A recent unfortunate situation with a client prompted this post. However, we learned a lot and thought we'd pass along some helpful information. Please feel free to contact us with any questions.
Life Changing Event
Life Changing Event
Recently, a longtime client of mine had a serious medical problem, a ruptured vessel in his brain resulting in severe dementia (mental incapacity). At the time, his wife required his full time attention – even with a care giver coming to their home.
Years of Careful Planning
We had met and consistently talked on the phone year after year. He had saved consistently and has over $100,000 in cash in the bank, over half a million in retirement funds, a monthly pension, social security and his house is paid off. Long ago we had arranged for long term care policies with inflation protection riders for him and his wife. He had established a relationship with an estate planning attorney and had a trust, wills and powers of attorney when he became incapacitated.
A Difficult and Challenging Time
Nothing went right. His daughter, his sister and his niece flew out from Illinois and Missouri. It took over a week to get access to his bank accounts. As a result, there was a delay in getting my client and his wife proper care. Three months later there are still serious difficulties with his finances. They are in a great convalescent care facility in Encinitas, CA where his estate can easily afford the $13,000 per month cost. Yet for some unknown reason the insurance payments for long term care haven’t been paid for three months. The two insurance companies cite privacy laws and won’t give information to his daughter as to the problem. The last email I received said the family might need to pursue the long and costly process of conservatorship.
Types of Problems When There is Incapacity (Mental or Physical)
IRA & Other Investment Accounts
You can't make withdrawals - If already withdrawing, you can't take extra withdrawals. If you are no longer in your home, you can't change the address to send statements to another address.
Bank Accounts
May not be able to write checks, even if your accounts are owned by your trust.
Phone Service & Utilities
Cannot get account information & service might temporarily be discontinued.
File Federal & State Tax Return
Returns can't be signed and filed.
Sell Property such as a vehicle
Often ownership of personal vehicles is not changed to the trust.
Pay caregivers and/or a convalescent home
May not be able to write checks, even if your accounts are owned by your trust.
The Missing Document
What To Do
What To Do
A financial power of attorney known as the Springing Durable Power of Attorney (DPA) would have solved many of these problems. It would have solved many issues. The main difference between a regular DPA and a Springing DPA is that a regular DPA is effective the day it is signed and executed, which means that even if you are competent, another person also has the legal authority to act on your behalf and engage in financial transactions. A Springing DPA, on the other hand, “springs” into effect only when you become mentally incapacitated, as certified by a physician or other designated individual. A DPA is a relatively easy and inexpensive way for allowing another person to handle your legal and financial affairs. Also, for your protection, a DPA does not give the other person legal access for his or her own use, they must use your assets for your benefit.
· Ask your attorney to email me (curt@reedwealth.com) your trust, wills and powers of attorney. I'll look at those documents to see it they properly coordinate with your investments and then contact you with my comments.
· Alternatively, mail the documents or bring them to my office the next time we meet. We can meet via telephone or Skype as well.
· Go to your attorney and have him or her draft the DPA.
· Provide your financial advisor, in this case, Curt Reed, with a copy of the document. He can then get the DPA acknowledged and accepted by Pershing, LLC, the custodian for your investments.
· Provide your credit union or bank with a copy of the DPA as well. Ask that the document be acknowledged and accepted.
· After you have followed the steps above for your own estate, check with parents or other family members to be sure they have a DPA. Tell them to get their DPA acknowledged and accepted by their financial institutions. Finally ask for a copy as you may eventually find yourself trying to help them with their financial affairs.
