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Cover Your Assets

Question: What can I do to protect myself if I become so ill that I can't manage my finances?

Answer: No one wants to think about being unable to manage their finances due to illness, but it makes sense to be prepared just in case. A good way to do that is to consult with an estate-planning attorney and create a durable power of attorney for finances. This document says that you give another person, referred to as an agent or attorney-in-fact, the authority to manage your finances if you become incapacitated.

While you can broadly state the responsibilities you want your agent to have, it's a good idea to specify the financial duties. For example, this person could pay your bills, manage your investments, access your safety deposit box and manage a business for you, among other duties.

Without a durable power of attorney for finances, if something does happen to you and you can't communicate your wishes, it puts your loved ones in a difficult position and they'd have to ask a judge to appoint a conservator or guardian. This can be time-consuming and costly. A conservator must post a bond, which serves as an insurance policy in case the conservator misuses assets. He or she often must receive court approval before completing certain transactions, such as selling real estate.

When you select an agent, make sure it's someone you trust who's responsible with money. Once the durable power of attorney document is created, you'll sign it and two witnesses and a notary are required. If you have questions about how to create this document, consult with your estate-planning attorney.

Douglas C. Lockwood, BS, MBA, JD, CFP writes on behalf of American Century Investments. Visit American Century's Education and Planning site to learn about other estate-planning documents and the importance of creating an estate plan.

This information is for educational purposes only and is not intended as investment advice.