Retirement Focus

With Americans living longer than ever, chances are good that most of us will live many years into retirement.

If illness or injury strikes, you want to know that there is someone on hand to manage your day-to-day finances and investments. Unfortunately, the burden of your care giving may be more than your spouse can handle – and he or she may have health issues as well. If you are single, you may not have other relatives within close proximity to be of assistance.

Who will make your financial decisions?
If you have not done any planning and you become disabled, legal proceedings may be necessary in order to have someone step in and take over for you. A guardian will have to be named to manage your assets. Such circumstances present several disadvantages.

First, the process can be protracted and expensive. Second, legal proceedings are a matter of public record, and you and your family may be exposed to unwanted publicity. Finally, and most importantly, because you may not be able to make your wishes known, the person whom you would want to handle your financial affairs may not be the person chosen by the court.

One solution: a durable power
A “durable power of attorney” can be helpful in making sure your wishes are followed. This legal document gives the person you choose the authority to act on your behalf in designated circumstances. While a regular power of attorney lapses in the event that you become mentally incompetent, a durable power remains in effect.

The authority you grant to your “attorney-in-fact” can be as sweeping or as narrow as you wish, ranging from the power to pay bills, collect debts, prepare tax returns, borrow funds and fund a trust are among the most common powers granted. For example, parents may want to take advantage of the federal annual gift tax exclusion by making a gift tax-free transfer of up to $12,000 a year to their children or grandchildren. The authority to do so should be spelled out in the durable power-of-attorney document.

While an effective tool, the durable power of attorney has drawbacks. Some institutions require that the power be executed on their particular form – this is simple if you’re in good health, but may be impossible if you’re incapacitated. In addition, because a durable power of attorney is not easily changed, questions of its validity may arise after several years.

A comprehensive solution
An alternative to a durable power of attorney is long-term financial and estate management. One tool of long-term planning is a revocable living trust, which offers comprehensive protection that can last as long as it is needed.

You can create a living trust now. The agreement is revocable; you can make changes at any time, even cancel it if the need arises. Initially, the agreement calls for you to retain full control over all investment decisions regarding the assets in the trust.

The trustee’s responsibilities may be limited to everyday investment chores and recordkeeping duties. If you become incapacitated, or upon your request, the trustee will assume full management of your assets, acting as you have directed in the trust agreement. In addition to handling your investments, the trustee’s responsibilities may include the use of the trust income to employ household help, hire nurses and even pay your monthly bills.

Advance directive spells out future medical care
An advance directive refers to oral and written instructions about your future care in the event that you become unable to speak for yourself. Each state regulates the use of advance directives differently.

There are two types of advance directives: a living will and a medical power of attorney. In a living will, you put in writing your wishes about medical treatment. State law may define when the living will goes into effect and may limit the treatments to which the living will applies. Your right to accept or refuse treatment is protected by both constitutional and common law.

A medical power of attorney, also known as “health care proxy” or “appointment of a health care agent,” enables you to appoint someone to make decisions about your medical care if you cannot make those decisions yourself. In many states, the person whom you appoint is authorized to speak for you at any time you are unable to make your own medical decisions, not only at the end of life.

Advance directives give you a voice in decisions about your medical care when you are unconscious or too ill to communicate.

Plan now to ensure financial security
It is important to make your plans while you’re able. Talk these issues over with those closest to you, as well as with your legal advisors and a financial institution experienced in establishing livings trusts.

Jim Spindler is Vice President and Senior Financial Advisor for Univest Corporation.