Money IQ: Financial Powers of Attorney

Money IQ
By Dan Monte

Financial Powers of Attorney

Tom is 78. He’s been married to Sarah for 52 years. They have five children, none of whom live nearby. Tom had always been blessed with exceptional health until he suffered a serious stroke on July 15.

Sadly, Tom is looking at a slow and uncertain recovery. Throughout their entire marriage, Tom has taken care of all bill paying, tax returns and investments.

He is now unable to assist in any way. Sarah is committed to being Tom’s primary caregiver and has become responsible for all household financial matters.

Tom and Sarah had talked for years about seeing an estate planning attorney to “get their affairs in order,” but had never taken that step.

With their home having many stairs, Sarah needs to sell and purchase something more appropriate for Tom’s condition.

Sarah also needs to begin withdrawing money from Tom’s investment and retirement accounts to pay for the expenses of Tom’s care and rehabilitation, which are not covered by insurance.

Sarah has been told by the investment firm and by the custodian of Tom’s retirement account that she does not have the authority to withdraw funds from Tom’s accounts without financial power of attorney.

Sarah also discovered that she is unable to sell the home without Tom’s signature. Upon the advice of a friend, Sarah scheduled an appointment with an estate planning attorney at their home.

The attorney concluded quickly that Tom was simply not competent to understand a power of attorney. The only option offered by the attorney was for Sarah to be appointed as Tom’s conservator.

To be appointed as conservator, a court would have to make a determination that Tom is not competent to manage his financial affairs.

If Sarah proceeds, the entire process will likely take several months and will be quite expensive. The court will appoint an attorney to represent Tom’s interests. There will be a hearing before a judge, and Tom, if present, will listen to testimony about how and why he is no longer capable of managing his finances.

Although fictitious characters, the example provided in this column is very real. If Tom had executed a durable financial power of attorney prior to his stroke, Sarah would have been able to immediately take care of all financial matters on his behalf and her appointment as conservator would have been unnecessary.

A durable financial power of attorney is a simple, but essential piece to any estate plan.

Taking the step that Tom and Sarah never took is critical. If you took this step many years ago, it is advisable to schedule a follow-up appointment with your attorney to make certain that your estate planning documents still say what you want them to say and that they are still current with applicable laws.

Editor’s note: Dan Monte joined LANB in January 2005; he is the bank’s senior vice president and trust manager.

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