Preparing for the Unexpected With Your Power of Attorney
Powers of attorney are crucial to estate planning. They allow you to designate a trusted friend or family member to engage in financial transactions on your behalf when you're not able to. But, not all powers of attorney are created equal, as shown by this story about John.
John was a real estate investor and he had options on multiple properties around the country. John traveled to Asia, where he unfortunately had a medical emergency and fell into a coma. John had his trust, his will, and a power of attorney naming his brother Matt as his agent for financial transactions – all important planning steps you should take too. But here's the problem: John needed to make several payments on the real estate options he held, and if he didn't, he stood to lose millions of dollars. Matt, who was now in control of John's finances, had no way of knowing that these transactions needed to occur.
John didn't inform Matt of the deals he had going, and the times that various payments were required. John never expected to end up in a coma, unable to make those payments for himself – but of course, this is what planning is all about. It's about being prepared for unexpected events. And being prepared is about more than just going through the planning process, which absolutely is a critical piece. It's also making sure that the people you choose to act on your behalf have the information and knowledge they need to protect you and your assets.
Even though Matt had the ability to make those transactions when John was disabled and unable to give instructions, Matt didn't know he needed to do so. The result was that several of John's options lapsed, and he did in fact lose the opportunity to earn several million dollars. The moral of this of the story is that these planning documents, while important, are not enough. With a power of attorney, and even with your trust documents, you have to make the information available to your agents, so that if and when they must take action on your behalf, they know exactly what to do.
In this instance, we would have suggested that John have a full schedule of all of the payments that were required on the real estate investments he had. That information would be in a place Matt would have access to if it became necessary. But, because he didn't do that, John paid a horrible price. So if you need to talk about setting up a power of attorney, or if you have a power of attorney but no idea whether your agents know what to do with your assets, get in touch and we'd be happy to steer you in the right direction.