Planning for incapacity or serious illness can be just as difficult as planning for death. Who wants to think of themselves as being sick and unable to handle paying bills or managing their money? This doesn’t just include lying on your deathbed in the hospital. It encompasses a wide array of situations that may temporarily or permanently affect your ability to deal with your finances, such as dementia, a bad accident, or a sudden illness. During Covid, many families experienced having a loved one hospitalized for weeks or longer. It can happen to anyone and you don’t have to be elderly to face this situation. That’s why every adult should have a plan for what happens if they cannot handle their financial affairs even for a short time. Here are a few things to consider in your plan:
Selecting a Personal Representative
It is crucial to identify the individual you want to handle your finances if you cannot handle them yourself. You want someone competent, trustworthy, and organized, and who has the time and interest to take on the role. The individual you choose doesn’t necessarily need to have the personal expertise to deal with all of your financial matters directly. However, the person must have the judgment to realize when they need assistance and be able to hire individuals with the appropriate knowledge and experience.
While married couples typically name each other as power of attorney, that may not be the best choice if that spouse is not comfortable managing money. Single people don’t have a spouse to put in this role so they need to look elsewhere. When there isn’t a spouse to rely on, you may want to consider an adult child, relative, friend, or professional adviser, like a lawyer, accountant, daily money manager, or other trusted individual.
Executing a Power of Attorney
You should execute a valid power of attorney that gives someone the legal authority to act as your agent and make financial decisions for you if you are unable to do so. A lawyer can help you determine what powers your agent may need to address whatever issues may arise with your finances.
A power of attorney is an essential legal document that protects you and your family. With it, your family doesn’t have to go to court to be named your representative if you become incapacitated. That saves time, money, and stress. It also avoids delays in accessing financial accounts, paying bills, and engaging in asset protection planning and Medicaid planning. Finally, it gives you the power to decide who you want in that role, rather than a judge deciding.
Preparing a Just-in-Case Box
It’s not enough to designate a power of attorney; you need to give the person the tools to do an effective job. That starts with a ‘just-in-case’ box that contains essential information your loved ones and power of attorney will need if you become incapacitated. The box should provide information like a list of your assets and where they are located; contact information for your advisers (lawyer, accountant, etc.); location of your signed power of attorney and legal documents; and a list of your bills, credit cards, insurance policies, and other pertinent information.
Putting Together a Team of Advisers
You may already have a team of trusted advisers that can either take on the role of power of attorney or assist the person you chose. If not, you may want to gather recommendations and vet candidates, especially if you have substantial assets, investments, or a business. This may include having a certified public accountant (CPA) to do your taxes and tax planning, a financial adviser to manage investments, a business manager to deal with your company’s finances, and a daily money manager to handle day-to-day finances. You should also have an estate planning attorney to draft the power of attorney, develop your estate plan and handle (or assist with) making transfers, Medicaid planning, and other legal matters.
Getting Help for Loved Ones
Your loved ones should have their own plan and you should encourage them to develop one. If you are currently a power of attorney or guardian for a loved one, remember you can and should get assistance if you feel overwhelmed. No one expects you to have the expertise to personally handle everything but you are legally obligated to act in the best interest of your loved one so consult professional advisers as needed.
If you need assistance with managing your daily finances or those of a loved one, contact me for a free consultation.
