Who Manages Your Finances if You Fall Ill?

Estate planning doesn’t only include planning for what happens after death. Even young and seemingly healthy individuals can suddenly become incapacitated. Consider the case of a serious accident that leaves one in a coma for a period of time. If this happens, who will make sure your rent or mortgage and other bills are paid?

You may need to give others financial responsibilities for other reasons as well. For example, if you’re leaving the country for an extended period, you may need someone to operate your business during your absence. Who will be authorized to run your business so that it stays open and running?

Though it might be unpleasant to imagine yourself having to rely on others to manage your finances, the truth is, estate planning is important for every adult — regardless of age, wealth, or health status. Having a plan in place can help ensure your wishes are respected and followed, even if you fall ill and cannot oversee your affairs yourself.

Can Family Help?

Many assume that their families will step up and take care of their finances if they ever fall ill. But while they may be willing to help, unless a family member’s name is listed on your bank accounts, they will be limited in what they can do. At most banks, for example, account holders must be there in person to authorize the addition of another person.

This scenario could lead to missed payments for rent or mortgage, car insurance, and credit cards, putting the account holder’s standing with these creditors in financial trouble. Even worse, all of this will be occuring while the family is dealing with the stress of whatever unfortunate situation created this issue.

Let’s look at a hypothetical scenario: Tom is getting older and it’s getting harder for him to handle day-to-day tasks. Luckily, Tom knows his son, Jim,will take care of his finances when he is no longer able to do so. One day, Tom’s doctor and Tom both agree that he is no longer able to take care of himself so Jim steps in to help his dad with the finances.

Unfortunately, when Jim tries to go to the bank to carry out a transaction on his father’s behalf, the bank will not permit it since his name isn’t associated with the account. Moreover, just adding a person to a bank account isn’t enough because that will only cover matters at that one institution. It won’t address paying taxes or medical expenses, buying or selling property, or covering employee payroll at a business. These situations require more preparation, and fortunately, the law provides a solution.

Durable Power of Attorney

In situations like where someone needs to authorize another to handle their financial affairs, a durable power of attorney must be created and signed. The specific type of durable power of attorney that is used to handle financial transactions is called a financial durable power of attorney. It legally authorizes another person to handle some or all of the financial affairs of another.

The responsibilities and freedoms of the person appointed to this role will be stated in the document and they may be limited or broad. Using the example above, Jim can be appointed power of attorney, but Tom may only want Jim to be in charge of paying his mortgage every month. Or, in an alternate scenario, Jim may be appointed power of attorney and placed in charge of all finances in Tom’s name. In either case, the appointed durable power of attorney holds this position until the ill person dies or the legal document is revoked.

A durable power of attorney can go into effect immediately or it can be “springing,” such that it only goes into effect after a doctor deems it’s creator to be incapacitated. It is usually recommended to have the durable power of attorney go into effect immediately because waiting on a doctor’s confirmation of incapacity can cause added stress and pose an unnecessary obstacle if pressing financial matters require action to be taken right away.

It’s important to choose carefully when it comes to selecting a person to act as one’s agent in their durable power of attorney. This appointed person may be in charge of, and have access to all of one’s finances – so it needs to be someone who is completely trusted. It is recommended to consult with an attorney before assigning finances to someone else. Attorneys who specialize in estate planning handle these situations every day. They are able to spot any issues with potential choices and help a client select the best person to be the durable power of attorney to ensure that the document is used as intended if the time ever comes.

How Can I Set Up a Durable Power of Attorney?

An attorney at Rosenblum Law can guide you through the process of appointing a durable power of attorney. We know that a serious illness or accident can happen at any time, so it’s important not to delay. The document that states the durable power of attorney must be signed in the presence of a notary. The client must be lucid (of sound mind) and understand what they are signing. We also recommend bringing two disinterested witnesses to the document signing to preclude any future challenges concerning the client’s state of mind or pressure to sign the document. Unfortunately, we know from our experience that such claims are made more often than one might imagine.

At Rosenblum Law, we guide our clients through all aspects of estate planning, step-by-step, giving you the peace of mind that comes from knowing that your affairs will be handled the way you want – regardless of what the future brings. Call us today for a free, initial consultation.

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