By Merri Rudd, appeared December 15, 2005, Albuquerque Journal, Business Outlook
Reprinted with permission

• Editor's note: This column may not be quoted or reproduced in whole or part without express written permission of the author.
  
  Q: Q: Your last column referred to powers of attorney and durable powers of attorney. What's the difference between them? G.H., Albuquerque, NM
  
  A power of attorney (POA) is a legal document created by a principal who appoints an agent to act on the principal's behalf if the principal is unavailable or unable to handle his or her financial and/or health care matters.
  
  "Durable" means that the POA stays in effect even if the principal becomes incapacitated. To be durable, the POA must include a sentence that states the POA "shall not be affected by subsequent incapacity of the principal, or lapse of time." A sentence stating that the POA "shall become effective upon the incapacity of the principal" or similar words should also create durability.
  
  Durability language is very important to insure that the POA can be used beyond a person's incapacity. If a POA does not include durability language, the agent will not be authorized to act if the principal becomes incapacitated. Some POAs signed years ago do not include durability language and should be updated.
  
  Q: Can an estate receive that recent New Mexico energy rebate if the intended recipient died this year?
  
  The New Mexico Taxation and Revenue Department's web site says the income tax energy rebate passes to the estate of a recipient who dies after filing a 2004 return. If the deceased recipient was eligible for the rebate based on his or her 2004 state income tax return, then the estate, through the personal representative, can redeem the check. If you are not the personal representative of the estate, you are supposed to return the check to the Department with a copy of the death certificate.
  
  If the rebate is the only item requiring a probate proceeding, then a small estate affidavit of successor in interest ought to allow the decedent's heirs or devisees to claim the rebate instead of opening a probate. However, Tax and Rev's web site does not address this option.
  
  Q: My husband died in January and held stocks. I have heard about a stepped-up basis in stocks, but someone said if the stocks are already held in a trust, you get no step-up. Can you tell me what is true? P.H., Albuquerque
  
  I had never heard this, so did not think it was true. To be certain, I checked with University of New Mexico Professor James Hamill, who writes a tax column for the Albuquerque Journal. Professor Hamill confirmed that the information you received is incorrect.
  
  If the trust is a grantor trust that is disregarded for tax purposes, the trust property is entitled to the same adjustments, i.e., a stepped-up basis, as if it were held directly by the grantor.
  
  Many assets increase in value since purchase. The general rule is that assets receive a "step up" in basis at the time of death, i.e. the fair market value at the time of death. In New Mexico, if an asset was acquired during the marriage with community funds and held as joint tenants, the entire value of the asset is stepped up at the death of the first spouse. In other states only one-half of the property is stepped up.
  
  If an asset is acquired and held as joint tenants with someone other than a spouse, then only one-half of the asset is stepped up at the death of the first joint tenant. Different tax rules apply when you add another person's name to an asset as a joint tenant and that person did not pay a full share of the price.
  
  
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