Most seniors have named a medical power of attorney or have established an advance health care directive to help guide family members should there be a need for life-saving decisions, as most doctors and hospitals routinely ask if you have one. However, only 39% of seniors have a financial power of attorney in place, a critical document should they become unable to handle their finances.
We tend to think of a financial power of attorney (POA) coming into play when there is an incapacitating event; however, simply aging increases the risk of natural cognitive decline, dementia, or side effects from medications, putting seniors in a vulnerable position for financial abuse. Making it official with an executed financial power of attorney will provide your agent legal authority to handle financial affairs on your behalf, such as monitoring and managing investments and property, filing your taxes, and filing insurance claims, as well as everyday tasks like paying bills and securely storing your financial records.
It’s important to remember that the power of attorney is a fiduciary obligation, meaning your agent must act in your best interest, not their own. While it may seem obvious, you will want to choose someone organized, trustworthy, and financially responsible because the person you select will have the same ability to handle your finances as you, including withdrawing your money and selling your house.
As you reach your later years, you may consider choosing your eldest child, a younger, trusted family member, or an unrelated close friend to act as your successor agent when dealing with financial situations. Your spouse is likely around the same age, so choosing a successor who will outlive you and can help on a continuing basis is important. Furthermore, if you have selected several relatives to assume responsibility should you become unable to make your own decisions, let each of them know who you’ve chosen as a fiduciary agent under your POAs, executor/trustees under your Will, and any special directions you have for your money and assets once you are gone.
Starting these conversations early allows you to make the decision while competent, ideally minimizing any question of the validity of the POA. You can also discuss when you feel comfortable having your agent step in on your behalf should you cognitively decline. Under your Financial POA, you can provide your agent with the authority to act on your behalf upon the establishment of your POA, or you could state that an agent’s power may only commence once you are deemed to be incapacitated by a physician. You may want to document the specific circumstances that will indicate when it is time to completely turn over financial management, including forgetting to pay bills on time, communication problems, confusion about time and place, and other troubling behavior.
Additionally, you may want to consider working with your financial agent to organize your information, including sources of income, like retirement accounts, Social Security, or other assets, plus what bills you pay regularly. If you are still paper-based, your agent may be able to help you manage your finances online, setting up a direct deposit and auto-pay to help ensure you don’t miss routine transactions. Generally, it does not matter if your agent lives in your state, as many tasks are done by email, telephone, or online.
Naming a competent person as your financial power of attorney can allow you to relax and enjoy the time you have left.
If you have questions on ensuring your money is safe, should you cognitively decline, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the February 11, 2023 “Henssler Money Talks” episode.
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