Protecting Financial Future by Estate Planning Now
You’ve never been comfortable with others handling your financial affairs. Who can blame you? After being burned in the past, you know that if you want something done right, you’ve got to do it yourself. Staying in charge of your future necessitates that you create proper estate planning documentation now before it’s too late. Unfortunately, that means abandoning the “do it yourself” mantra as you’ll have to name a trusted agent or agent(s) to run your affairs in the event of your incapacitation and on death. A properly crafted estate planning scheme protects your medical and financial interests during life (if you become “incapacitated”) and passes your property to your intended loved ones on death. Got a pen? Time to create an estate planning checklist.
- An advance healthcare directive details your medical treatment wishes in the the event of your incapacitation. Medical – check.
- A will used in combination with a revocable living trust allows you to retain control of your property during your lifetime, while also allowing you to avoid probate and control “who gets what” on your death. Beneficiaries – check.
You’ve done the math. What’s missing? An estate planning document that allows you to name an agent (attorney-in-fact) to control your financial affairs if you become incapacitated. You can’t ignore the facts. People are living longer – 85 and older is the fastest growing age group in our population. The consequence of finding the fountain of youth? While you may may live longer, you’ll likely be incapacitated at some point during your now extended lifetime. Up to 80% of elderly people die in hospitals, many of which are in a state of incapacitation. In fact, a staggering 47% of our fastest growing age group will develop Alzheimers in their lifetime. Gulp. Time to get your financial affairs in order.
Durable Power of Attorney for Finances
There are different types of powers of attorney used in California. A general power of attorney is a common estate planning tool that gives another person the right and authority to act on your behalf. This authority ends in the event of your incapacitation, unless you have a durable power of attorney in place. Alternatively, you can create a “springing” power as part of your estate plan to “spring into action” at a specified future date or event.
Still leery of delving out control? Listen up, control-nuts. The authority given to your named agent can be specifically tailored to address your concerns. You agent’s authority can be limited to paying your bills, which is typically much safer than adding someone else’s name to your bank account. Or you can empower your agent to step-into-your shoes and handle all of your financial affairs from diversifying your portfolio to maintaining your bank accounts. Prob 4128 provides that your agent is not authorized to take anything of yours as a gift without specific written authorization.
It’s important to remember to update your estate planning documentation on a periodic basis. Banks and brokers are extremely cautious when dealing with powers of attorney. The reason is clear. There’s a lot at stake. Financial institutions want to avoid liability and fear litigation if they wrongly give away someone’s money. This leads to enforcement problems. Some evidence suggests that powers of attorney are rejected by financial institutions at least half of the time. Keeping your financial powers up to date will help to ensure your financial institutions will accept your power of attorney and let your agent act on your behalf when the time comes.