Everyone should plan for the future and for anything that could happen, but many people don’t think about obtaining a power of attorney in case anything happens or how a joint account might be affected if the power of attorney may come into play.
A person who wants to plan for their future will want to learn about the benefits and disadvantages of accounts that are co-owned by two or more people and how that can be effected with a power of attorney to ensure their money will be safe and used the way they want it to be used if anything does happen to them.
Differences Between Adding a Person to an Account or Creating a Power of Attorney
Many people believe that adding a person to their bank account means the person can access the money on their behalf if anything happens to them and this can be a way to avoid hiring a lawyer to create the documents for procuration.
However, people do need to be extremely careful when doing this as the person who is added to the account will then have equal access to the account and will be able to use the money as they see fit, no matter where the money came from. A person who has the power of attorney, however, has to work in the person’s interests and use the money for their benefit.
The Downside to Adding a Person to the Account
When a person is added to an account, they are considered a co-owner of the account and they will have access to all of the money in the account. They can do everything the original account owner could do, including withdrawing money at any time for any reason. The person may use the money appropriately to help the original account owner, but they aren’t required to.
They can drain the entire account and leave the person with nothing or take small amounts of money over time for their own personal gain. Since they are an account owner, there isn’t much that can be done about this even though it is considered financial abuse.
Why Choosing a Power of Attorney is Preferred
A power of attorney names a specific person who will be in charge of the finances if the person obtaining the document is incapacitated for any reason. This document typically outlines what the person can and cannot do and limits how they can spend the person’s money. They will be able to use the money for things that benefit the person, such as ensuring the mortgage on the home is paid, but they cannot spend the money for their own benefit or drain the bank account.
If they do, a person who notices can bring this to the attention of legal authorities to help the victim of the situation. It’s important to speak with a lawyer before creating a power of attorney as the lawyer can explain what the power of attorney allows, what isn’t allowed, and what it does and does not cover. This way, the person obtaining the document will know exactly what can occur if the situation ever arises where the document is needed.
When a person is interested in planning for the future, it’s essential they understand the upsides and downsides of all of the decisions they make. While they may believe they can trust someone to create a joint account with them in case anything happens, the reality is there many different downsides to this choice.
Instead, they will want to speak with a lawyer and learn about how a power of attorney can give them the assistance they need if they are incapacitated yet protect them from financial abuse or the loss of their money for other reasons. Take the time to speak with a professional about your finances today so you can start preparing for your future.