Over the years here at AgingOptions we’ve dealt with hundreds of families, and we’ve seen some of the harm that poor planning combined with toxic family dynamics can create. Estate planning done poorly offers limitless opportunities for family tensions. As you approach retirement, you may be thinking about designating one of your adult children as your power of attorney to make decisions on your behalf when you no longer can. But be careful: if you fail to take some important precautions, you could be setting your family up for a lasting feud.
When Assigning a Power of Attorney, Family Transparency is Essential
We’ve written about this important topic before on our blog, and this recently-published article on the Considerable website doesn’t really break any new legal ground, so to speak. But it’s a helpful reminder about a topic that is too often overlooked. The article is called “How to assign power of attorney without sparking a family feud,” and as the article suggests, when selecting someone for this powerful role, transparency is key. “Deciding who gets the power of attorney is an important step for parents looking to organize their estate and plan for a future without them,” says Considerable writer Kenzo Nakawatase. “This can be a complex process for many families, especially when there are numerous relatives involved.” If you make the wrong choice, or handle your selection poorly, resentment and misunderstanding are sure to follow.
The problems faced by families over the issue of a parent’s power of attorney aren’t just legal ones, which can be confusing enough in themselves. The real emotional landmines are found in what the article calls “the tricky emotional contours of family dynamics and money.” Handled poorly, these issues can act like a magnifying glass, bringing to light a lifetime of sibling rivalries and past battles over the parents’ affections. For these reasons, says author Nakawatase, “It’s crucial to understand what power of attorney is, how it factors into estate planning, and how sibling roles can both differ and be shared.” The Considerable column summarizes recommendations from estate-planning lawyers regarding the best ways a power of attorney can work within a family and among siblings.
Power of Attorney Is Not the Same as the Executor of an Estate
As the article explains, the term “power of attorney” is a legal designation giving a person (or, in some cases, more than one person) the authority to act on someone else’s behalf. Usually this authority comes into play when the person is unable to make decisions for themselves, often for reasons of ill health. “People sometimes confuse power of attorney with executor of the estate,” says the article. “These are two very different roles, though they can be held by the same person.” The biggest difference is that the authority to act as power of attorney is only in effect while the person who has granted the authority is alive. “Once that person passes away, the executor of the estate then assumes responsibility of managing the estate through the probate process,” Nakawatase writes.
While people often designate someone to act on their behalf in the health care arena – called a medical power of attorney – the Considerable article concerns itself with the general power of attorney, which deals mostly with the management of financial, business, or private affairs. Parents need to understand, says the article, that in choosing someone to act on your behalf, you’re giving them significant power. “If a parent grants power of attorney to one of their children, that child then has the sole authority to act on behalf of the parent,” the article states. As one attorney told Considerable, “This means, for other siblings, that they must respect the inherent authority of the sibling with the power of attorney to make decisions” on mom or dad’s behalf. If the siblings don’t trust one another, it can spark family warfare. The law stipulates that the power of attorney is a fiduciary obligation, which means “the person who holds it must act in the best interests of the parent, not their own, and abide by certain rules that ensure this,” says Nakawatase. “Still, things can get dicey if there isn’t proper trust among siblings, or transparency when major decisions are being made.”
“Joint” Power of Attorney? It Can Work, but Be Careful
Some parents decide to “solve” the trust issue by giving two adult children joint power of attorney. This can work, says the article, but it can also slow down decision-making. We have also seen instances where siblings with joint authority were paralyzed by their dislike of one another. Regardless of the structure, says Considerable, “Parents must understand the great power they are bestowing. The sibling who has been named must understand the range of responsibilities they now have [while] the siblings who have not been named must respect the arrangement.” As the article concludes, “Making sure your entire family is on the same page can make all the difference when it comes to planning next steps. Blood, after all is thicker than water. And less expensive than lawyers.”
A positive first step we often advise families to take is to schedule a family conference. This is much more than a chat around the dinner table. Typically, it takes place in an attorney’s office and is facilitated by a lawyer or other professional with a specific set of goals and objectives in mind. If you would like more information, please contact us during the week so we can answer your questions and provide further information about this important service.
Your Power of Attorney is Part of Something Much Bigger
Preparing yourself legally for retirement is essential – but it’s not the whole picture. Even the right legal protection accompanied by a decent financial plan is insufficient. At AgingOptions, our unique planning approach involves the total range of retirement living, which, along with legal and financial elements, encompasses your medical preparation (both short-term and long-term), your housing strategy (again, both for the immediate future and for the years ahead), and your relationships with those closest to you. When woven together, these facets comprise an AgingOptions LifePlan. With a retirement strategy like this in place, you and your loved ones can face your retirement future with a sense of confidence and peace of mind you never thought possible.
We invite you to find out more about LifePlanning – without cost or obligation – by joining Rajiv Nagaich at an upcoming LifePlanning Seminar. This lively and information-packed session will open your eyes to the power of a LifePlan. You’ll find a calendar of currently-scheduled seminars here on our Live Events page. Bring your family and bring your questions – and meanwhile, age on!
(originally reported at www.considerable.com)