Don’t postpone this key financial decision

Think about the amount of time you’ve spent securing your financial future.

Building or renovating the family home, researching superannuation options, and even putting off a holiday to stash a few more dollars in the bank, aren’t just the financial decisions of daily life.

The time spent on all of these decisions is also key to your level of financial comfort in retirement.

Now, look back at the amount of time you’ve spent considering how these assets you’ve worked hard to accumulate might be protected if you’re no longer able to personally manage them. If you haven’t devoted any time to it yet, now may be the moment.

This mental calculation is helpful in another way too – when you consider how much time and energy you’ve spent managing and protecting your financial future, it becomes clear that it could be daunting and confusing for someone – your child, partner or another relative, perhaps – to step into that decision-making role on your behalf.

This is where an ‘enduring power of attorney’ can be a useful option to look into.

The vital role of enduring power of attorney

Broadly speaking, an enduring power of attorney is a person you give authority to make financial and personal decisions on your behalf if you’re unable to because of ill health or a loss of capacity.  The level of power over your affairs you can delegate to another person differs depending on the state or territory you live in.

Regardless of the amount of power you delegate, though, having a formal arrangement in the form of an enduring power of attorney can be the start of a valuable conversation that you may’ve put off otherwise.

Clear guidance on your priorities for the future handling of your assets can make the process less complex for the person you choose to act upon your behalf.  Talking with your appointed attorney can also help them to understand the importance of the role.

In addition, such a conversation can provide greater transparency and oversight to people such as your accountants and advisors, who’d likely be involved in the process if your power of attorney needs to act in the future.

Self managed super fund (SMSF) trustees should consider professional advice

A professional advisor can help you prepare for the discussion you’ll need to have with  your chosen enduring power of attorney. This is one reason ‘supported SMSFs’ – where an adviser helps you manage your SMSF – are increasing in popularity.

An advisor can help you to understand and summarise aspects of your portfolio that are key to decisions your appointed attorney may have to take in the future; for example, how many years’ worth of living expenses your cash and savings could cover.

Although medical expenses can eat up your reserves more quickly than expected, this knowledge can still help you to anticipate how much time you may have before decisions to sell other assets have to be made.

You’ll also be better able to help your appointed attorney understand your situation if you’re armed with the knowledge of how much of your portfolio is in riskier growth-type investments – compared to defensive income-focused investments – and in what situations you’d be comfortable adjusting this balance.

Depending on your situation, there may be other financial decisions that need to be anticipated, such as the sale of investments outside of super and your wishes for the family home. You might also want to consider specific medical and care decisions.

If you’re looking for advice on enduring power of attorneys or other estate planning issues, or just want some specialised family wealth information, find out how we can help.