Real Time Web Analytics

Sunday, February 13, 2011

Is there a down side to having the same person as executor and power of attorney?

The question of who to appoint to the important jobs of executor of your Will and attorney under your Power of Attorney can take some real time to answer. As well it should, given the responsibilities and work you're putting on someone's shoulders and the potential for things to go badly off the rails. In my view, those who take the time to really think this out - as opposed to those who seem to do no more than rock-paper-scissors to make a decision - are much more likely to end up with things running smoothly.

Typically, a married couple will name each other as their first choice of executor and attorney. Their alternate choice for both of these jobs is frequently one of the children. That way, should one of the couple become widowed or incapacitated, their spouse still has someone to make decisions.

Typical, yes, but is it a good idea?

The potential for financial disaster is actually very large when you have one of your children in charge of your finances under a Power of Attorney while you're alive, and also have that same child in charge of your estate after you pass away. It's traditionally done this way, but the world is changing and it's time to re-think the old methods.

The problem arises because the Power of Attorney gives enormous power to the person you've named. It has to do so, in order for the person to step into your shoes and make decisions for you. Unfortunately, this power is abused by a shockingly large number of children. At this point, you are thinking that it would never happen in your family. But please keep in mind that the majority of financial abusers of seniors - some studies show as many as 3/4 of them - are the senior's own children. All of those people trusted their children too.

How does it happen? The person you've appointed might be having financial troubles of his own, or his marriage might be on the rocks and he needs to make a settlement. Maybe he sees a great investment opportunity but doesn't have the funds right now so he "borrows" it from the estate. Maybe he figures he's going to inherit some of it one day so what the heck, he'll just take some of it early. And in some blatant cases the child is simply greedy. No, we don't want to think of our children this way, but clearly it happens time and time again.

The common thread that runs through all of these scenarios is that the person is pretty sure that he isn't going to get caught. After all, nobody else has access to the accounts and the property. The crime is invisible.

There are some things you can do with a Power of Attorney to protect yourself and your estate, many of which have been the subject of previous blog posts. One of the most obvious steps is naming a different person as executor under your Will. Why does this help? Because the executor has the right to demand a full accounting from the attorney under the Power of Attorney, once you have passed away. If money is missing, the executor will find out about it. After that, the attorney under the Power of Attorney might have to repay the money, might lose some or all of his inheritance, or in extreme cases he might go to jail.

In other words, knowing that one day someone is going to see what you've done can be a powerful deterrent.

But if the executor is the same person as the Power of Attorney, obviously he isn't going to demand any accounting from himself. If there is pressure from the beneficiaries of the estate, he can delay and obfuscate and generally prevent anything from happening for a very long time.

Think of your appointment of executors and attorneys as business decisions and make the careful choice to protect yourself, your estate and your family.

1 comment:

  1. Are you saying that a beneficiary of an estate cannot expect to see account transactions of a deceased person's estate that took place prior to the death of the estate owner? In my case the executor of the state had power of attorney for the estate and I would like to know what happened financially in the estate for the two years prior to the passing of the owner.

    More than a year has passed since the death of the estate owner and responses to questions to the executor seem to be reluctantly given. An interim disbursement has taken place but a large sum of money has been held back.


You might also like

Related Posts with Thumbnails