Make financial plans in case of accident or illness

We don’t want to think about it, but it’s always possible — an accident or illness can leave us incapable of taking care of our financial affairs for an undetermined period of time.

If you take steps now to prepare for that possibility, you can reduce the stress and trouble your family goes through when they step in to handle your affairs. These safeguards will help you recover financially, once you have recuperated and are able to manage on your own.

• Look into establishing a durable power of attorney. A power of attorney is a legal document that allows a person you trust to act as your agent, or “attorney-in-fact,” in managing your financial affairs. With a durable power of attorney, this person can continue to act as your agent even when you become incapacitated or disabled.

For instance, if you become incapacitated during an illness or accident, a durable power of attorney provides a loved one with the legal authority to pay your bills, close accounts, transfer assets and the like. He or she must act in your best .

You can limit your durable power of attorney to take effect only given specific conditions (i.e., when you become incapacitated), or only within certain areas of your finances.

If you haven’t signed a durable power of attorney, and you become incapacitated, your family may need to go to court and establish a guardianship in order to manage your financial affairs. Such proceedings may involve higher costs, more time, and more stress for your family.

Think carefully about what you need and who you would trust to take on this role, and talk it over with a legal professional. Legal authority over your finances is not something you should hand over without serious consideration, so make sure you completely understand what you are empowering your agent to do, and the circumstances in which the power of attorney goes into effect.

• Prepare a letter of instruction. You can make it easier for a spouse, family member, or friend to step in and manage your affairs by leaving them step-by-step instructions for an emergency situation.

Start with a basic inventory of your important documents. Write down the location of your will, insurance policies, trust documents, deeds, safety deposit boxes, medical information, social security information, tax documents, and your family records (i.e. birth, death, adoption, marriage and divorce).

Next, compile an inventory of your assets. Include all of your financial accounts, along with account numbers, contact information for financial institutions, and login IDs and passwords. If you’re incapacitated, your agent will likely be unable to communicate with you, so be sure to include information he or she would need to access and maintain your accounts.

Specify which accounts should be used to pay for regular expenses, and in what order your accounts should be liquidated to pay for your medical expenses if need be.

Third, compile a list of your regularly billed expenses each month, quarter and year. Provide login IDs and passwords for those accounts, or provide the address and key where bills are received.

Keep this information safe, somewhere accessible to your agent. With these preparations in place, your family can act with confidence and ease your financial recovery.

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