The Most Important Estate Planning Document You Need if You’ve Entered Your 60s
These days, during the Covid-19 pandemic, too many people have had a health crisis. When you are in your 60s and up, your chances of having a non-pandemic health crisis increase every decade. As we age, we are increasingly at higher risk of stroke, Alzheimer’s disease, and other debilitating illnesses. Without the most basic estate planning document in place, the fall-out from a long or irreversible medical condition can result in a huge financial mess for your family and loved ones.
Who Will Take Care of My Finances?
Your incapacity can wreak havoc on your financial life if you have not prepared a Power of Attorney for finances. Unfortunately, we still have bills to pay when hospitalized or in a nursing home. However, if you have not appointed anyone to help you when you are incapacitated, you have left yourself exposed to late payments, threats of foreclosure, and/or eviction. Wouldn’t it be nice to know that if you did face a time when you become incapacitated that you could have someone step into your shoes? The person you designate, in advance of a possible incapacity, will act as your agent or “attorney-in-fact” who can deal with your finances on a day to day basis to make sure you can return home to the same home you had before your illness. The designated agent will also be able to make sure that all of your bills are paid.
What does Incapacity Mean?
In the estate planning world, “incapacity” refers to a person’s inability to manage their day-to-day business affairs, such as managing and protecting assets, paying debts, filing taxes, and so forth. In the California Probate Code, incapacity is said to be a deficit in mental functions that significantly impairs a person’s ability to understand and appreciate the consequences of his or her actions. See Probate Code 811(b).
Power of Attorney for Finances
If you can designate a trusted helper and ideally, at least one alternate, you can have an attorney prepare a Power of Attorney for Finances. This legal document states that your trusted helper (or alternate) can take care of various finances for you. You can give your trusted helper the power to act, effective immediately, or you can provide that they take over only when your primary care physician determines that you are indeed incapacitated.
The tasks that your trusted helper (the “agent” or “attorney-in-fact”) can perform are also within your control. For example, you can give the agent the power to perform some or all of the following:
conduct your banking transactions;
sell or buy personal property, commodities, stocks, and bonds;
conduct real estate transactions and operate your business;
deal with retirement plans, Medicare and Social Security;
aid with business transactions, lawsuits, and tax matters; and
take care of personal and family maintenance.
As you can see, the person that you choose does need to be a trustworthy individual. Often a spouse is the first choice but having a backup person is highly recommended because sometimes a spouse might be also incapacitated by the time the power of attorney is needed.
Conservatorship - The Alternative to Preparing a Power of Attorney
A conservatorship is a court proceeding filed by a proposed conservator who is requesting that the court appoint him or her to take care of your finances and/or health care needs because you are legally incapacitated. This proceeding is not easy by any means and a lot of your personal financial and medical information will become part of the public record. A conservatorship proceeding is a matter not taken lightly by the courts and your proposed conservator will have to attend many hearings before being appointed (and the appointment is not guaranteed). Attorney’s fees and bond costs will get paid for from your funds if the conservator is appointed.
A benefit to a conservatorship that might outweigh the tens of thousands of dollars it can cost to get appointed is the fact that the court will demand annual accountings from the conservator (so there is a small amount of oversight for you).
However, by the time a conservatorship is filed in court, you would already be incapacitated and therefore have no control over who is going to be your conservator. Using a power of attorney gives you the freedom to choose your agents and you can also nominate your own conservator in the document, just in case one is needed.
I hope you now have more information to help you see the importance of having a Power of Attorney for Finances. If you would like to reduce the possible financial mess that could develop during your incapacity and also greatly lower the chance of going through a conservatorship, I would be happy to help you prepare a Power of Attorney for finances. Yes, that single document can be drafted without requiring you to go through the entire estate planning process. Some folks need to take small steps and that is perfectly acceptable.
If you would like to discuss preparing a Power of Attorney for finances, you can contact me via a phone call or text to (949) 416-3575.
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