One of the most important planning items we stress to our clients is to be sure they have a financial Power of Attorney (POA) document in place. I cannot tell you how many times we’ve brought this up with individuals and they reply ‘I have beneficiaries in place, etc etc.’ But these are two completely different things.
Beneficiary designations determine who gets what when you die. But what if you’re seriously sick or injured, but not dead? That may sound blunt, but this is critical. Situations when an individual might need a financial power of attorney are in cases of an accident or severe illness, progressive medical/mental decline, or routine or major surgery that may involve a lengthy recovery where you are temporarily unresponsive or unable to handle your financial affairs.
A financial power of attorney is a document that allows another person to legally manage your financial affairs. Some examples of things a POA can do on your behalf are paying bills, handling bank accounts, managing investments, filing taxes and buying or selling real estate.
Unfortunately, we’ve had numerous clients over the past few years who have needed to use their POA. Please do not assume that a POA is only important for ‘older’ people to have. The unexpected can happen at any age! Having a Power of Attorney can ease the burden and stress on loved ones in an already-stressful and emotional situation. Also, having a POA in place should give you more peace of mind in knowing that you’ve chosen someone who you trust to handle your financial matters.
There are no ‘automatic rights,’ which means that family members, spouses, and adult children have no automatic legal authority to manage your bank accounts or investments, pay your bills, etc. if you become incapacitated without a power of attorney. An ‘interested party’ would have to start a legal proceeding and ultimately a judge would decide and name a ‘conservator’ to handle your finances. The appointed conservator must then file regular financial accountings and reports with the court from that point on.
We’ve had clients assume that since we know their spouse and adult children, we would be able to take instructions from them, but we legally are not allowed to do so.
Hopefully this has helped you realize that having a financial power of attorney in place is a very important part of an individual’s financial planning and something that should not be delayed.
This article was prepared by Cathy Stevens. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult me prior to investing. LPL does not provide tax or legal advice. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through IHT Wealth Management, a registered investment advisor. IHT Wealth Management and Stevens3 Financial Services LLC are separate entities from LPL Financial.
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