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Posts tagged Power of Attorney
Beware the Boilerplate: Lessons from Donald vs. Shelly Sterling

The recent battle between Donald and Shelly Sterling over control of the Los Angeles Clippers basketball team provided a valuable lesson for clients who have created trusts, or are considering creating trusts.  Not only is it critical for those who create trusts to understand the dispositive provisions of their trusts, but they also need to understand the so-called “boilerplate” provisions included in their trusts.

“Boilerplate” typically refers to the standard provisions that are included in legal documents such as contracts, trusts, powers of attorney, and wills.  In trusts, the boilerplate language usually refers to procedural and more general provisions concerning various aspects of the trust and how it is to be administered.  However, in the Sterling situation, the case turned on the meaning and use of certain “boilerplate” language.

The critical “boilerplate” language in Sterling dealt with the way in which a trustee would be deemed unable to continue to act as trustee of the trust.  The court determined that the trust language was clear and its procedures properly followed by Shelly Sterling.  As a result, Donald was deemed incapable of continuing to act as trustee.  This allowed Shelly to proceed and sell the Clippers for $2 billion to Steve Ballmer, which was in the trust’s best interest, and which avoided the NBA seizing control of the team.

One valuable lesson learned by the Sterling case is that those who create trusts need to understand the “boilerplate” language in their trusts, including provisions like the ones at issue in the Sterling case.  These provisions are designed to address situations that may arise in the future, and chances are that some of them will not be applicable to a given person’s situation.  However, there is no way to predict which provisions will become at issue in the future, which is why it is critical for those who create trusts to understand these provisions and ensure that they accurately reflect their intent.

You May Not Always Be Your Own Trustee

The focus for many people when they create a Trust is the distribution of their assets at the time of their death. We are seeing more clients who are living past their ability to direct and maintain their own finances. Make sure your Estate Planning documents are clear as to what you want for yourself in the event that a Conservator is appointed for you or in the event your Successor Trustee takes control of your finances during your lifetime.  What care and level of living do you want? Do you want to remain in your home for as long as possible despite the cost of home healthcare? Do you want annual gifts that you make to continue during your lifetime? Remember your Agent for Power of Attorney does not have authority or control over your Trust assets. If a Lease needs to be renewed or a Certificate of Deposit needs to be renewed and the assets are in the Trust name it will take the power of your successor Trustee to direct those assets.


Estate Planning 101: Breaking down the Documents

An estate plan consists of several documents including a will, usually a living trust, a financial power of attorney, a health care power of attorney and a HIPAA (Health Insurance Portability and Accountability Act) Waiver.  Here is a break down of what each document is:

Will – Describes how assets (Cash, Property, Collectibles, etc.) held in your individual name pass to heirs.  A will is necessary even if you have a trust to insure that assets held in your own name are transferred into your trust.  The Will is also where you would name guardians for minor children.

Revocable Living Trust – A revocable living trust is a legal entity that holds your assets while you are alive. In other words, the Trust is like a manager of your assets.  In the event of incapacity it dictates the transfer of assets to your heirs or beneficiaries on your death. It also avoids probate.

Financial Powers of Attorney – A financial power of attorney allows a person of your choosing to handle your individual assets. This document can be drafted to become effective immediately or only upon your incapacity.  A financial power of attorney can give your person of choosing, or agent, the authority to do some or all of the following:

  • Pay your everyday expenses
  • Manage your real property, including buying, selling and maintaining the real property
  • Collect social security, Medicare or or other government benefits
  • Invest your money
  • Handle transactions with banks and other financial institutions
  • Buy and sell insurance policies and annuities
  • File and pay your taxes
  • Operate your business
  • Claim property you inherit
  • Transfer property to your trust
  • Prosecute or litigate cases on your behalf
  • Manage your retirement accounts

Health Care Power of Attorney – A health care power of attorney allows you to appoint someone to make your health care decisions if you are incapacitated.

HIPAA Waiver – is a legal document that allows doctors to communicate with specifically named individuals about your health history and current health situation.  Without such authorization, doctors are legally barred from discussion anything about a patient with third parties, including family members.

Next week: Estate Planning 101: Why Should I Have an Estate Plan?