The question of POD (paid on death) for bank accounts or TOD (transfer on death) account registrations for brokerage accounts and mutual funds held indirectly in individual or joint names comes up often.
What about your disability, incapacity, or unwillingness to handle your financial matters? What contingencies should you be thinking about and at what age should you be setting up a plan? The questions are numerous and age does not matter.
If you have assets, you need another estate planning document called a durable power of attorney, a document that allows for the financial decision-making process to continue on your behalf. Even if you have a living trust and everything you own has been funded into the trust, you still need a durable power of attorney.
This document does not replace your estate plan, it enhances it. Under a properly drafted durable power of attorney, you give authority to an agent (sometimes called an attorney in fact), and this authority continues despite your incapacity, disability, or unwillingness to handle your affairs.
Your attorney will share with you that the range of authority granted under a durable power of attorney may be limited or broad depending on your needs. Under a durable power of attorney, you may grant this authority to anyone you choose. Be careful, however, that you choose wisely.
For example, you may own tax-deferred annuities in your individual name. From an estate planning and income tax planning perspective, the best way to title this type of asset may be to hold it in individual name, and designate your spouse as primary beneficiary with your trust or children as contingent beneficiary. This allows maximum flexibility for different choices that may be made at the time of your death.
However, what do you do during your lifetime if you need someone else to step up on your behalf and update investments, change beneficiaries, or select an income distribution each month for your living needs? The answer? You name someone you trust as your agent under a durable power of attorney. Speak with your attorney.
Marriage does not give automatic authority to your spouse and children do not have automatic legal authority for their parents when and if needed. Proper estate planning documents should be established to secure the ability to continue the management of your financial affairs. When working with your adviser, remember to think ahead. If you name a power of attorney, what about a successor to that person?
If you are in the position of caring for your parents and managing their affairs, set them up for a successor to you. Do not leave this as a costly burden to be handled by the courts and family. Nothing good can be accomplished under a "no contingency" plan scenario. You have worked too hard to get where you are. Do not allow a temporary or permanent inability to manage your own affairs or someone else's for whom you have taken this responsibility, to be a devastating and permanent misfortune.
Plan ahead and while you are engrossed in proper planning, also review your health care documents. Naming someone to step in to make health care decisions can be just as important to you as a successor to your financial decision-making.
Be proactive and you will sleep easier.
Kim Ciccarelli Kantor is president and founder of Ciccarelli Advisory Services Inc., a family owned and operated firm in Florida and New York, which provides comprehensive financial investment and estate planning services for individuals, families and businesses. Ciccarelli Advisory Services is at 3066 U.S. 41 N., No. 202, Naples.