It is a natural instinct to designate an adult child as your power of attorney should you ever need one. However, you need to be certain that your children are capable of the job.
When creating an estate plan be sure to plan for incapacity, in addition to death. Who would you want to handle your affairs if an illness or injury left you incapacitated?
The first instinct of most people is to appoint an adult child to be a power of attorney or a trustee and let the child handle things. However, that can be problematic, especially if the child has little experience handling financial matters.
Such was the topic in a recent Forbes article entitled "Aging Parents And Loss Of Wealth In Widowhood."
The article tells the story of one aging couple with two adult daughters. The father handled all of the family finances and was successful enough to have rental properties and an estate worth about $2 million. When he passed away everything went to the elderly mother. She, in turn, did not know how to handle finances and had no interest in learning.
One of the adult daughters was financially sophisticated, but lived far away. The other daughter was not as financially sophisticated. She worked in retail and had no experience with rental property.
Nevertheless, since this second daughter lived nearby she was designated to care for the mother and the finances. The daughter neglected the property and did not file taxes. Eventually, the $2 million dwindled to $50,000.
The story is not all that uncommon.
When children do not know how to handle the finances it is not a good idea to put them in charge until they learn. If for some reason the child must be put in charge, then they should be directed to get professional assistance.
Your estate planning attorney can help you make the appropriate arrangements now so all will be smooth sailing later.
Reference: Forbes (Feb. 5, 2016) "Aging Parents And Loss Of Wealth In Widowhood."
