Choosing Whom to Trust
When it comes to choosing a Power of Attorney, you can’t be too careful
Selma chose her oldest son as her Power of Attorney instead of her daughter because he lived closer. When he used her money to invest in some ‘get rich quick’ scheme, she lost $90,000.00 and realized she had made a big mistake (even though his intention had been to pay her back).
Charlotte’s only child was a daughter who had never done an especially good job of managing her own finances. Charlotte felt she had to use her as her POA because it would be ‘free’ and she didn’t want to hurt her daughter’s feelings. When her daughter took over, Charlotte’s meticulous recordkeeping went by the wayside. She incurred tax penalties for lateness, fees on credit cards, and one insurance policy lapsed.
Tips for Choosing a POA
Choosing the right person for the job of Power of Attorney can be critical to financial survival. You should also name a backup, in case the first person cannot serve. Don’t think for a minute that you can wait until you are “old” to do this. Disabling accidents happen every day.
I’d like to share what I think are some important points to consider when choosing your POA.
TRUST
What is your gut telling you? Would they ever feel entitled to your money? Would their financial situation, substance abuse or coercion by another affect their behavior? What is your relationship like? You need someone who can understand and follow your wishes; someone who will put your interests first.
DEVIL IN THE DETAILS
Is the person detail oriented enough to do the things they need to do like monitor your transactions, pay bills on-time, keep track of taxable items, evaluate options for different services you might need, and keep your paperwork organized? I have seen the best-intentioned people fail simply because they didn’t do the upkeep well.
SKILLSET
Even if you have a trust-worthy, detail-oriented family member, they still need an understanding of financial matters. If all you have is a checking account and a few bills to pay, this isn’t too hard. If you have investments, properties, or a business, then you need to consider whether they will understand things like the language of the financial advisor, the difference between various investment holdings, and when to seek professional advice. If legal & financial matters make their eyes glaze over, then keep looking!
PROXIMITY
Depending on the issue, it may be very challenging for your niece in California to manage your affairs in Pennsylvania. Families are very scattered these days. Technology can overcome much of the proximity issue, but only if you have someone on your end who can deal with things like scan/fax/email & DocuSign. There will always be those instances where you need someone nearby to deal with an issue.
AGE & HEALTH
Is your power of attorney significantly younger and healthier than you are? At the very least, name a contingent POA (a backup) who is. Changing your POA is common as you go through different stages of life. You might start with a parent when you are young, and then name a spouse or sibling as your parents begin having issues or die. I think it’s usually best to have someone younger and healthier as you approach your silver years.
IS IT TIME TO REVISE YOUR PLAN?
Does this confirm your choice or have I made you start to second-guess your thinking? The key is to ask questions of the person you have chosen, or are choosing, and make sure you are comfortable with the answers in light of the factors I have highlighted. A Power of Attorney can be changed at any time, while YOU still have the mental capacity to understand what you are doing. It is important to establish a POA before something happens to you.
Think about who you can choose. Could it be a family member who meets all the criteria above? Might you need to appoint a professional? Sometimes a hybrid of the two is ideal where one person does most of the work and the other has oversight. One can be local and the other distant. Having seen all kinds of abuse, I recommend that you have two sets of eyes whenever possible. Contact us if you need POA services, guidance in choosing, or a second set of eyes to work with your chosen fiduciary. It may give you the peace of mind you crave.