Do you have a durable power of attorney? If not and you’ve done everything that you can to secure your retirement, it’s one of the steps that you must take. We’re firm believers that when you’re in the midst of your retirement planning, you also need to work on your estate plan.
And what’s arguably the most important document in an estate plan? The durable power of attorney.
No one wants to think about invoking a power of attorney in retirement, but there are times when you’ll need this document. For example, if you have an IRA, it cannot be held jointly. A durable power of attorney will allow a designated individual to access this money for you.
We’ll mention a few times when you may need this important document, along with 10 reasons for a power of attorney in retirement, in the following section.
10 Reasons to Have a Power of Attorney in Retirement
1. You Become Incapacitated or Disabled
We had a client who could not move or speak following a massive stroke. This individual is alive and has their mental capacity in place, but they could not:
- Express themselves
- Coordinate any muscle movement to show mental capacity
The majority of the person’s money was in a 401(k) and IRA. Unfortunately, the person’s spouse could not access any of the money their partner saved for retirement. Going through the process of getting this document after the stroke was a long and arduous one.
Eventually, the individual recovered enough to nod and approve the power of attorney document.
However, their spouse spent months in limbo without being able to withdraw money from accounts to pay bills. Due to the laws in place, we cannot even talk about a person’s IRA or 401(k) with anyone else unless they have a durable power of attorney in place.
2. Convenience While Traveling
If you’re in the middle of retirement and backpacking outside of the country, you may also want to have a durable power of attorney in place. During the pandemic, many people fell into this scenario where they couldn’t get back to the United States, and this led to financial difficulty.
Having a durable power of attorney in place allows someone else to:
- Access your money to pay the bills
- Access your money to send it to you while you are overseas
Many people have retirement plans to travel, and a lot can happen when you’re not home. The power of attorney document provides you with peace of mind that someone can act on your behalf in financial matters and also in business.
3. Health-related Issues
It’s important to note that there are two main types of power of attorney that you need to concern yourself with:
- Durable Power of Attorney
- Healthcare Power of Attorney
We’re not talking about the healthcare power of attorney today. Instead, we’re talking about someone like in our first point – an individual who is incapacitated and needs to go into a facility for rehab.
You may also need to bring the person home and hire people to care for them.
All of these decisions are financial decisions rather than medical ones. In these scenarios, the durable power of attorney will empower someone of your choosing to access the funds to hire caregivers or send you to rehab.
4. Have Someone to Manage Your Finances
While this point overlaps with most on this list, it’s worth mentioning because having the option of allowing someone to manage your finances is huge. Power of attorney allows someone to:
- Setup income streams
- Pay your bills
- Pay for you to move from a home to a facility
When you have a durable power of attorney in place, it even allows the person to sign things on their partner’s behalf with us.
5. Real Estate Transactions
Imagine that you have any form of real estate: your primary home, rental home or even a second home. Included in your power of attorney document is granting someone the ability to manage your real estate on your behalf, such as:
- Retitling the property
- Selling the property
Many of our clients have a second home that they know they can sell if they need cash or their spouse needs the funds to go into a long-term care facility. In these cases, having a durable power of attorney will allow your spouse to sell the property, as you talked about prior, without needing your signature.
Imagine if you had a stroke and couldn’t sign off on the sale of the property with your spouse.
In this scenario, a single document would allow your spouse to act on your behalf, sell the property and use the funds to get you the care that you need.
6. Making Gifts
If you want to make gifts, such as paying for your grandkid’s college education, you might open a 529 plan. A person that is listed on a power of attorney can continue funding these accounts on your behalf.
What if you do not have a 529 plan and simply transfer money to the child’s school every semester to help them pay tuition?
In this case, the person that you list as your power of attorney can do this for you. Also, if you make charitable contributions, this can continue with your power of attorney.
7. Dealing With Tax Matters
Even if you’re incapacitated, the government will still want you to file your taxes. When you have a durable power of attorney in place, the individual can:
- Make decisions to save you money
- File taxes on your behalf
You can include taxes in your power of attorney so that the individual can act on your behalf.
8. Protecting Your Privacy
Perhaps you’re someone who likes their privacy. You can have the durable power of attorney act on your behalf to protect your privacy. This individual can then access your accounts, make transactions and do anything you direct them to without mentioning your current situation.
9. Avoiding Guardianship Proceedings
Going back to our first example, the individual who had the stroke could not communicate for some number of months to get the durable power of attorney signed. We had discussions with lawyers to help their spouse gain guardianship over the person.
However, this is a very complex matter that can be exhausting and takes a lot of time and money.
If you have a durable power of attorney, you won’t need to go through this process. The heartache, stress and cost of having to gain guardianship are fully alleviated with a durable power of attorney in place.
10. It Provides Peace of Mind
Perhaps the most powerful reason to have a durable power of attorney is that a durable power of attorney provides peace of mind. You want to have these documents in place before you need them, so if anything does happen, you have already planned to allow someone that you name to handle your affairs.
Emergency situations can happen at any moment, or they may never happen.
However, having a durable power of attorney will allow you to have peace of mind that if something does happen, you have a backup plan in place.
The good news?
A durable power of attorney is not an expensive document. We can even provide you with the resources and direction to help you put your durable power of attorney in place. We’re not attorneys, so we cannot make this document for you, but it is something that we can help you secure through an attorney.