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Personal Succession Planning – Part III – Financial Power of Attorney

Sigma Investment Counselors

January 29, 2015

Thus far in this series I have discussed organizing your important documents, consolidating assets, and the Medical Power of Attorney.  In this, the third installment, I will discuss the Financial Durable Power of Attorney (DPOA), Executor and the Successor Trustee.

A Financial DPOA is a legal document authorizing someone to act for you.  It may grant immediate powers to your agent, or it may allow them to act only upon your incapacity.  This document should be as comprehensive as possible; many banks and brokerage firms have their own standard DPOA forms and they are sometimes hesitant to accept a form that is not their own. You should also know that these powers cease immediately if you should pass away.  At that point, the Successor Trustee/Executor steps in to distribute your assets.  Generally, but not necessarily, the DPOA/Successor Trustee/Executor (Agent) are the same person.

What I see most in my practice is that a husband and wife name each other, and they then tend to suggest naming their children in succession, by age.  This is not necessarily the best alternative.  I had a client who wanted to name his oldest daughter as his agent, yet she had a terrible track record handling her own financial affairs.  She consistently asked her father for loans and had gone through bankruptcy twice.  Obviously, her siblings would not trust her decisions and would probably question her integrity. In other words, this parent was setting his child up to fail.  He and I discussed it and he ultimately selected the child most suitable to the task.  You have to very carefully consider who your children are and what talents they possess.  Keep in mind, you are not honoring someone when you name them to act for you; it is a big responsibility and not one that should be taken lightly.  It is also not always possible or prudent to name a family member.  In some cases, a family friend or trusted advisor may be the most suitable person to act as your agent.

There are a few questions you should ask yourself to determine if you have named the right person: 

If you answered yes to the second or third question, it is time to revisit who you have named to act on your behalf!

All comments and suggestions are welcome.

Suzanne M. Antonelli, CFP®

 

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