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who have signed and funded revocable trusts have a decreased need for financial
powers of attorney because the Trust has within it a mechanism to change the
Trustee (manager) of the Trust on the death, resignation or incapacity of the
Creator of the Trust. But IRAs (and
other retirement plans) cannot be transferred into a trust because to do so
would amount to withdrawing the IRA assets which would in turn accelerate
income taxation of the IRA assets.
might ask 'what about the beneficiary designation form that can be filled out?'
Such form is only effective on the death of the Creator of the IRA and is
specifically not effective on the incapacity of the Creator of the IRA.
might further ask 'Can't the Creator of the IRA just withdraw assets (without
penalty if he or she has reached at 59 ½) whenever he or she needs the
money? If the Creator has become
incapacitated, he or she will not be able to exercise the withdrawal power,
whether or not this person has reached age 59 1/2 .
solution is that for IRAs and other retirement plans, the Creator can use a
Power of Attorney to designate a person to access the IRA at any time. If it is a durable power of attorney, it will
not be rendered ineffective by the person's subsequent incapacity.
to signing such power, the IRA Creator needs to understand that it is a license
to steal. Unless the Creator of the IRA
has total trust in the proposed agent/attorney-in-fact, he or she should not
sign a power of attorney.
stationary stores have powers of attorney forms and many attorneys routinely
prepare power of attorney forms, either of which can be adapted for use with an
IRA or retirement plan. But IRAs are maintained by custodians such as banks and
brokers. Many banks and brokers have
their own power of attorney forms which they insist must be used instead of
stationary store or attorney prepared forms.
IRA Creator (or his attorney) may prepare a power of attorney for the IRA and
give it to his or her agent. The Creator may instruct the agent not to present
it to the IRA Custodian until the Creator has become incapacitated. By waiting,
the agent will learn that the Custodian does not accept the power at a time
when it is too late (because of the Creator's incapacity) to use the
Custodian's power of attorney form.
Randy Spiro is a Beverly Hills attorney who is a
certified specialist in Taxation and in Estate Planning, Probate and Trust Law.
He holds a Masters Degree in Taxation from Golden Gate University and has
taught tax and estate planning courses at UCLA and USC. He has been named
as Super Lawyer by Los Angeles Magazine.
Spiro's Martindale-Hubbell profile on www.martindale.com