Durable Power of Attorney for Health-Care Decisions Good Idea for Older Couples

Q My wife and I want to execute a durable power of attorney in favor of the other. Do these have to be notarized to be legally enforceable?

--B.S.

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A Before answering your specific question, let’s explain what these important documents, also known as durable power of attorney for health-care decisions, are and why many couples--especially older ones--want to have them. Generally speaking, these documents allow you to give another person the right to make health-care decisions for you in the event you are unable to give informed consent about your care. If you become incapacitated, your designate would have the authority to give consent to your doctor to withhold treatment to keep you alive or to donate your organs upon death. The documents are good for up to seven years at a time and must be notarized or signed by a witness to your signatures.

These documents can be obtained from your attorney or from the California Medical Assn. To obtain them from the CMA, send $2 plus sales tax based on your county’s tax rate to CMA Publications, P.O. Box 7690, San Francisco, CA 94120-7690. The CMA will send you the form, a pamphlet outlining its contents, instructions on how to execute the document and an identification card for you to carry in your wallet in the event of an accident.

Sale of Stock During Lifetime Is Taxable Q I bought some stocks several years ago that are worth much more today than what I paid for them. May I give these to my children to pay for their college educations and let them sell them without having to pay taxes on the gains?

--D.L.A.

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A Despite the recent resurgence of attention (read: lip service) to family values and education among politicians, the truth remains that with few exceptions, there are still no tax breaks for parents attempting to put their children through college.

Under current law, which applies to all gifts made for any reason, the tax basis of an asset given during the donor’s lifetime is the donor’s purchase price of that asset. If you purchased shares for $1,000 and they are worth $50,000 today, taxes on the $49,000 gain are due if those shares are sold during your lifetime. You can pay them or your children can pay them. You might argue that giving the stock to your kids and letting them sell it off in small chunks would result in a smaller tax bite since your children are presumably in a lower tax bracket than you are. And you certainly could proceed in this fashion if that is true. However, there is no escaping the tax in your lifetime.

Now, if you leave the shares to your kids upon your death, the taxable basis in the stock is generally set as of the donor’s date of death. Assuming the same values as in the example above, the $49,000 appreciation of your stock would go untaxed if you were to bequeath it. Any appreciation after the bequest is taxable to the recipient upon the sale of the asset.

Divorcing Couple Can Divide Plan Q My wife and I are divorcing. We belong to the dividend reinvestment program offered by AT&T.; Is there a way for us to divide the shares we hold in this account without having to sell the stock or close the account?

--G.H.K.

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A AT&T;, as well as virtually every other company offering a DRIP, provides a way for divorcing couples to divide their assets without closing their accounts. The specific requirements of each company may vary, but first you should contact the investor or shareholder services office of the company in whose DRIP you’re enrolled.

In the case of AT&T;, you should call (800) 348-8288 and ask for what the company calls its stock power form. Both you and your wife must complete it and get a “medallion guarantee” of your signatures from your bank. Return the form, plus stock certificates you have as part of the DRIP, with instructions as to how the shares should be registered--in essence, 50% for each of you or any other percentage split dictated by the terms of your property settlement.

Although this doesn’t apply to AT&T; shareholders, anyone with stock in a company whose shareholder services office or phone number isn’t readily available should contact the transfer agent (the bank handling all share transactions) for the stock. AT&T;’s transfer agent is First Chicago Trust Co. of New York, P.O. Box 2575, Jersey City, NJ 07303.

Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. Or send e-mail to carla.lazzareschi@latimes.com