Nobody can know for sure what will happen in the future. One day you may be healthy and of sound mind but the next you may end up incapacitated. Maybe you end up in a coma following a car accident or you experience the onset of dementia. Whatever the cause, you need to prepare for the possibility of you not being able to make decisions for yourself. The best way to do this is through creating a power of attorney as a part of your estate plan.
A power of attorney document vests in an individual or other entity the power to make decisions on your behalf in the case of you being incapacitated. However, it is important to carefully decide who you choose as power of attorney. This person should be trustworthy and capable.
One of the most important aspects to consider when choosing a power of attorney is whether the candidate is trustworthy. You do not want somebody who may act with ulterior or selfish motives when you are incapacitated and unable to make decisions for yourself.
Your chosen power of attorney should have enough life experience and knowledge to be capable of making the right decisions on your behalf. You may want to consider choosing one person to specifically deal with financial decisions based upon this individual’s financial knowledge. Another person, such as your spouse, may be better suited to make medical decisions on your behalf.
Naming children as power of attorney
Instead of naming your spouse you may find it advantageous to name your children as power of attorney. Your children will likely be considerably younger than your spouse which means they will not be subject to the same health risks related to the age your spouse is. These may be the same health risks causing your incapacitation. There is no way to know for sure these similar age-related causes will not also incapacitate your spouse.
On the other hand, the youthfulness of your children should be taken into consideration since younger people have less life experience which could arguably make them less capable of making important financial and medical decisions on your behalf.
Naming multiple power of attorneys
You may want to consider naming multiple power of attorney agents. It may be advantageous in the case one agent becomes incapable of fulfilling his or her duties. On the other hand, multiple agents can be a problem if the agents cannot agree on making important decisions such as whether or not to sell the family home.
Risks of naming a power of attorney
The most considerable risk of a power of attorney is the danger of self-dealing which means the agent making decisions to enrich himself or herself instead of in your best interest. This could include fraud or theft. Therefore, you may want the power of attorney document to require your agent to report all decisions and actions to a third party, such as a family accountant or attorney.
Developing a complete estate plan
A power of attorney is just one part of an effective estate planning strategy. There are many other parts of an estate plan required to be comprehensive. In partnership with your lawyer, Independent Financial Services can also help you understand the financial implications of the various important estate planning decisions you make.
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.