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When you can’t speak for yourself

By: Louis Feldman

The good news, people are living longer lives.  The bad news, people are living longer lives. As we live longer, what if an accident, illness or just the simple effects of aging made it impossible to manage your financial affairs?  Recently, I came across two different cases, the first being a retired single woman who lives on her own with no local family to count on, and the second being the husband of a married couple who has developed dementia.  Both individuals are getting up there in years.  This brings up an important question.  As our loved ones age, have you ever considered what would happen if they were physically unable to take care of their day-to-day financial affairs? 

It’s never easy to think about or plan for what will happen as we age and our capacity diminishes.  We spend many years planning for retirement, but many of us don’t consider or can’t decide who will handle our finances when the time comes and we are no longer able to make financial decisions for ourselves.  At some point, we may have difficulty remembering where our bank accounts are, what needs to be paid and when, or where did we hide the money in the house.    If we have emails or other social media accounts, it may become difficult to remember our user names and passwords.  Paying bills, writing checks, making deposits, and selling investments may become challenging, cumbersome if not impossible for us to do.

What is a Power of Attorney?

If your estate planning documents are not in order, your family may have to go to court to get the authority to handle your financial affairs.  One way to prevent the courts from stepping in is to execute a power of attorney.  A power of attorney is a legal document delegating authority to someone you choose to have the power to act in your place.  In case you ever experience situations in which you become mentally incapacitated, you’ll need what is known as a “durable” power of attorney.  An important distinction between a power of attorney and a durable power of attorney is a durable power of attorney simply means that the document stays in effect if you become incapacitated and unable to handle matters on your own.  Conversely, a “nondurable” power of attorney automatically ends if the person who makes the power loses mental capacity.

Do you need one?

Everyone should have safeguards in place to take care of their financial affairs in the event you become incapacitated.  Incapacity can strike at any time.  With a durable power of attorney for finances, you can give a trusted person as much authority over your finances as you like.  The durable power of attorney enables the individual (called the “principal”) to authorize an “agent,” such as a trusted relative (often a spouse or a trusted child) or friend, to do a wide variety of things on their behalf, including handling their legal and financial responsibilities.  The agent can handle mundane tasks such as sorting through your mail, depositing your social security checks, as well as more complex jobs like watching over your retirement accounts and investments, or filing your tax returns.  Of course, it is essential that you choose your agent wisely and discuss the scope of their responsibility. 

We know it’s not pleasant to think about the possibility of having a condition that impacts our health and prevents us from making financial decisions for ourselves.  Without a durable power of attorney, family and friends will not be allowed to make many important financial decisions on your behalf.  It’s better to be prepared and hope it never happens, than the alternative of having the courts step in.  Families should begin to prepare long before someone starts having trouble with certain aspects of their life.  Don’t wait for a crisis to hit.  Taking the time to prepare these documents is well worth the small effort it will take to ensure the peace of mind you deserve. 

Investor Solutions does not provide accounting, investment, tax, or legal advice.  The information presented herein is not intended to provide specific advice or recommendations for any individual and does not take into account any individual’s personal circumstances.  You should consult financial, tax or legal professionals for specific information regarding your individual situation.