Meta Description: As you get older, you might need to let someone else manage your finances. Learn how to pick someone who’ll always make the right choices.
Choosing who will take over your finances is always difficult. If an emergency arises, a power of attorney document highlights who can use your money and how. In this post, we’ll show how to decide who’ll make financial decisions on your behalf.
When To Entrust Someone Else
You may worry about the future and if you can keep making sound decisions. Or, you might just want to let someone else take care of your investments. They may, for example, have a lot more experience in handling these matters.
There’s also the possibility of a sudden accident or emergency. If you’re incapacitated, then you won’t want your assets in limbo. Somebody else will be able to manage them in a way that suits your interests.
Planning for the future means knowing you won’t be in control of your finances forever. You may even give this control to your family before they take ownership of your assets. When (and why) you trust someone with your finances is up to you.
Family, Friend, or Financial Advisor?
Similarly, choosing the actual person you trust will be entirely your decision. This can be a family member, a close friend, or a trusted professional.
In any case, this must be someone who’ll stay objective about the decisions they’ll make. But, at the same time, they also need to respect your decisions. They should act as you would, without needing to consult you for every detail.
If you do opt for a financial advisor, always check their credentials. Are they a Certified Financial Planner, for example? Or a licensed accountant? You can also look at public reviews to find the right person.
You might just feel more comfortable choosing someone you’re close to. But you must be sure that they’ll make decisions that reflect your interests.
Should You Use a Power of Attorney?
You don’t need a power of attorney to entrust someone with your finances. However, this still allows you to have some measure of autonomy over your assets. Even if you’re incapacitated, your “agent” will only be able to make decisions that you set out.
To give yourself extra peace of mind, use a limited POA. This specifies which transactions your agent can act on. You may trust them with real estate payments, but they might not make smart stock market choices. You can spread different decisions across several agents.
If you use a power of attorney, a free online template can help. These will save you the time and money of drafting one with a lawyer. You can also customize these documents to suit your state laws. This includes if you need a notary’s signature.
Making the Tough Choices
This might involve asking someone to handle big assets, investments, and transactions. Even if you trust someone completely, will they make the decisions you’ll need them to make? Can they take a risk and buy a rising stock or sell one before it bottoms out?
It’s best to pick someone who knows what you would want. If you use a POA, they usually come with the stipulation of acting in your interests. Even with this binding condition, they might just not be comfortable controlling your finances.
Always have a backup in mind. This really helps if your original choice ends up not working out for any reason.
Choosing an Executor
Perhaps the most important, and consequential person to entrust is your executor. They’ll make sure your assets go to the right people after you pass. Similar to a POA, this person will have to follow your words to the letter.
Your executor must work alongside other professionals (including your lawyer) to work out your will’s practicalities. They’ll also help settle your estate’s debts, if any exist. You could pick one of your beneficiaries, but only if you know they’ll follow your wishes.
Executors will have a lot of complicated tasks to manage shortly after your passing. They won’t need to be financial/legal experts. However, they should at least know your different asset types.
Balancing the Costs
If you use a financial advisor/planner, make sure their fees line up with your situation. Choosing your family to help you out has a lot of benefits. However, one of the biggest ones is still that it’s completely free.
Similarly, this is yet another reason to use free power of attorney documents. A paid POA would cost around $300 on average.
You should also remember that even a small mistake can cost a lot. This might include failing to carry out a stock investment or not paying off high-interest debt.
Conclusion
It’s never easy to decide who’ll have control over your financial decisions. This is the case even if you’re using a POA to make sure they follow your wishes. So long as you trust the person you choose, your finances are in safe hands.
