Protecting your future finances with a comprehensive estate plan
Despite common misperceptions, estate planning is relevant to everyone. While Prince certainly suffered for the lack of any estate planning documents, it is not just the wealthy and famous who must leave directions regarding their finances and medical care to loved ones. In fact, every single boomer should have a financial and health care directive in place to protect themselves and their future finances and medical care.
More seniors living with chronic disease
While people can expect to live well, and for longer, than many previous generations, boomers still face the prospect of living with a chronic illness. According to the AARP, four out of five seniors are living with a chronic disease. And according to numerous demographical studies, by 2050 approximately 20 percent of the population will be over age 65. Nor is it just health concerns that boomers should guard against. According to a MetLife study from 2011, financial exploitation costs seniors $2.9 billion per year. An Allianz study found that elder fraud victims lose $30,000 on average.
That means having a plan in place to guard financial, physical and mental health are extremely important as boomers enter retirement or continue to enjoy retirement. Nor is it just a matter of planning in case you become afflicted with Alzheimer’s disease or dementia. In many cases, financial powers of attorney are needed before
An estate plan guards against more than just estate taxes
A comprehensive estate plan will include protections for your medical care and finances, should you be unable to manage them yourself. A financial power of attorney can name a trusted relative, friend or financial institution to manage your financial well-being in the event you can no longer manage them yourself. Importantly, legal protections exist in New York for how a financial power of attorney can use his or her authority. In other words, financial powers of attorney come with fiduciary duties. A fiduciary duty means that your named financial power of attorney must always act with your best interests in mind. Legal repercussions exist if he or she does not.
Keep these tips in mind when creating or modifying your financial power of attorney documents
The following three considerations are integral to determining who should be your financial power of attorney:
- They must be capable. A financial power of attorney must be able to manage your own finances, in addition to his or her own. Your children or other close relative may or may not be the right choice.
- You must be able to work together. While we often think of mental incapacity as an extreme situation, such as end-stage Alzheimer’s disease, in reality most of us need help with finances before we reach a stage where we are considered mentally incapacitated.
- Establish a baseline. Talk with your named POA regarding how well you manage finances and when you want them to step in. Do you want them to help you pay bills, so you can concentrate on other things? Or do you want them to be hands-off and only step in when absolutely necessary?
If you have questions about financial powers of attorney or protecting your financial and medical health through an estate plan, contact an experienced estate planning attorney to discuss your situation and legal options.