In a previous issue, we discussed the dangers of adding a joint owner who is not your spouse to your bank account. If you did not receive the January newsletter and would like to read the article regarding joint owners on bank accounts, feel free to contact us and we will get a copy to you.
In this issue, as promised, we will discuss the great alternative to adding a joint owner (and avoid inadvertently GIFTING your bank account to another)!
A Power of Attorney is a document which nominates a trusted individual to manage your financial affairs for you. Most often there is no requirement that you become incapacitated before your trusted Agent can act on your behalf. The benefit of this broad power is that nobody has to jump through any hoops to establish your incapacity, such as certification by two physicians, before they can assist you.
This can help greatly in the event you are unexpectedly out of town, and need assistance such as having your Agent stand in for you during a real estate closing you have scheduled, or accessing your accounts for you.
The other option some people use is to name someone under a “springing” power, meaning the powers granted under the Power of Attorney will spring into being only upon the Principal’s incapacity. This creates some difficulties as mentioned above, and is not utilized as often as a general power. There are times, however, when this would be appropriate.
The Power of Attorney outlines the specific powers granted to the chosen Agent, such as the power to pay debts, borrow for the Principal (that’s you), deal with the IRS, sue on behalf of the Principal, manage governmental benefits such as Social Security, and many more. There are several limits on the Agent’s power as well, such as not being able to amend the Principal’s Will, but the bottom line is that an Agent must serve his or her Principal’s best interests.
The reason we say this is such a great alternative to adding a joint owner on accounts, is that you are able to give your Agent the same access to your accounts, without GIFTING them your asset!
If you are not sure whether you have added someone as a joint owner, take a look at your monthly statement. If you see their name in the address block along with yours, they likely have been added as a joint owner, unless there is some contrary indication following their name such as “FBO,” “TOD” or “POD.”
If you are still not sure, or if you want to execute a Power of Attorney to make things easier on you and your loved ones during a difficult time, just give us a call and we will be happy to help!