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Are you a gambler? Do you like to play the odds? Here are some
real-life odds for you to consider: 90% of people become incompetent
before they die! Of course, your spouse might not think you’re of
sound mind right now, but that’s beside the point! If you don’t take
action, you could needlessly cost your spouse thousands of dollars
and countless headaches in order for them to make decisions on your
behalf.
Competence refers to the ability to make rational decisions about
your affairs. For instance, if you develop Alzheimer’s or dementia
as you age, you’ll become incompetent. Two critical areas are
affected by incompetence—your ability to make your own financial
decisions and your ability to make your own medical decisions.
Unless you give someone the ability to make these decisions for you
prior to becoming incompetent, it will be left up to a court to
decide who should make these very personal decisions for you. The
person the court appoints may not know you very well and, as a
result, the decisions they make may not reflect your desires.
There’s a simple way to protect you and your spouse. You can legally
name someone you would want to make these decisions for you ahead of
time. Then, should you become incompetent, that person you named can
step in and make decisions for you without the involvement of the
courts. You choose them. You can also make them aware of your wishes
to better insure they are carried out. If you are single, this is
even more important!
The legal document that accomplishes this is called a Power of
Attorney. I recommend each person have one Power of Attorney that
covers financial decisions and a separate Power of Attorney that is
used solely for medical decisions. That way, you can name someone
who is financially minded to handle your money matters and someone
more compassionate to handle your medical decisions.
There are two types of Powers of Attorney (POA)—General and Durable.
The General POA gives someone the ability to make decisions for you
while you are competent. The Durable POA is only active while you
are incompetent. Many of my Private Wealth Management clients are
concerned about keeping control as long as possible, therefore, most
of them rely on the Durable POA. By the way, most Durable POA only
spring into action based on letters from 2 physicians attesting to
your incompetence.
Some people think their children will be able to make medical
decisions for them should they become incompetent, they can’t
without a POA. Spouses can make medical decisions for each other but
that’s it. One spouse cannot make financial decisions for the other
spouse. For example, if I were to become incompetent my wife, Julie,
would not be able to give any instructions or effect any
transactions within my retirement account unless she had a POA (she
does).
One of my newer clients now wishes he heard this several years ago.
Chuck and his wife have been married forever and are in their early
80’s. About 3 years ago Chuck noticed that his wife was becoming a
little forgetful. Dementia had begun and she slowly lost her mental
capacity. Like most couples, the real estate they own is in both of
their names. That way it will automatically go to the other spouse
should one pass away.
Unfortunately, Chuck does not have a Power of Attorney over his
wife. No one does. Therefore, he can’t sell any of the real estate
to use the money to help pay for her care. He doesn’t have the
authority to sign on her behalf and since she is no longer
competent, she doesn’t have the legal capacity to sign for herself!
To correct this, Chuck will have to go before a court to become her
conservator—a long drawn-out process that is humiliating and cost
thousands and thousands of dollars. He will then have to appear
before the court each year for the rest of her life to account for
his actions.
Don’t gamble like Chuck. Your attorney can inexpensively draft
Powers of Attorney for you and prevent countless headaches. Do it
now, before it’s too late. Your spouse and children will be glad you
did! Go to www.guardingyourwealth.com to learn more.
Mr. Voudrie is a Certified Financial Planner and President of Legacy
Planning Group, Inc., a Private Wealth Management Firm in Johnson
City, TN. Contact him at jeff@guardingyourwealth.com. |
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