Have you ever thought about what would happen to your real estate, bank accounts, investments and other property (your “stuff”) if you could not take care of them because of incapacity due to an accident, illness or injury? How would your property be maintained, bills paid, income collected or property sold?
If you have done no planning, no one would have the legal authority to act on your behalf during your incapacity without court involvement. In order to make decisions regarding your property, your loved ones would have to file in probate court to have someone appointed. In this filing, the probate court judge first makes a determination if you are legally incapacitated and cannot handle your own affairs. If you are legally incapacitated, the judge then appoints a representative to handle your property. The judge then decides what your representative can do. The court may include in the appointment order, that any expenditures above a certain amount require court approval. It could take over a month to get these expenses approved by the court. In addition, when an attorney is used for these approval proceedings, it could cost more in legal fees than the expense being requested for approval. This is not the result that most people would want. Most people would rather have their family or someone they choose making these decisions, instead of someone who does not know them.
There are several planning opportunities you can use to avoid probate court to take care of your stuff. Probably the most common tool used is a General Durable Power of Attorney for financial matters. A General Durable Power of Attorney is a legal document in which you appoint an agent or agents to act on your behalf with regard to your property and finances. This document can be effective either when signed or when you become mentally incapacitated. In your General Durable Power of Attorney, you direct what your agent(s) can do, all without court supervision. Your agent(s) can collect your income, pay your bills, deal with governmental agencies and do just about everything you could do to manage your stuff.
Most Durable Powers of Attorneys are General Durable Powers of Attorney in that they cover all property of the maker of the Durable Power of Attorney. You can limit the power in a Durable Power of Attorney to specific assets or for a specific period of time. There are other alternatives that you could use to avoid a probate court to take care of your stuff. Some alternatives are a properly drafted and implemented revocable living trust, limited liability company, corporation or partnership.
You do not need to have someone outside your family making decisions regarding your property if you are unable. Make sure your wishes are followed. Do proper planning today.
By: Matthew M. Wallace CPA, JD
Published edited August 10, 2008 in The Times Herald newspaper, Port Huron, Michigan as: Planning could save trouble for loved ones