Make Plans for Someone to Handle Your Finances

Who would take over the management of your financial affairs if – for any reason – you become unable to handle them personally?   Who would do your banking, pay bills or manage investments?  Two or three options generally are available:

1.  Power of Attorney.  In most areas you can establish a “durable” power of attorney, naming a friend or relative to act for you on a broad or narrow range of activities.  Standard forms are usually available, although you may need an attorney’s assistance for complex situations.  In any event, check with your advisers whether your power of attorney indeed will continue in effect if you are disabled (a “durable” power). 

2.  Trusteeship.  You can set up a revocable living trust and name a trustee (money manager) who will act on your behalf as to the assets placed in the trust.  The trustee can provide valuable assistance in the event of disability.  You could be the trustee at first and provide for a “standby” trustee in case you are disabled.  A power of attorney sometimes is incorporated into trust arrangements, as well.

3.  Guardianships.  Courts will appoint guardians for persons who become incompetent – an often cumbersome, costly and time-consuming arrangement.  With trusteeship or a power of attorney, you – not a court – decide who will handle your affairs.  Guardianships nonetheless provide the protection of court supervision of all transactions made on your behalf.

Note: If you have made charitable bequests in your will or living trust, many advisors would suggest that you give the person who holds power of attorney, or who would be your standby trustee, the power to “accelerate” such bequests into lifetime gifts that provide income tax savings to you or your family.  Estate tax savings would be available as well.

Copyright © 2009 by R&R Newkirk. All rights reserved.