This is the third of 4 articles in our 2013 Estate Planning Fundamentals Review series. We’ve already covered, life insurance and healthcare powers of attorney. So moving on…to property powers of attorney.
Property powers of attorney are important components of an estate plan because the documents help people plan for today as well as tomorrow. The instruments are even more important for single parents and small business owners because often the single parent or smallbiz owner is the sole keeper of the keys to the family’s or business’s financial kingdom. So if the key keeper becomes seriously ill or suffers a devastating injury, the financial kingdom could turn to ruin if a trustworthy substitute keeper isn’t ready to step in. A property power of attorney allows for designation of a substitute keeper.
Consider the following:
Karyn and Jonah are divorced. Karyn has sole custody of Little Caroline because Jonah was abusive; Karyn’s restraining order proved so. Karyn was an only child whose parents died a while back. She and Jonah moved to Illinois immediately following the birth of Little Caroline, who is 5 years old. By the time Little Caroline was 2, Jonah and Karyn’s relationship was over.
After the divorce, Karyn bought a flower and wine boutique, which is thriving. She owns a modest home and lives well within her means. However, Karyn has recently learned that she must be undergo major surgery and will be in recovery for at least 6 weeks, 3 of which will include her being heavily medicated. Because she put so much time into her business, though she has a part-time employee, and spends all of her spare time caring for Little Caroline, she hasn’t had a lot of time to really nurture other friendships. Furthermore, Jonah not only has a violent temper but he also has an erratic employment history. So there is no way Karyn would let him near Little Caroline or her financial affairs.
So some but not all of the questions Karyn should consider are:
- Who will care for Little Caroline while you’re in the hospital and during the first few weeks of your recovery?
- Do you have 6 months of emergency daily living expenses saved?
- If you pay your mortgage early, will you be penalized?
- While you are in the hospital and a bill becomes due, have you arranged for its payment and how?
- If a complication arises, requiring a longer hospital stay and, thus, a longer recovery period, who will tend to your personal and business affairs?
- If you conduct your affairs online, who will have access to your online accounts and how have you cleared this with the relevant institutions?
- Can your part-timer handle opening and closing the shop during your absence?
- How has this authority been provided and is there a back-up plan?
- Can the shop survive during your absence?
- If you have arranged for someone to manage your financial affairs, have you limited their authority and how?
All parents and business owners owe a duty to their families and business stakeholders to plan. For single parents and small business owners, failing to plan creates dangerously and unnecessary high risks to family and stakeholders.