Power of Attorney Benefits and Pitfalls

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This show does not offer investment products or investment advice. Welcome to Finishing Well with Certified Financial Planner, Hans Shiel, and today's show is Power of Attorney Benefits and Pitfalls. And so, you know, the reason I'm laughing is I can't help but think of the first pitfall we know about in the Bible, which was Joseph. Which, you know, fortunately, as it turned out, God gave him a power of attorney over his brothers. He showed him in a dream and it got him in the pit. And so, you know, as you know the story, his brothers, you know, they found out about this power of attorney he had and they threw him in the pit.

It didn't work out so good it didn't appear. But as it turned out, right, when the famine hit and whatever, they're out of food and then all of a sudden this power of attorney kicked in and they're in bad need, right? But there's a fascinating thing, I don't know, just, you know, for my delight and hopefully you'll see the beauty of it, is that Joseph in so many ways is a picture of Christ, right? I mean, we'd starve to death, literally, spiritually, if it weren't for our brother who, you know, went ahead of us. When Joseph fixed to tell him those famous words that we know Joseph said to his brothers, what you meant for evil, God meant for good. Right before he said that, he says shalom to you, right, shalom aleichem, it's like saying peace unto you. The first time that's ever said is when Joseph's fixed to tell his brothers, hey guys, it's me, guess who? And so Jesus uses this exact terminology with the disciples when he has just been resurrected. They don't recognize him just like Joseph's brothers didn't recognize him. There were 11 in the room similarly to the 11 brothers, right, because Judas wasn't there. And one of the very first words Jesus says to those guys when they don't recognize him is exactly the same thing that Joseph said. It was everything's good, peace, shalom unto you.

What a great idea as we're heading into Christmas, right, to be thinking, right, peace unto you. And so when it comes to this idea of power of attorney, let me just tell you from having some experience with it, and my friend here certainly being the goad that he is to get me to do it with my father and now in my own case, is you want peace when you got a bad situation? Wow, can a power of attorney do that.

So take it away, Hans. We've talked about these on shows in the past, but we haven't narrowed down and done a whole show on the two powers of attorney that I think everybody walking the planet ought to have. So the good news here is if you're a married couple, your power of attorney, your first power of attorney is going to be your spouse and vice versa. And if you're a married couple and you don't have these powers of attorney, your spouse is going to be able to get you through some stuff better than somebody else would.

In other words, a married couple can get away with not having these and be doing a lot of things that these things are for without a power of attorney. So that's good news if you're married. But one of you dies before the other. Now you did these documents years ago. Now you're a single person.

Well, even if I'm incapacitated, I'm interested. I got a question. So I have a Roth IRA, right? And that's in my name only.

It's not in Tammy's name. Correct. Right. And now she's the beneficiary of that Roth IRA.

However, let's say I become mentally incapacitated and all of a sudden the stock market starts to crash and whatever and something needs to happen. Would that power of attorney help her in getting into that? Absolutely. In fact, if she doesn't have a power of attorney. She does. But if she didn't, she's locked out.

She can't touch that. Yeah. Out of your IRA, this is a place that spouses need to have powers of attorney. Oh, so it was a good question.

It was a wonderful question. And it's a wonderful point because the only person that can mess with your IRA is you. Your spouse can't go in and change your IRA unless they have a power of attorney. If they have a power of attorney, they can go in and act as you. And it's necessary for required minimum distributions. You have to actually make the distribution.

And if you're mentally incapacitated and you can't sign and you can't make a decision and you don't have a power of attorney, we've got a bit of a problem here. It's time for the code, folks. Yeah.

It's time for the code. It's just an example with spouses. Wow. Yeah, because, I mean, you point that out in the IRA show so well that you can't have a joint IRA.

No, no. IRA is in your name for life. Right.

I don't care whether it's a Roth, a traditional. And there's things that need to be done. Like if you're in bad health and mentally incapacitated, we're probably going to want to make some withdrawals out of this IRA to pay the bills. Yeah, we can't even do that unless we've got a power of attorney. We're going to have to go for a guardianship. So that's one of the underlying, let's just, the sales points of the code here is that what you're really avoiding by having a power of attorney is if you get into the position where you're mentally incapacitated, you just can't make decisions for yourself. The only way somebody's going to be able to do them for you is they're going to have to petition the court for a guardianship. A whole bunch of problems with a guardianship.

Number one is it's expensive. Then the next thing is you've got to prove, now it's some other person proving that you're mentally incapacitated and you may not play very well. So we've got to prove this person needs to have a guardianship.

Well, that's just, you know, I live this in real time because the goad and my friend Hans told me I need to get this on my dad. I needed, you know, he needs to get these power of attorney. So before he got sick, before he became mentally incapacitated to some extent, right, we had this in place. We had a power of attorney. Well, right not long after my father fell, alarm company that I won't name came in and sold my dad a crazily expensive, like oh my goodness, he had a perfectly good alarm system. Next thing you know, he's got a $12,000 alarm system.

He doesn't know because he isn't quite up to speed mentally as he normally would be that he paid anything for it. He was like, son, my payments on this are going to be less on the one that I have. And I'm like, oh dad, they charged you $12,000 to your credit card. No, they didn't.

I said, oh yeah, they did. Well, my dad wasn't in any position because he'd been in the hospital, in and out of the hospital to fight with the alarm company, right? But praise God, I had a power of attorney.

I moved right in, you know, and it took me a couple months and some effort, but it basically saved my dad out of his estate $12,000 for what had happened because at that moment, of course, the power of attorney came in handy all sorts of different places before the end of the game. But in that particular case, oh my goodness. And my dad would not have sat still for me going after a guardianship.

Well, he wouldn't have. And even if he would have stood still for this, number one, it's not him agreeing to it. It's the court looking at him and auditioning him to see does he need to have one or is somebody going to come in and testify because he can't come into the court? Then the next thing you got to prove is you're the right person or, you know, if you're the son or daughter here, you've got to prove not only does he need one, but I'm the person that you want to make the guardian. Right. Then you got the problem are their competing interests here, which a lot of times in their situations like this, there's another brother, another sister, a cousin or a spouse or boyfriend or girlfriend.

Just all kinds of people can come by the court and say, no, he needs a guardianship, but don't put Robbie in charge, put somebody else in charge. So a guardian deal is just something you want to avoid. So I'm back to the point is you need these things. Okay. And now we're going to start talking about who you put down as your as your power of attorney.

Okay. And you're really going to need to put down one. And it's best if you put down a backup or second. So if like I said before, if you're married, your spouse is going to be the other guardian of the first guardian on your thing. And then you do vice versa. But then now the second person is the long term first person because your spouse might be deceased. And then who was number two is now number one. You need to make sure you pick the right one.

Okay. And we did a little exercise before the show and I just said, you know, Robbie, you got three children and does it come to you immediately? Like who out of the three ought to be your power of attorney? And he said, yeah, this is where we run into a stumbling block, especially with a lot of mothers. But sometimes fathers, too, where they're having to choose one child over the other.

So you're you're forcing them before it's needed or I'm forcing I'm goading them is a better way than forcing them to make that decision. I mean, it just with a lot of you folks is that one of your children is clearly a better choice to handle your money than your second child. And there's lots of factors in that, you know, completely. And I know a big part of the factor in me was that's a certain burden that I saw came on me because there was my father's power of attorney. So when I was selecting it between my kids, you know, some of my kids handle burden sure differently than other of my kids handle burden. And so it's not just a matter of which one would be the most responsible, which one would do the best job. But which one is what I lovingly want, you know, that is no way or shape or form going to resent that my parents did this and now I'm stuck doing this. And, you know, there's all sorts of factors that go into it.

A lot of prayer, really. And the problem here is the fact that you you got to make that choice. OK. And then if you just have two children, then you do have to make that choice. If you only have one child, then there ain't much of a choice here to make. But then you're going to need to decide, is it going to be your child or is it going to be somebody else? And it needs to be somebody younger than you, presumably. And but still, you need an alternative to make choices. But the biggest place I run into problems is people have more than one child. They have two or three kids and we're talking about picking one of them. And that causes stress on the person because you don't have to tell these people right away. I mean, you just need to name them and go on with it. It's advisable to tell them.

But if you think that's going to cause your problems or angst. Yeah. So today's show is Power of Attorney benefits, but also pitfalls. We're going to get into those as we move on in the show. This is one of the things that I really love is in really Hans' ministry of helping people. He obviously doesn't make a dime off of just saying, you know, but he's just saying, here's something that comes in really, really handle it well if you're going to finish well, which is in his book, The Complete Cardinal Guide to Planning for and Living a Retirement.

Certainly there's a video, as you might imagine, that cardinal advisors, you know, on YouTube. Again, you know, Power of Attorney benefits and pitfalls. So when we come back, we're going to talk about a few more benefits. And certainly we got to look at some other interesting pitfalls. But this is a critical part of finishing well from my standpoint, not to leave your family in a lurch with you incapacitated.

We'll be right back. Welcome back to Finishing Well with Certified Financial Planner, Hans Scheil. Today's show, we're talking power of attorney benefits and pitfalls. We were talking about, you know, one of the interesting challenges is, you know, who is your power of attorney going to be? And we're still into the benefits.

I'm convincing you. And if you just want to know my recommendation, it's this. Get a power of attorney and actually get two of them. The financial power of attorney and worded very similar, pretty much the same person, the same thing, but a health care power of attorney around health care decisions. So you need two of them. And then what we've also, if you're married, then your first person named on there is going to be your spouse and vice versa. Who's going to be named second? Or if you're single, who's going to be named first? Typically, that's one of the children. If you only have one child, then it's going to be that child. We probably still ought to compare it to somebody else like a niece or a nephew or a very dear friend.

You need it to be somebody younger than you. That's one of the benefits of children. And if you do get in a position where you're mentally incapacitated and you're not able to make sound financial decisions, you're not able to care for yourself.

It's just natural for the children to be the person that can step in and do this. And one of the main reasons you want a power of attorney is you don't want to put your family in a position of having to lobby the court for a guardianship and add that drama to what is already a very stressful situation where somebody's got to come in and take care of dad or mom's stuff. The thing I want to point out is a power of attorney is going to end at death.

So some people think that your child is going to be put in a position of distributing the money after you're deceased, and it could well be that you're going to name this same child as the executor in your will, but they still don't get to make decisions about who gets what. It's the will that does that, that you wrote. So a lot of people do these things all at the same time. But today we're just talking about power of attorneys.

They begin when they begin, and they end at the end of your life. Now, what there are people – Yeah, which by the way, the bank pointed that out to me very quickly. Well, sure they do. They have to do that all the time because people come in there, hey, I'm the power of attorney, and that's on file.

Go look in the file. We're going to do this. So-and-so just died.

And they're like, okay, that's fine. We're going to lock up the account now. What I really want to do in the first part of the show, and I've gone beyond the break talking about it, is convince you of the need to do this and then talk about a little bit about who you ought to name. Now, I want to make one last point, and then we're going to move on to the pitfalls.

I want to talk about what is called a springing power of attorney. And I mentioned that – I asked you before the show. I said, do you know what that is? And you – I thought it might be the Tigger power of attorney because, you know, the wonderful thing about Tiggers, they're bouncy. But anyway, that wasn't it. I wasn't it.

No, that's not it. And so what the gist of that is, is that I'm not recommending a springing power of attorney because it's going to add one more hassle. But I am recommending it for somebody that says, I ain't doing that.

I'm 65 years old. I'm not putting my son in a power position to go spend my money. I mean, just not doing it. Well, then that person, in the absence of doing a power of attorney, I might recommend a springing power of attorney. And what that simply means, it springs into effect when I'm incapable of making financial decisions. So it's very clearly in the thing, it says, you know, a definition of when Robbie is not able to make decisions for himself, then until that time, this power of attorney has no effect. But when that happens, it has to be certified by one doctor or two doctors, however you want to write it. Then at that point, the person you name has your power of attorney and it has effect. So again, don't recommend that you go do that on all powers of attorney because it sounds nice, because it's going to add some more hassle of running down the doctor and that sort of thing.

But use it if you're selling this to your parents and they're just not going to do it without something like that, well then go ahead and put it in there and then they'll at least have something in place to prevent the guardianship. Right. Right. Okay. So now we're going to shift to the pitfalls. Okay.

So now that I've convinced you to do it and I'm still there, do it. What are some things that could go wrong? Number one, the power of attorney that you name could be deceased before you are. I mean, so that's why you need two of them or three of them. But two of them is usually enough because if the first one dies, then you can go in and just add another one because if you're still got it together. But if you don't, then you're left with the number two.

And the number two, that's why you need to pay just as much attention to the number two as the number one because the person you picked so carefully could be deceased. That happened with my sister, had a healthcare power of attorney on my mom. Well, she kind of needed it. She was in about halfway through Alzheimer's, about three or four or five years in and my sister died. And then, you know, I was named second.

So it was pretty easy because we went and redid everything when we moved my mom up here to North Carolina. And I was the number one on the financial power of attorney. But just know that is you need more than one person.

They need to be younger than you. And you need to pay attention to the number two person that you put down because they may be the number one person when this thing is actually happening. People could use a power of attorney for nefarious purposes.

I mean, it goes beyond your son or daughter. They could be in a very unfortunate financial position or something. And it could be their spouse that influences them to go pay themselves for something or just buy. There's the potential for fraud and it does go on.

And again, that's why you need to pick your people carefully. But there isn't really a very good policing system on these things because they're just sitting in a drawer somewhere. And most of the time these are not registered with the court.

They're just there. I mean, and so you need to hold it tightly, keep an eye on things and then keep an eye on your powers of attorney. When it comes to healthcare, the reason you need a separate one is, and it's recommended, you could try to write the healthcare powers into the same one.

But it's much cleaner to just do two of them at once. One handles financial matters. Somebody could sell your house, mortgage your house, borrow money, check you into a senior living center.

You could sell your car, buy a car, pay your car insurance, draw money out of your IRA, do a minimum distribution. I mean, it gives them the full powers to conduct your business. And they are fiduciaries. They are responsible, according to the law, to act on your behalf. And there are penalties if they didn't act on your behalf. But people still do it.

It still ends up happening. The healthcare power of attorney is just so they can go negotiate with the doctors, the hospital, the healthcare settings, the home healthcare agency, whether you do surgery or not, whether you do take a pacific drug or whether you go see a different specialist. Which ended up in my father's case again to be really helpful because it was quite clear to the family near the end of his life that, you know, we were done with in and out of the hospital program. It was hurting him.

I mean, it was hard. And so we were able to, because we had his healthcare power of attorney, say, no, we ain't going back in the hospital. I mean, we're going to finish things here. And we got hospice and whatever. We're so glad we did that because it would just mean more torture for him.

And that's what the deal was. We do this all the time for people. We do it all over the country. We have an attorney in our office in Cary or in Durham.

And she will work with people over the phone. So we have people all over the state. Her state is limited to North Carolina. But we have another arrangement with a group of attorneys that can do this over the phone or over Zoom. And they cover another 22 states. And if you're not covered by those 22 states and North Carolina, I will find you an attorney.

And I've done that for plenty of people because it's in my book. I'll find you somebody that isn't going to charge you an arm and a leg. I mean, you don't need Perry Mason defending you for, you know, for a power of attorney and, you know, in a simple will. And most of these can get done for a thousand dollars or less where you can get all the documents, even for a couple, which would be a total of eight documents because we would throw in a redoing or an updating of your will and doing the HIPAA release, which is another document that you really want.

Is you want the power to look at HIPAA information that it can be released to you as the child or you want as if you're the person giving it that your power of attorney or your child can have that as well. So this is just kind of like the clients that are coming in. We tend to make it routine. And the reason I'm highlighting it today is I just went through a presentation when I was at the ed slot meeting of a lady attorney that went through this. And she really made some points with me.

And I said, you know, I'm going to bring this up again. Get this done while you're of sound mind and it'll just add some peace to you. Right. I mean, it is peace to you because I know, I mean, that these decisions were made for my family. Right. Because at this point in time, you know, there's a lot of stress.

I was there with my dad. Right. To making these decisions, whatever, and to have the ability to do it without getting a bunch of attorneys and doing a bunch of crazy stuff without a bunch of drama when it's the least convenient. Right. I mean, this is no time to be adding drama when already your father or your mother is sick or, you know, whatever the situation is.

It's just really part of the reason it's nice to have the goat around. And listen, if you have young adults that are still under your prevents, you know, they're not married yet, like my youngest son, Stu, she recommended, and I'm going to get this done, that I get a health care power of attorney and a financial power of attorney where he's given that to my wife and me so that if he were to get in an accident or need somebody to step in and take care of things for him. I don't have legal authority.

He's an adult. So I'm going to do that for him. I'm going to also do it for my older son who's married. I'm going to just give them these four documents and I'm going to pay the attorney to do it for them. And it's just going to be a gift. It doesn't sound like a real exciting gift here on the holiday season. I'm going to give him some other things too. Well, I think that, you know, I'm able to influence them. My kids actually see the gift in that. I've bought life insurance on hand. Oh, there is. I've given it to them, but you're right. You need to get them other things too.

This isn't something you get excited about at 25 or 35. Again, there is a video about this at Hans' YouTube channel, which is Cardinal Advisors and or you can go to cardinalguide.com, get Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. It's got a whole section on all these documents that are just absolutely wonderful. And again, you can go to cardinalguide.com and email Hans. Any questions you have or certainly you want to contact him on these forums, he really is helpful with it.

This stuff is unbelievable when you got it in place. It does provide peace. Thank you so much for listening. Enjoy your Christmas season. Thank you. Thank you. This is the Truth Network.