Financial Management Tools
THE FINANCIAL POWER OF ATTORNEY.
The Financial Power of Attorney is an invaluable tool
for incapacitated persons and their caregivers. Using a Financial Power of
Attorney, a person (the "principal") delegates decision making
authority to a trusted family member or other agent. A Financial Power of
Attorney allows your financial affairs to be managed effectively and in
accordance with your wishes if you are ever unable to handle them
yourself.
A Financial Power of Attorney is a powerful tool that
should only be given to an agent who can be trusted completely. There are
many issues you need to consider before you sign a Financial Power of
Attorney. Questions to ask yourself include: (1) Should the document give
your agent the power to act whenever the agent decides it is necessary, or
only when only when someone other than your agent (e.g. your doctor)
determines that you are incapacitated? (2) How broad are the powers you
want to give to your agent? For example, do you want your agent to have
the power to give away your assets? (3) Do you want to name more than one
person to serve together as co-agents for you. (4) Who should you name as
a back up to take over if your original agent cannot serve?
JOINT OWNERSHIP OF PROPERTY.
Joint ownership is a widely used form of property
management. Husbands and Wives often share ownership of bank and
investment accounts and real estate in this manner. Normally these assets
are held "with right of survivorship," which means that upon the
death of one of the owners, the asset becomes owned solely by the
survivor. Joint ownership as a property management tool has many
limitations and may not allow your joint owner to effectively manage your
finances. There can also be tax complications with joint ownership
arrangements and they can upset your estate plan. Most experts suggest
that you should not rely on joint ownership as your only management tool.
THE LIVING TRUST.
A living trust is a trust you create to take effect
during your lifetime. If it can be changed or canceled by you at any time,
it is called a revocable trust. If you cannot change or cancel the trust,
it is called an irrevocable trust. Revocable living trusts are asset
management and probate avoidance devices. They have no tax or asset
protection advantages. Irrevocable trusts are usually created to obtain
tax savings or to protect assets from creditors.
Representative Payee Status & Guardianship
Representative Payee Status
functions something like a mini-guardianship, limited to the sole purpose
of managing a person's Social Security income check. It is also available
for Civil Service, Railroad Retirement, and Veterans Administration
checks. A representative payee can be established for an incapacitated
beneficiary without going to court. Someone must apply to the Social
Security Administration or other agency to be named as representative
payee. Annual financial accountings are required.
