It’s your money
By Verlyn de Wit
You’re enjoying the African safari you’ve been planning for years. In addition to the incredible beauty, part of the allure is that you simply cannot be reached by phone, fax or any other means. But while your camera is bagging big game on the Serengeti, the “big one” just got away back home. Like a lightning bolt out of a clear blue sky, developers have made a crazy offer on that hard-to-sell parcel of real estate. The buyer needs an answer today, or the offer evaporates. You are nowhere to be found, much less be in a position to sign documents.
Terri Schindler-Schaivo, a brain-damaged young woman from Florida was the focus of a costly decade-long legal battle that gained national attention and split her family. Her husband, who was her legal guardian, wanted to have his wife’s feeding tube removed, causing her to die by starvation and dehydration. Terri’s parents fought for her life. Everyone had a great deal to say, except Terri.
Everyone knows grandpa has been slipping a little but no one has had the courage to say the “A” word. Grandpa has always been a fiercely independent, cards-close-to-the-vest business man. Suddenly, his health takes a turn for the worse. The family decides its time to implement the massive gifting plan to his children, their spouses, his grandchildren and great-grandchildren that grandpa has talked about. The tax savings would be in six figures. But grandpa has lost the mental capacity to legally make such gifts, and the plan stalls.
Assuming that my readers’ intelligence is far above average, (and their mental capacity is beyond question) you’ve probably guessed that all of the crises above could have been resolved with an appropriate “power of attorney” (POA).
A POA is a legal instrument that is used to delegate legal authority to another person. The person who signs the POA is called the principal. The person who is empowered to make decisions or take actions on behalf of the principal is called the agent or attorney-in-fact.
While definitions vary from state to state, here’s a quick POA primer:
Nondurable (or Limited): takes effect immediately and is often limited to a specific transaction, like the closing on the sale of a residence, or handling business affairs of someone who is traveling. A nondurable POA remains in effect until it is revoked by the principal, or until the principal becomes mentally incompetent or dies.
Durable (or Blockbuster): enables the agent to act for the principal even after the principal is not mentally competent or physically able to make decisions. This power may remain in effect until the principal’s death.
Springing (or Standby): this type of POA becomes effective at a future time. Perhaps the POA “kicks in” or “springs up” when the principal becomes mentally incompetent or is otherwise unable to handle his/her affairs. The principal’s physician is usually asked to determine if the principal is mentally competent.
Whether a POA is “nondurable,” “durable,” or “springing,” it can give an agent the legal power to do one or all of the following:
• Buy or sell real estate
• Manage property
• Conduct banking transactions
• Make health care decisions
• Invest money or liquidate investments
• Make gifts on your behalf
What happens without the POA? An opportunity may be lost, wishes are not carried out, or unnecessary expense is incurred. Family members may be forced to petition the court to appoint a guardian and/or conservator to handle the incapacitated principal’s affairs.
It is important to note that state laws can vary widely in this area. Also, when it comes to health care you may want to go beyond a simple POA. A “living will” gives your physician specific instructions concerning which life-sustaining procedures you wish to have employed. A POA simply dumps the burden of decision in someone else’s lap who may not want to decide, or may not see things your way.
Do-it-yourselfers will find hundreds of websites that help you draft your own POW. The mentally competent will ask for their attorney’s help.
■ Verlyn De Wit helps successful dairy producers make smart decisions about their money. He can be reached toll-free at 1-888-468-1728 by e-mail at email@example.com or snail-mail at 1270 Eastside Dr., Sioux Center, IA 51250. Securities offered through Sammons Securities Co., LLC. 4261 Park Road, Ann Arbor, MI 48103. Member FINRA and SIPC.
■ Neither Western DairyBusiness nor Verlyn De Wit is qualified to offer legal or tax advice. Consult your attorney and/or tax professional for a qualified opinion regarding your personal situation.