Monday, February 08, 2010

Handing Over the Keys to the Kingdom

It goes without saying that nobody wants to give up control of their finances and put themselves at the mercy of someone else’s decisions; which is why most people spend hours and hours considering who to name as their agent when they sign a power of attorney.  But what happens if you pick the wrong person? This article about an elderly mother and the daughter who stole from her is a sad example of just how important it is not only to choose your agents wisely, but also to relinquish control wisely as well.

It is commonly believed that simply adding your “agent” as a joint owner on your bank accounts is the easiest (or cheapest) way to gradually “hand over the reins”; but giving someone else unfettered access to your bank accounts is a dangerous risk in the best of circumstances—all too often it leads to the tragic exploitation and abuse mentioned in the article above.

The good news is that there are safer ways to give your agents the powers and access they need without completely handing over the keys to your kingdom: 

A Durable Power of Attorney that goes into effect when two doctors have declared you incapacitated

Naming more than one person as your agent (This can lead to a slower decision-making process, but it does provide you with checks and balances and oversight.  If you’re worried about disagreements between agents, name a third party to serve as a mediator or tie-breaker.)

Naming a financial institution as your financial agent

Choose a professional advisor or overseer through whom all decisions must be approved. This has the added benefit of giving your agents someone to whom they can go for advice in a tough situation.

Any of these options may be safer than joint ownership of your bank accounts, but every family and financial situation is unique, so ask your trusted attorney about which options may be best for you.