use a qualified and competent attorney then you should have comfort in that the document will “work” when you need it.

For you, I would suggest you contact us immediately so we can review the documents and map out a strategy to save the family fortune. For our other readers, I recommend that you give us a call to have all of your estate planning documents reviewed before they are needed.