Power of Attorney can make estate planning sense
Over the past year, one of the advisers in our company has been struggling with a difficult situation.
He had to watch as his elderly father’s health deteriorated. If you have ever been in this terrible position, you will know the enormous emotional toll this takes.
But there were practical issues to navigate, as well. Hospitalisations to organise and doctors to consult with. Bills that had to be paid, whilst his father was incapacitated. Financial issues to sort out.
Luckily, our adviser had Power of Attorney, giving him the authority to make both medical and financial decisions on his father’s behalf.
“It would have been so much harder without that,” he told me recently. “It enabled my father’s whole world to go on without him having to worry about money or paying bills.
“When I was asked to take on Power of Attorney, it was something I wrestled with. I knew I might have to make some difficult decisions. But it turned out to be absolutely the right thing to do.”
In a year of stress and grief, the Power of Attorney made things just a little easier.
Do you have a Will?
There’s a key lesson here for everyone
In my last blog, I talked about how important it was to discuss with your beneficiaries what financial arrangements are in place, should the worst happen (to them or to you).
Inheritance plans are a big part of this:
Do you have a Will? Who are going to be your beneficiaries? If you have adult children, do they know what to expect, so there are no bad feelings or disagreements later on? If you have an elderly parent, do you and any siblings know what to expect?
But as our adviser's experience shows, there are other financial issues for you to discuss with your family and beneficiaries, as well.
Who has the authority to make my financial decisions, if I’m too ill to do so?
Or who will handle other family members’ decisions – for example a parent or partner - if they are incapacitated?
The last thing you want is to be lying in a hospital bed, worried about dealing with your pension, responding to a letter from the bank, or having to make any large financial decisions.
Read: The Complete Guide to Inheritance Tax
You need to make sure that someone you trust has financial Power of Attorney in case anything happens to you. And if you have an elderly parent or a spouse of any age, you need to make sure they have appointed someone trustworthy to this role, as well.
How is my spouse or partner going to manage financially, if something happens to me?
One of our advisers once told me that when people fall ill, they never wish they had put more money into their ISA. They always wish they had taken out more life insurance, so that they knew for certain that their family could cope without their income.
If you have a significant other, you need to talk to them about what financial arrangements are in place, if – unfortunately - either of you were too ill to work or died suddenly.
Could it be more tax efficient to give away some money now, while I’m still alive? And if so, to whom and how?
With some careful planning, you might be able to help out beneficiaries financially now, instead of waiting to distribute your money through inheritance.
But before you do that, not only do you need to make absolutely sure that you have enough income to live on in retirement, and that you understand the tax implications of giving away money now….
You also need to understand the financial needs of the beneficiaries you want to help.
That’s something you probably have to talk through with them, openly.
It will take more than one conversation to work your way through these issues. In fact, it might take months or even years.
So you should start thinking about it now.
Guide to Estate Planning
To help you, we’ve produced a short guide, outlining exactly what you need to consider when deciding what will happen to your money after you are gone.
It’s called: “Who Gets What When I Die?”
This will be of interest if you are retired or approaching retirement and want to make sure that your money is distributed the way you like, if the worst happens.
It’s relevant if you are nowhere near retirement but have a young family to think of and want to make sure they will be taken care of if something happens to you.
And it’s for you if you have elderly or ill parents and want to talk to them about the need to get their financial affairs in order, too.