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| Best Practices |
Living Arrangements
Melissa Phipps
05/03/2004
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Groucho Marx is often cited as a poster boy for why living
trusts can be invaluable. In the early 1970s, after becoming incapacitated by a
series of heart attacks and strokes, Marx was dragged through lengthy court
proceedings while members of his family, the Bank of America, and his live-in
girlfriend, Erin Fleming, battled each other over his wealth and care. Marx’s
will was useless until after his death, so for months he was brought
wheelchair-bound into court, incapable of making his own decisions, his private
life exposed to the public and the press.
| Advisors often recommend a living trust combined with a durable power of
attorney to cover intangibles such as health care, as well as
assets not named to the trust. |
“The practical and administrative
consequences of having a living trust are extremely important,” says Bill Knox,
a former tax attorney and current financial advisor with Regent Atlantic Capital
in Chatham, N.J. Knox not only recommends them to clients, he also drafted one
for his mother, who has since suffered the early stages of Alzheimer’s disease.
“I don’t have to answer any questions from anyone, because when her health began
to fail, the assets were all administered in the revocable trust. It’s a
wonderful tool as an alternative to guardianship,” he says. Family business
stock and general partnership interests can also be held inside a living trust,
smoothing the transition from one generation of company leadership to the next.
A durable power of attorney can allow for a similar transfer of
administrative authority, but Knox and other advisors argue that, in many
instances, it can be a struggle to assure that powers of attorney are honored.
If it is older than seven years, the power of attorney is sometimes considered
“stale” by financial services firms. Selling someone else’s real estate under a
power of attorney can also be problematic, since people are often unwilling to
accept a title not signed by the original holder. Advisors often recommend a
combination of a living trust with durable power of attorney to cover
intangibles such as health care, as well as assets not named to the trust.
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