Don't leave your loved ones without access to your funds
When an elderly widow recently became incapacitated, lawyers were forced to play detective. To cover her expenses, they scrambled to gain access to the woman's online accounts. “There was a big problem because nobody had the passwords,” said Sanford J. Schlesinger, managing partner of Schlesinger Gannon & Lazetera, the law firm that was asked to help sort out the widow's affairs.
Such legal quagmires have become all too common at a time when many investors have several online accounts. To avoid trouble, investors should make careful preparations. For starters, assemble all your account information and passwords in one place. You can put the material into a folder and give it to a relative or your attorney.
If you decide to store the information online, be sure to find a secure location. Clear Harbor Asset Management offers clients a web service where all the accounts can be listed. “If there is a crisis, then the survivors and the adviser can see the complete financial picture in one location,” says Aaron Kennon, chief executive of Clear Harbor.
To make sure that your assets will be spent prudently, assign power of attorney to an agent who has access to the accounts. Be sure to pick someone you trust, such as a responsible relative or an accountant. The importance of picking the right agent was highlighted in the recent case of Anthony Marshall, the son of New York philanthropist Brooke Astor. Marshall, who was given power of attorney, was jailed for stealing assets from his mother.
To provide a check on your agent, you can assign someone to monitor the assets. The monitor must review all disbursements made by the agent. Parents can give power of attorney to two children, who must agree on all payments. Under New York law, agents cannot make gifts to themselves or others for more than $500.
To avoid the paperwork of assigning a power of attorney, a parent can set up a joint account with a child. Then the younger family member can write checks easily. But joint accounts can pose problems, warned Gideon Rothschild, a partner with law firm Moses & Singer. “If there is a joint account, the child can take the money and spend it on himself,” he says. “When there is a power of attorney, the child is required to act as a fiduciary for the parent.”
Joint accounts can create disputes in families with several children. Say a father establishes a joint account with a daughter. The father dies, and the daughter takes all the cash, leaving nothing for siblings. To avoid the problem, some banks offer what are known as joint accounts for convenience. Using one of these, a father and daughter can hold a joint account. If the father becomes disabled, the daughter would be able to cover expenses immediately by making withdrawals from the account. But if the father dies, the daughter no longer has access. The account moves into the father's estate, which must be divided among heirs. By using such tactics, parents can insure that their assets are used in ways that will not create antagonism among survivors.
