Your Finances
A recent study forecasted “a dramatic rise in the burden from dementia in the United States of the coming decades, with one in two Americans expected to experience cognitive difficulties after age 55” according to Dr. Josef Coresh, the study’s senior investigator and epidemiologist. Dr. Coresh is the founding director of the Optimal Aging Institute at NYU Langone Health. Incapacity comes in many forms, but dementia caused by Alzheimer’s or stroke are exceedingly common. Planning for potential incapacity is a must.
Hopefully, you have worked with our firm or another estate planning attorney so that you have planned for potential incapacity. But what happens when you become incapacitated? If you have proper estate planning documents, nobody should have to go to court and deal with the difficulties of a guardianship proceeding. There are two key documents in most estate plans, a durable power of attorney a/k/a financial power of attorney, and a medical power of attorney. If you have a revocable living trust, the trust document defines who takes over running the trust in case of your incapacity.
Regardless of the planning vehicle, the person taking over your financial affairs must contact your various financial institutions and convince them that you are incapacitated and that the estate planning documents validly authorize the agent’s authority.
If your financial power of attorney was drafted by an attorney and executed in an attorney’s office, it is far easier to enforce because of the wording of the Texas Estates Code. The Estates Code authorizes an attorney to issue an opinion letter to the financial institution that the power of attorney is valid, which greatly eases the transition to the financial agent. If you have not executed your power of attorney before an attorney, no such opinion letter can be obtained and enforcing the power of attorney can be difficult.
Once your agent has gained control of your financial information, they proceed to pay your bills and manage your finances just as you would do. Working with your medical agent, they may need to determine where you live, the medical care you need, and how it is being paid. Your assets do not become the property of the agent. Instead, the agent assumes the role of a fiduciary to manage your assets for your benefit. That is why the person you picked as your agent is someone you explicitly trust. Just like handling your estate, an agent’s job in handling your financial affairs is going to be much easier if your financial affairs are simplified and you have used professionals. In other words, your financial agent encounters the same issues that an executor encounters in handling your estate, so you want to make their job as easy as possible, so if you did not read it, I suggest reading our recent post about simplifying your estate.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.
