One of the most important conversations to have as a family is how to handle the finances of aging loved ones. Naturally, most individuals wish to maintain personal control over their assets for as long as possible; however, incapacity at old age is a reality. If your loved one loses the ability to make decisions, somebody will need to make those decisions in their stead.
A popular way to manage this is with a financial power of attorney. This particular power of attorney designates a person to handle the financial affairs of another if necessary.
What does a financial power of attorney do?
The person holding the role of financial power of attorney is the “agent.” It is possible to customize the power of attorney: for example, some aging adults choose to give control to an agent for certain financial aspects but not for others so long as they have the mental capacity to govern their assets.
The agent would be able to handle everyday financial matters like doctor's bills, insurance and rent. It is also possible for an agent to be able to manage a business, investments or property.
Do I need a financial power of attorney?
Having a financial power of attorney is not necessary in all cases. For instance, if all of an individual's assets are also in his or her spouse's name, it may not be necessary to create a financial power of attorney. It is also possible to put your assets in a living trust that would appoint a trustee in the event that the aging individual dies.
However, it is almost always a good idea to establish a financial power of attorney even if the person in question holds assets jointly with a spouse. There might be income or assets that are not attached to joint accounts or a living trust, or it is possible that an asset may come into somebody’s possession after they establish a trust. Power of attorney allows for greater flexibility and asset management.
Who should be the agent?
Choosing a person to act as the agent is one of the most difficult aspects of the process, particularly if there are multiple adult children. It is possible that the child best-suited to be the agent is not the child closest to the parent. In many cases, a professional mediator may be the best option for an agent since they make the most grounded decisions. It is also a good idea to choose somebody who has the time and integrity to handle the responsibilities pursuant to financial power of attorney.
Finally, it may be tempting to give financial power of attorney to all adult children in equal percentages; however, this is rarely a good idea and may cause infighting. Overall, it is helpful for an agent to be geographically close to the persons and assets in question, but this is not 100% necessary. If you are afraid that choosing one of your adult children over the other will cause conflict, you may wish to choose a non-familial agent for this role.
Making it work for you
Allocating financial power of attorney is a difficult yet necessary component of creating a comprehensive estate plan. Contact us at AmeriEstate to learn more about making these vital choices.