Join one of our upcoming estate planning seminars! Click here to save your seat.

Chapter 5: Why do I need a Financial Power of Attorney?

Estate planning is not only about planning for what happens after you die. Equally important is planning for what happens if you become incapacitated. This is the scenario where a physical or mental impairment, whether temporary or permanent, prevents you from being able to manage your financial affairs. With coronavirus continuing its rampage around the world there has been a renewed focus on incapacity planning. If you were hospitalized and had to be intubated, for example, who would make sure that your bills continue to get paid? Who would liaise with your investment advisor to authorize the purchase or sale of investments during these turbulent stock market times? Who would be able to access your retirement accounts? Importantly, how do you make sure that a person who you would never have wanted to manage your finances doesn’t end up doing exactly that?

Enter the Financial Power of Attorney. If you have created a revocable living trust, a Successor Trustee will be able to step in and take over your finances if you become incapacitated. However, that will only work for assets that have been transferred to the trust. For all other assets, a Financial Power of Attorney will be needed ensure that the person you choose is able to access your finances.

What happens if you don’t create a Financial Power of Attorney? Surely your spouse/son/daughter/ brother/sister/other caring person will be able to access your accounts if something happens and you’re not able to?

Actually, they can’t. If you’re in hospital, intubated, and urgent decisions need to be made in relation to your finances, someone would have to initiate proceedings in probate court to be appointed conservator of your estate. Imagine that: you’re in hospital. Your family just want to be able to care for you and handle your affairs. Instead, they are going to have to find a lawyer and suffer the indignity of a court proceeding during which the judge is going to interrogate them and investigate their background to satisfy herself that the person wanting to be appointed as your conservator has your best interests at heart.

This is where things can get really out of hand. Say you have one son. He’s 27. He would do anything for you. You trust him implicitly. He is the one that you want handling your finances if you’re not able to. But you haven’t created a Financial Power of Attorney. Something happens to you and your son heads down to probate court to be appointed conservator. The probate judge asks your son if he has ever been bankrupt. As it turns out, he had made a bad business decision when he was very young and was bankrupt at age 22. He is doing just fine now. Nevertheless, the judge denies his application to become your conservator. Now your sister, who you haven’t spoken to for 10 years, is in court asking the judge to give her control of your finances. What will the judge do? Who knows.

When it comes to Financial Powers of Attorney, as is the case with estate planning in general, this is not about documents. Yes, you need carefully and comprehensively drafted documents. But all of this is about making things as easy as possible for the people that you care about if and when something happens to you. Court proceedings are a nightmare scenario for all concerned. If you want to make sure your family doesn’t have to go through that, a Financial Power of Attorney is going to be a key component of your overall estate plan.

About Daniel Weiner

Daniel Weiner is a US and UK licensed attorney, based in San Diego, who provides trust administration and estate planning services to families and individuals across California. Dan guides his clients through the often confusing maze of financial and legal decisions to create plans that ensure the well-being of their families and the accomplishment of cherished family goals.


More Posts

Contact Us

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

  • Sign Up For Our Newsletter

    This field is for validation purposes and should be left unchanged.

  • Leave a Reply

    Your email address will not be published. Required fields are marked *