Money Management Newsletter
Crisis Management Series
When One Can Not Make Decisions
Dr. Jo Turner,
Professor, Family and Consumer Economics
Earlier newsletters focused on documents available to help plan how your personal and financial affairs are to be handled. This newsletter will examine other important legal documents.
Power of Attorney
A power of attorney is used when you can still make your own decisions, but you want someone else to act on your behalf. It gives another individual legal authority to manage some or all of your personal affairs. A power of attorney is created in a signed document that states who is the principal agent for you. It also describes what powers are being given on your behalf. A power of attorney does not necessarily go to an attorney, but can be any trusted individual who can act on your behalf. He or she does not have to reside in the same state as you.
You need to be specific about what decision-making power you grant with the power of attorney. The power of attorney maybe very limited. You may allow someone to make a deposit into or withdraw money from your bank account or represent you in the selling of your house. In that case you need to be careful to limit the power of attorney's action. The power of attorney can be very general and broad to cover any activity that you could do for yourself. The power of attorney may end in several ways:
- When you remove the power of attorney. (This can be done at any time.)
- When the individual has completed the designated task;
- If you become unable to make decisions, and/or
- Upon your death.
Will
The main purpose of a will is to carry out your wishes in disbursing your property (assets) and to allow you to identify guardianship for a minor child, or incompetent child or adult. Without a will, state law will guide the distribution of assets among your relatives including the decision of who will be designated as the guardian for individuals who need such oversight.
Trust
A trust is a legal document in which legal title of property is held (home, investment, etc). A person or institution (trustee) then manages the property for the beneficiaries. This relieves the burden of managing finances from an individual who is inexperienced in handling finances. It allows the individual to decide how and when money will be disbursed from one generation to the next. A trust also allows the estate to avoid the risk of a will being contested. A trust can shorten the time it takes to distribute property to heirs as well as providing privacy for financial affairs. A personal trust is also advantageous in the event that you become incapacitated. In addition it avoids the process of going through probate court.
A trust will not suit everyone's needs, and you should consult an attorney before deciding to set up a trust. You must weigh the cost of setting up a trust verses the benefits a trust can provide you. In most states, the probate process is usually simple and relatively inexpensive for small estates.
Letter of Last Instructions
Upon your death, your loved ones will need information to collect death benefits and settle your estate. Last instructions should include your full name, birth date and place. It should contain the location of important records, such as marriage certificates, Social Security papers, life and other insurance policies. It also should contain the location of any other legal documents, including your will, deeds to property, automobile titles, and income tax records for the last seven years. In addition your letter of last instructions may include specific directions for funeral arrangements.
