Pattie Lovett-Reid: Protect yourself financially at any age
No one likes to think there may come a day when they can no longer manage their financial affairs. But the reality is diminished financial capacity will impact some regardless of age.
An important element of a financial plan that is often overlooked is a financial power of attorney.
I get it, there can be a hesitancy to have someone step in and manage your finances for you; however, if for some reason you are unable or unwilling to do so, an enduring power of attorney is the route to go.
This is your financial life so it is only natural you want to have a say about who the power of attorney is going be. Ideally, it will be someone you trust, respect and whose judgement you value.
Here is how it would work.
If you don’t have any limitations in your document, your power of attorney can do your banking, sign cheques, buy or sell real estate and buy consumer goods. He or she does not become the owner of any money or property; they only have the authority to manage it on your behalf.
Your power of attorney cannot make a will for you, change your existing will, change a beneficiary on a life insurance plan, or give a new power of attorney to someone else on your behalf. No one should pressure you and it takes effect as soon as you sign in.
Here are some of the advantages and risks to assigning a power of attorney.
• You can make it clear who will be responsible for your money and property if you can’t manage it on your own, even temporarily.
• Your attorney must manage your money and property for your benefit and can be required by law to account for and explain how he or she is managing it.
• It’s flexible
• It can be as general or specific as you need
• You can choose to appoint two or more attorneys. You can require that they make all decisions together, or to act separately if one of them is unavailable. You can also appoint alternate or successive attorneys. This will help to reduce the chance of fraudulent activity.
• It may make you vulnerable to financial abuse
• Can lead to mismanagement of your money and property if the attorney you choose is not trustworthy, uses your money improperly, or does not make decisions that are in your best interest
• Not enough information or limitations in the document could lead to the mismanagement of your finances, or your finances being managed in a way that you do not agree with
• Your attorney must manage your affairs in the way that you direct in the document. Strict limitations can make it difficult for your attorney to take care of your finances
• If you appoint more than one attorney to act jointly, disagreements between them could cause problems and lead to delays in the management of your financial affairs
This is not a static document. As you age, your financial situation may changes, or the family dynamics may be altered, so you need to review the plans you have in place to ensure they reflect your wishes.
The best time to appoint a power of attorney is long before you may need one.