When do you need your estate plan to “go to work” for you? While you may think that the correct answer is “after my death”, the real answer is “when I lose the ability to manage my own affairs”.
That means the right type of permanent financial power of attorney is drafted and signed. A June 2020 survey by the Transamerica Center for Retirement Studies found that only 28% of retirees have financial authority. And many people don’t understand that there are two types of these advance directives; Everyone has very different purposes.
In this COVID-19 environment, knowing how both types work is crucial, just in case you get infected with coronavirus.
Two types of permanent financial authority
A permanent financial power of attorney can be either “source” or “immediate”.
“Permanent” refers to the fact that this power of attorney persists after you have temporarily or permanently lost mental or physical abilities. It lists when the powers are granted to the person of your choice and when the powers end when you die.
An “immediate” permanent financial authorization will take effect immediately upon signature of the document. However, a “jumping” permanent power of attorney for finance means that two doctors must first examine you and explain that you can no longer administer independently.
In other words, “jumping” means that the person you have chosen and named in the document to act on your behalf (known as your agent) can only use the powers if the doctors’ letters are first acquired .
See also: Why your estate plan isn’t as tight as you think it is
To pay your bills, your agent must have the letters from these two doctors. he or she does not automatically have the authority to ask for them.
Why might you want a “jumping” version?
You may want your permanent financial attorney to be an important document as you fear that if you did so, your agent could go to the bank and add their name to your account without your permission or awareness.
Some people name their spouse as an immediate agent; then the successor representatives would have to receive medical letters.
If obstacles such as medical letters are required before the person you choose can serve you, seek advice from your lawyer.
This is because an impairment that requires permanent financial authority can be devastating, and potentially involve you and your spouse at the same time. For example, they could both contract COVID-19 or have a car accident together.
Name the right agent for you
It is also important that the person you named on your permanent finance mandate is the right person to do the job for you.
Consider this: what if you gave your checkbook to your chosen agent for two billing cycles without being instructed to pay the bills on time? If you hesitate about this, you may have picked the wrong person.
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When you restore your capacity, your agent is required to return everything to you upon request. If you fear that your agent does not want to give you your own power back, you have chosen the wrong person.
The powers of a typical permanent financial attorney are often broad and extensive. They enable the sale and purchase of assets; Managing your debt, auto, and social security payments, filing your tax returns, and processing assets that aren’t listed in a trust you may have, such as B. Your individual retirement account.
It is likely that the executor, your trustee, and your permanent financial authority representative are the same person or persons. It is your responsibility to track every single penny you have, know where everything you own is, and make sure that your funds are being used to your advantage as efficiently as possible.
Remember: your advance documents are only as good as the people who implement them. Often times, family members chosen to do this work have never done it before and may not have the time or energy.
What your representative needs for permanent power of attorney
One last tip: it is not enough to fill out your permanent financial authorization document and save it somewhere in a file. Make sure everyone by name knows they have the job when needed. You need to know where to find this and all other major financial documents, where to bank and invest, and to have information about all of your assets and liabilities.
They should also include detailed information about how you want to get things done when you are alive but unable to manage them yourself.
In short, you want your chosen person to be ready to go to work as soon as you need them.
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