Last month we started the discussion on how to talk to your family about finances. We kept the conversation a bit vague. This month we encourage you to take things a step further and actually ask one very important question: “If you need help with your finances someday, who is your Power of Attorney (POA)?” This question recently came up in my family.
As I’ve mentioned, being a financial planner often means I get pulled into family conversations that I otherwise wouldn’t be. This past fall, my husband’s 90 year-old grandmother received a notice from her health insurance (that she’s had since she was 65) that they would no longer be insuring her. Rather, they will be depositing money into a health retirement account (HRA) for her; and she needs to buy her own insurance. Grandma has never had to shop for health insurance. She was one of the lucky ones who had 100% health care coverage from grandpa’s employer. Those were the days. So, you can imagine how this notice was received. Let’s just say that most of the family heard about it that day, and I was on the short-list to call in to help.
Being her granddaughter-in-law, it may seem a bit odd that I’m assisting with her personal finances. However, I am the most knowledgeable about HRAs and health insurance in the family. That being said, we needed other people to be there when we discussed this situation. Here is a list of who needed to attend:
- Me – (default family financial planner).
- Grandma – (We needed to find a time when she was feeling well enough to meet. She is 90 years old and was just released from the hospital 3 days earlier).
- Her son – (who is technically her Power of Attorney, but is not the person who helps Grandma with her finances).
- Her son’s wife, who is the daughter in-law, but helps the most with grandma’s finances,
- Her daughter, who is my mother in-law and felt like she should be there (my father in-law was lucky enough to be excused).
We all barely fit around the dining room table. Though it was crowded, and we spent 75 minutes on the phone with 4 different people, when we were all done, grandma had secured new health and prescription drug coverage. By the end, she was exhausted, her son was likely frustrated over the loss of 75 minutes of his time, and the rest of us were a bit weary.
It all worked out but, what if grandma hadn’t felt well enough that day to talk on the phone? What if she was still in the hospital? What happens if we have more questions in a few weeks and she can’t talk at that time, or next year when open enrollment comes up again? Since I had already breached some sensitive financial topics, I took the opportunity to ask to see grandma’s Power of Attorney (POA) document.
Upon reviewing her POA, I noticed that her son was, in fact, named as primary POA, but ONLY in the event of incapacity. In order for Grandma to be deemed incapacitated, she must be deemed so by two physicians and one psychologist. Grandma may not be feeling 100%, but she is definitely NOT incapacitated. What that means is that the type of POA that she has in place really isn’t “helpful” for her right now. Her son can NOT act on her behalf right now. If grandma would’ve still been in the hospital or simply not feeling well enough for a 75 minute call, we would have been in a difficult situation.
Here’s the situation:
- Grandma has what is called a SPRINGING Power of Attorney, which means it “springs” into place when a person becomes incapacitated.
- What grandma really needs is a DURABLE Power of Attorney, which would allow her agent to act on her behalf right now, even though she isn’t incapacitated.
The easy part is getting grandma to agree to update her POA from Springing to Durable. The HARD part is deciding who to name. Historically, people have named their oldest male child. That works in some cases, but what if your oldest male child is NOT the best person to help with financial matters? Though this should be a practical decision, it becomes an emotional one. That’s worth noting, but in the end, emotions shouldn’t drive this decision. We find that the emotions become exaggerated when matters are not transparent and there is lack of communication. If all close family members understand who grandma’s POA is and what their responsibilities (and limitations) are, most people will be fine with the decision.
This conversation is easier had well before someone needs “help.” It is easier to be practical at that point. So, here are some questions to get a conversation started with your loved ones:
- If you need help with your finances someday, who is your POA?
- Are they the best person for this role?
- What are their responsibilities and limitations?
- Can they act on your behalf right now, or would you need to be incapacitated for them to take action?
As financial planners, we are generalists when it comes to legal documents. You should visit your attorney to learn more about the difference between Springing and Durable Powers of Attorney and what is best for you.
But make sure you ask, “Grandma, if you need help with your finances, who is your POA?”