Last month I shared information about the meaning of a durable power of attorney and an example of its use. This month we will continue to discuss this important document and provide more examples of how it benefits each of us.
Estate planning is much more than planning for the transfer of our assets upon our death, it is just as important to plan for our incapacity and who will access our assets for our benefit if we can’t. A comprehensive durable power of attorney is perhaps one of the most important planning tools we have. Some of the top benefits of the durable power of attorney include the following:
If you sign a durable power of attorney and later become incapacitated, the agent you named can step into your shoes and make important financial decisions on your behalf. Without a durable power of attorney, a guardianship will need to be established. This is a very expensive and time-consuming court process that goes on as long as one is incapacitated. Through this process a judge decides who should manage your financial affairs and you have no input as to who will be appointed.
As we age, our needs change and our durable power of attorney should reflect that. We may have concerns about long-term care, applying for government benefits to pay for care, and choosing the proper care providers. If we don’t specifically provide our agents with the powers necessary to assist us during various times of need, then we leave much of our care up to chance and a great deal of time and money can be wasted.
Court battles are always occurring regarding the notion of intent. By signing a well-crafted durable power of attorney, and other advance health care directives, your intent will be clear. This can eliminate family arguments and court battles about your wishes.
One of our goals is to plan for unknown future circumstances and while asset protection and tax planning may not be on your mind now, it may be necessary in the future. A well-drafted durable power of attorney will include the powers required to do effective asset protection and tax planning. Take for example the possibility of a change in the federal estate tax or Florida instituting an estate tax. At this time, your estate may not be taxed upon your death, but ten years from now it may be taxable. If you become incapacitated, you may want your agent to do asset protection and/or tax planning on your behalf. Leaving these opportunities on the table may cost your estate unnecessary expenditures.
A well-crafted durable power of attorney will include provisions to allow your agent to access your assets such as a safety deposit box, digital assets, and your IRA or other retirement accounts in a timely manner. Absent specific provisions that allow your agent access to these assets, court approval would be required. Let’s consider the situation where one who is incompetent has an online business and the domain is about to expire. Without providing the agent with access to digital assets, one could lose the domain and significant business. The financial detriment could be endless. Another example is access to an IRA to pay bills. If you are currently withdrawing money from your IRA and later become incapacitated without appointing an agent, your financial advisor will not be able to release your funds to cover your bills.
This discussion of the Reasons Why Everyone Needs a Comprehensive Durable Power of Attorney could be expanded by many more. Which benefits are most important depends on the situation of the principal and their loved ones. Therefore, a comprehensive durable power of attorney is so essential: Nobody can predict exactly which powers will be needed in the future. The planning goal is to have a durable power of attorney in place that empowers a succession of trustworthy agents to do whatever needs to be done on your behalf.
Please contact us if we can be of assistance in any way or if you have any questions about durable powers of attorney.