If you live long enough, you will eventually need the help of others to do things that have been easy for you to do your whole life. When this happens, children will often step up and do your bookkeeping. Many of our bills are easily paid online with bank information or a credit card. The company that receives the payment cares little who is making those payments, even when that person might not have authority to do so. Grocery stores are sending customers to self-checkout to save money on employees, with the added effect that no one is monitoring the ID of the purchaser and comparing that ID with the credit card they use. It is becoming very easy for someone to “borrow” a credit card and make purchases without ever being caught.
If you become incapacitated, well-meaning children may use your credit credit card to buy your groceries and household supplies with ease. No one will stop them. Your children can even order your lunch in advance online using your credit card, and then show up and pick it up without proving their identity. Even Banks allow withdrawals of a few hundred dollars cash each day using the automated teller machines. Only a few stores still check your ID, usually those with memberships like Costco and Sam’s Club.
If your caretakers have your best interests in mind, these modern conveniences can be a life saver for someone unable to drive, shop, or pay bills online. Unfortunately, not every caregiver has their family member’s best interest in mind. Caregivers put up with a great deal of physical effort, time, and poor treatment, sometimes even from the person in need. This may result in a caregiver deciding they are owed something, more than whatever might have been agreed upon. When this happens, the sky is often the limit. This can result in emptying your nest egg, or even taking you deep into debt.
Who will care for you someday? Who will manage your finances? It is not uncommon for children to take their “inheritance” early, without the knowledge or consent of their parent. Many of these problems can be avoided simply by naming someone you trust as your Power of Attorney.
Many people never set up an estate plan because they figure their family can figure things out on their own. If they want a share of the money, they can go through the trouble of probate. What these people don’t realize is that half of the estate plan is designed to handle their care while they are still alive.
Wills Can’t Help You
A will doesn’t take effect until you die. If all you have is a will, you haven’t started taking care of yourself yet. A trust can hold assets both before and after you die. Most of my clients place their home in a trust. This valuable asset can be rented or sold if necessary to fund your care before you die. But someone needs authority to do it. A Trustee has authority to manage any assets currently held in the Trust. Another option is a Power of Attorney. This gives your named “attorney in fact” authority to manage assets outside of the Trust.
Court May Be Necessary
If you don’t have a Trust with assets, or have named someone in a Power of Attorney, and you lose the ability to understand what is going on around you, your loved ones will be unable to assist you with your finances. To get this power, they will be forced to go to court to seek a Conservatorship, to receive authority to manage your money and assets. This can be expensive and be an ongoing burden as they are required to give reports to the court of their use of your funds.
Adding a Child to Your Bank Account is a Mistake
A common work around that many use to give their children the ability to manage their money, is simply adding a child as a signer on your bank account. Initially, this may seem like a good idea when you know you can trust that child. Unfortunately, even when the child is trustworthy, there are several ways this can still go wrong. Marriage requires a continued commitment from two people. No matter whether you feel your child is a saint, it’s always possible they may get divorced if their spouse no longer wants to be married. At this point, everything with your child’s name on it is at risk of being divided in the divorce. You may find yourself involved in the divorce trying to defend your own bank account from your child’s ex.
After that, we have to deal with creditors. If your child is an honest person with your money, but gets in a car accident, they may end up owing thousands of dollars to the other side. Those injured may sue and pursue anything in that child’s name, including your bank account. The same issues appear if your child is forced to file for bankruptcy.
Finally, after you die, if you have more than one child, you may expect your child to divide up the money in your account and give it to your children equally. Some do. But the law doesn’t automatically require them to do it. Utah law gives the surviving owners on an account full ownership of the money after you die. If your child still intends to make gifts of that money to their siblings, they can still be stopped from doing so by ex-spouses, creditors and bankruptcy courts. If your child is ever in an accident before the money is gifted to siblings, and the child is no longer able to manage their own money, whoever is now caring for your child gets to choose what happens to that money. Maybe they don’t want to give it to the siblings.
All of this is easily corrected with a Power of Attorney that is set to take effect when you become incapacitated. Your child can be ready to use the Power of Attorney when you can’t manage your money on your own. They will take the Power of Attorney to the bank, and will have access to the funds, but those funds will never be your child’s money, so they won’t be accessible by your child’s creditors.
Pay on Death Beneficiaries
To prepare for distributing the money in your bank account to your children, simply go to the bank today and name beneficiaries of that account. The Bank calls them “Pay on Death Beneficiaries.” You can name all of the children as beneficiaries, giving them each an equal portion. This works pretty smoothly unless one of your children dies or becomes incapacitated before your death. In that case, the bank won’t give a share to the deceased child’s family. A disabled child may need someone else to hold and manage their money. If you want to be sure the money is distributed at the right time to the right people, you will need to name a Trust as the beneficiary. Then the Trust can manage the money for those who are unable to manage it on their own.
Estate Plans Work!
The tools exist to solve all of these problems, but you must choose to create them. The longer you wait to sign a Power of Attorney, the greater the chance that you will add challenges to those who care for you in your old age. An easy answer to this problem is to create your estate plan now, and make adjustments as needed while you age. Here at Prigmore Law, we have the experience needed to prepare for your future without any pain in the present. Give us a call today to make an appointment for a free consultation to discuss your options. Your friends and family will thank you later!
This article will discuss general principles of law. Please do not take action based on this article alone. Only an attorney can discuss your specific situation with you and then help you determine your best course of action.
