Not having a will, like Prince or Aretha Franklin, creates one set of problems for the children of unmarried celebrities. However, this isn’t the only problem that plagues the rich and famous. Questionable decisions about power of attorney (POA) and not planning for incapacity also lead to estate disasters, as explained in a recent article from Forbes, “Why Your Power Of Attorney Probably Is An Accident Waiting To Happen.”
You’ll probably recall the stories about radio personality Casey Kasem, Marvel Comics creator Stan Lee, and astronaut Buzz Aldrin. While the specifics may differ, the basic facts are similar. As a person ages and their cognitive function declines, someone has to assist in the management of their financial and personal affairs, as well as help with medical care and decisions.
The power of attorney might be the most important document in your estate plan. The POA determines who manages your affairs, when you unable to do so. It also ensures that your bills are paid, investments are managed, and other important financial tasks are performed. A POA is typically part of most estate plans, but as many celebrity cases show, the principals were careless about who was designated to manage their estates and other details.
Consider these actions to minimize the chances your estate will end up facing similar issues and in disarray.
Select your agent carefully. He or she will act on your behalf under the POA. This isn’t an appointment a person should receive just because he or she is the oldest child, or because they might be upset if someone else is named. This is a person you’re trusting to diligently, intelligently, and honestly handle your finances and other matters, when you aren’t able to. Remember not to designate a person without first discussing it with him or her to be certain they’re willing and able to take the on the responsibility.
Think about appointing more than one person. One way to get an extra layer of protection and expertise, is to name more than one person to act jointly to handle your finances. It is important to understand that even this isn’t foolproof, since co-agents also can create headaches. The two individuals should live reasonably close to each other, so they can meet to discuss options and sign documents. They also have to agree on the actions to take on your behalf. Those actions might be delayed, until they can discuss and agree and then sign the appropriate forms.
Discuss POAs with your financial institutions. Many banks, brokers, and other financial firms have their own procedures for honoring POAs and they might have their own forms. You and your estate planning attorney need to work with the financial institutions to be certain of a smooth transition.
Determine when the POA is effective. A durable POA takes effect as soon as you sign it. The agent legally could use it and take actions in your name right away. An issue in some celebrity cases is that the principals believe they retain all or most of their cognitive abilities, while at least some of those around them think it’s time for others to make decisions.
Here’s a better way to go about selecting the person to be your representative, if you should become incapacitated. Get them involved in your life long before you think you’ll need them. Over time, allow them to make decisions with you, and watch how they think and learn what their values are. Remember if they are always looking to somehow gain advantage over someone else, that response could just as easily be turned upon you or your loved ones. You’ll have a chance to judge them over time and make a change, if necessary.
Reference: Forbes (August 24, 2018) “Why Your Power Of Attorney Probably Is An Accident Waiting To Happen”