Planning Potpourri

Springing Powers:

What if
you’re uncomfortable handing over all rights to a child now under a power of
attorney while you are still capable of managing your own affairs.  Is a springing power of attorney the
answer? A springing power is a power of attorney that only becomes effective if
you (the grantor or person signing the power) become disabled. This approach addresses
the exact concern raised. You don’t provide powers to your kid as agent until you
really need the help, i.e. when you cannot handle matters on your own. While
this sounds seductively good and simple, as the saying goes, the devil is in
the details. If you cannot trust your kid while you’re alive, well and astute
to keep an eye on the kid, why and how can you trust the kid to do right when
you’re disabled? The entire concept of a springing power is often questionable.
How do you define disabled such that the power of attorney “springs”
into effect? Not such a simple definition. If you have a temporary illness is
that sufficient? What is? What if you recover? How do you get the financial
reins back from junior? All these issues can be dealt with but they add
complexity. Don’t forget HIPAA. This law imposes strict limitations on the
disclosure of medical information. To prove disability you need to address
these requirements.  Once you get
through all that your kid will have to convince the bank or other person to
accept the power, not always so simple. So a springing power can address a
common parental worry, but it creates a host of issues. A power effective
immediately might mitigate some of the concerns. A funded revocable living
trust can provide an even more comprehensive alternative. The bottom line is,
even a power of attorney, which too many people dismiss as “simple” and
“standard” is fraught with issues that you can only ignore at your own peril.

FLP/LLC Funding:
Some courts have looked
askance at FLPs and LLCs that delay funding after formation, or whose
partners/members leave time lags between each making contributions. These
delays happen regularly in the non-family world in deals with real independent
parties. Consider including in the partnership or operating agreement a clause
giving the GP or manager the right to make any equitable adjustment to address
the problem.