When you visit the office of Gruber & Associates, P.C. for your estate planning appointment, we frequently suggest other documents in addition to your will or trust. One of these includes a durable power of attorney. This document appoints an agent to handle your financial or business affairs if you are incapacitated or unavailable. It becomes invalid when you die.
This is a fairly simple document that does not add much to your estate planning expenses. When you need it, it is often a dire situation which makes this an essential part of long-term care and planning. If you do not have a power of attorney when you need one, it can make things difficult for you and your family members. Here are three possible horror scenarios if you do not have a valid power of attorney.
Unmanaged Insurance Claims
A power of attorney may go into effect immediately or if you become incapacitated. Since incapacitation often leads to filing a disability insurance claim, you may need an agent to handle that process for you.
However, an insurance company is not going to let just anyone file the forms, grant permission to access your medical records or make decisions during claim processing. Your spouse is not automatically granted this privilege since the law sees married people as unique individuals, not one unit. The only way for your spouse, sibling, business associate or good friend to help you through this process is with a power of attorney. When you appoint any of these people as an agent, they only need to provide the claims adjuster with the power of attorney and that grants them the authority to manage your claim.
Otherwise, appointing an agent to act on your behalf becomes expensive and complex. You will secure disability benefits quicker if you prepare just in case of incapacitation.
Limited Access to Assets
If you do not have a joint checking account with your spouse or you have business assets that are only in your name, your family will not have access to these income sources if you are incapacitated in a hospital bed. The only way your separate assets can be used for your benefit is if you execute a power of attorney.
This can be especially necessary if your incapacitation is for the long-term or you face an uncertain prognosis. The power of attorney may grant permission to a business partner to transfer income to your family or allow your spouse to access a business account.
This not only provides income but assures other functions are carried out too–like paying bills, filling out automatic deposit forms, and managing investments. If you are single, it is unlikely you have a joint owner on your accounts. Unless you want to return from incapacitation with a defaulted mortgage and past-due bills, you want to appoint someone to manage these affairs in case you are unable to do so yourself.
Poor Asset Management
Sometimes, it is a matter of finding the best person for the job. Powers of attorney also apply if you are leaving the country for a while and need someone to manage your property in the United States. Sometimes, that can end with a bad surprise when you return home.
For example, you may allow a spendthrift relative to stay in your home while you decide to live in Italy for the next five years. It may be difficult to trust this relative to pay the mortgage on time or keep utility bills current.
However, with a power of attorney, you can appoint a responsible manager for your home and its expenses. This individual can pay the mortgage and utilities from your account, and demand reimbursement each month from your temporary resident. If they fail to pay, your agent can start eviction procedures on your behalf by hiring an attorney and making decisions throughout the case. Your interests are protected better if you go this route rather than rely on someone who may not follow through.
There are also instances where clients trust their oldest child more than their spouse to make investment and financial decisions. Single people who live estranged from their families may desire that their live-in partner or best friend handle assets in case of absence or incapacitation. Just because an individual is a joint owner or physically present does not necessarily mean your best interests motivate them. You take better control of your situation with a power of attorney.
So when we recommend a power of attorney at your estate planning appointment, do not scoff. Perhaps the circumstances requiring one will never arise. But if they do, you want to make everything as easy as possible for you and your family. Plan for contingencies and make an appointment with Gruber & Associates today to create a solid estate plan.