Many Americans spend a lot of time and effort in managing their finances. Most people are worried about how the coronavirus (COVID-19) will impact their income—whether that's because they are temporarily furloughed, find themselves suddenly without a job, or watching their investment and retirement accounts dwindle. There is another way COVID-19 will wreak havoc on American's finances: lack of incapacity planning.
As COVID-19 continues to expand across the country, thousands of Americans are unable to carry out normal financial responsibilities because they are too ill, stuck abroad and unable to travel home, isolated at home or nursing homes., maybe even in ICUs, or on ventilators. If you are healthy now, why should you bother? You need to ensure that someone will take care of your financial duties by setting up a Financial Power of Attorney. This important legal document will not only protect your finances should you fall ill from COVID-19 but also from any events that might leave you incapacitated, like an injury or accident.
Financial Power of Attorney: what is it?
A Financial Power of Attorney (FPA) allows you to select a trusted family member or friend who will be responsible for managing your money and other property if you become mentally incapacitated (unable to make your own decisions) due to illness or injury. Without a Financial Power of Attorney, tax returns won't be filed, bank and investment accounts held in your name will be inaccessible. If you are a Senior, retirement distributions can't be requested. Your property can't be bought, sold, or managed and bills won't get paid. The FPA provides for management of your digital asset accounts.
Why do you Need a Financial Power of Attorney?
If you get sick, are placed in ICU or worse on a ventilator, how will you keep your household running? What happens if you cannot make or communicate your financial decisions? Without an updated FPA in place, a judge can appoint someone to take control of your assets and make all personal and medical decisions for you through a court-supervised guardianship or conservatorship. Not having a financial power of attorney means involving Probate Court and taking the decision away from you. Why? As an adult, no one is automatically able to act for you, you must legally appoint them through the use of an FPA.
WORD OF CAUTION: Don't think you're protected just because your assets are held jointly with your spouse, child, or family member. Here are three reasons why you shouldn't rely on joint ownership:
Limited power. While a joint account holder may be able to access your bank account to pay bills or access your brokerage account to manage investments, a joint owner of real estate will not be able to mortgage or sell the property without the consent of all other owners.
Tax liability. By adding a family member's name to your accounts or real estate titles you might be saddling them with gift tax liability.
Property seizure. You read that correctly. If your joint owner is sued than your property could be seized in order to pay their debt.
Medicaid disqualification. Putting a loved one's name on a joint bank account or property title can disqualify them from receiving government benefits, such as Medicaid.
Only a comprehensive incapacity plan will protect you and your assets from a court-supervised guardianship or conservatorship and the misdeeds of your joint owners. Do not rely on joint ownership as your plan—it's simply too risky and unreliable.
Financial Power of Attorney: Outdated or DIY?
An FPA can become “obsolete” in as short as one year and must be reviewed and updated. DIY online documents may have legalese and not offer full financial protection. DIY does not take the place of attorney legal advice. Banks, financial advisors, and other institutions do not want to rely on a stale, outdated document, or one that does not comply with your current state law. A stale, obsolete financial power of attorney does not help your family in time of an emergency. Today, your FPA needs to include provisions for insurance and investment accounts, and managing personal accounts such as email, Facebook, Instagram and LinkedIn, elder care or special needs planning.
If it's been more than a year or two since you've signed your power of attorney, it might be time for a fresh one. Call me! I will make sure you and your family are fully protected by helping you determine:
- Who will be the best choice for this responsibility,
- How much authority you should give your financial agent, and
- When to make your power of attorney become effective.
Talk to an Attorney Today
Regardless of your priorities, there is a financial power of attorney right for your situation and goals. Plan now while you have capacity. Be Proactive to protect your finances and your family. Determine your specific needs while you are “of sound mind” – able to make decisions. I offer video conferencing and remote notarization. Call me at 314-332-0011 or book your video conference Book Now