By Roy Larsen, CFP®, AAMS®
What if’s are very rarely top of mind for most of us but with a little knowledge, time and most importantly execution, peace of mind for a possible incapacitation can be quickly addressed. In this article I hope to address the basic differences in Power of Attorneys’ and when this simple document simply isn’t enough.Lastly, what powers do you have if something happens to your adult children and grandchildren?
Did that last one get you thinking? Let’s start there:
Our adult children- Your child or grandchild comes to you saying, “Mom, Dad, now that I’m 18, I need to prepare a power of attorney so you can still act on my behalf in the event of an emergency”. Happens all the time right? OK…my unscientific research tells me this conversation has never happened in earth’s history! Quite likely, it isn’t something as parents we are likely thinking about either. The fact remains that if our children are legally an adult and they are in an accident or have another health event, you as a parent may just have to go to court to make decisions on their behalf! Don’t let it happen. As they probably don’t have finances to worry about yet, at least make sure they create a Healthcare Power of Attorney giving you the ability to act on their behalf.
General Power of Attorney versus a Durable Power of Attorney- First an ordinary or general POA can have various ranges of authority from very general to only a very specific purpose. The general POA is often used for those that can still legally act for themselves and that principle can revoke the POA at any time he or she is still capable to do so. Once that person is incapacitated, a general power of attorney is automatically revoked. The durable POA on the other hand continues to be valid even after incapacitation and very often is triggered by the incapacitation itself. A durable POA often requires specific language based on the state they are used in. Often Powers of Attorneys are used in conjunction with a living trust which can provide further instruction on asset management, income and distribution.
Does every entity recognize a General or Durable Power of Attorney? - No! It is not all encompassing. For instance, many banks and brokerage firms although they will request submission of your POA, will want documentation of their own. There have been far too many fraud cases involving the appointed representative so financial institutions now require additional hoops to jump through. This helps to protect their client as well as avoid being sued. It is best to update these documents frequently and keep them current as well as checking with financial institutions in advance to discover their requirements.
A second institution which will not recognize your POA is Social Security. You will need to use their specific forms in order to transact business on behalf of someone incapacitated. The form number is 2848 and they call the person acting on behalf of a beneficiaries funds, a “representative payee”.
Living Wills- Lastly a complement to any Health Care Power of Attorney is typically a living will. (Which is different from a Living Trust) While the Healthcare POA will cover major medical decisions when you are incapacitated, the Living Will addresses “End of Life” preferences in terms of pain relief and to what measures you would want to be kept alive depending on the condition it would potentially leave you in. Caringinfo.org is a great site with additional resources and up to date living will forms for the State you reside in.
Still have questions? Reach out to your financial advisor or feel free to contact our office on the steps necessary to create a comprehensive Estate Plan.
Roy Larsen, CFP®, AAMS® is a Fee Only Certified Financial Planner practitioner and acknowledged fiduciary. He works with clients in the Gainesville, GA. area outside of Atlanta and throughout the United States. Larsen Wealth Management specialized in the distribution phase of retirement or your version of chapter two. Roy has been quoted in the Wall Street Journal as well as the New York Times and has won the 5-Star Professional award for 6 consecutive years as one of the top Wealth Managers in Atlanta. Roy can be reached at 678-696-8755 or roylarsen @investinretirement.net.
The opinions voiced in this material are for general information purposed only and are not intended to provide specific advice or recommendations for any individuals(s). To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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Roy Larsen is a Certified Financial Planner™ practitioner and Fee Only Wealth Manager who resides outside of Atlanta, Georgia.
Roy's Financial Blog contains articles on the multiple and complex issues of living successfully in Retirement. There are additional resources on our educational website, www.successfulretirementinstitute.com.