A run-of-the-mill power of attorney is nondurable

Sunday, Sep 03 2017 09:25 PM

What will happen if you’re suddenly unable to handle your financial affairs? It can cause a big mess if you haven’t made any provisions for this possibility.

Stephen Moss bows his head as he is led from court today. He was found guilty of fleecing his mother out of £86,000.

Read more: http://www.dailymail.co.uk/news/article-1282339/Thieving-son-uses-power-attorney-cheat-ailing-mother-86-000.html#ixzz4qInhfg21

Strategy: Include a power of attorney in your estate plan. This legal document appoints someone—called the attorney-in-fact or agent—to act on your behalf.

Generally, you’re better off with a “durable” power of attorney than a “nondurable” one.

Here’s the whole story: A run-of-the-mill power of attorney is nondurable. This means that it no longer applies if you lose your capacity to make decisions. But a durable power of attorney remains in effect in the event you’re incapacitated. Thus, the attorney-in-fact can file your tax returns and handle other critical tax matters like maximizing the marital deduction and estate tax exemptions under current law. Similarly, this designated agent can elect to take retirement distributions, disclaim an inheritance, etc.

But it’s not as simple as just inking your name on a piece of paper. There are a couple of key considerations.

1. You must name someone you trust as the attorney-in-fact. Frequently, it is a spouse, child, sibling or close family friend. Alternatively, you may choose a professional who is familiar with your financial matters. If you’re leery about giving one person such a wide berth, you might name co-agents who have to make decisions jointly.

2. Have the power of attorney drafted by an attorney experienced in estate planning. Don’t follow a random form you found somewhere on the internet. A mistake in the document or one that isn’t clear can end up costing your estate.

Of course, you might not want to give up control over assets while you still have all your faculties and no change is expected in the near future. As a result, investigate a “springing power of attorney,” which is available in some states. This power doesn’t become effective until a specified event takes place, such as incompetency certified by a physician or entry into a nursing home.

Tip: Don’t just shove the document into a safe deposit box. Have it reviewed periodically by your attorney and updated when necessary.


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