Management of Property
People should have contingency plans to deal with injury or illness. Even if an accident or illness does not affect a person's ability (capacity) to control assets, serious illness or injury may make it difficult to pay bills, manage finances, take care of property, and handle business affairs. Having plans to turn over legal authority to a trusted decision maker can minimize disruption and expenses.
Three principal mechanisms allow a person to arrange in advance for property and business to be overseen by someone else: a power of attorney, a revocable trust, and joint tenancy. These arrangements are best made with the help of an attorney.
A power of attorney is a document in which one person (the principal) appoints another person (the agent or attorney-in-fact) to perform specific actions--such as handling bank accounts, investments, or other property--if the principal is too ill or too severely injured to handle them personally. Usually it is wise to draw up separate powers of attorney for health care and business matters, even if the same person is named as agent. Many general powers of attorney do not empower the agent to make health care decisions.
A revocable trust (living trust) places legal title to property in the hands of a trustee, who holds the property for the use and benefit of the beneficiary. The trustee cannot legally use the trust property for any purpose not specifically described in the trust document.
Joint tenancy is a form of ownership that gives all named owners the right to manage the property. Many people hold their bank accounts and homes in joint tenancy. In joint tenancy, an owner's share passes automatically after death to the other joint tenants. For example, if a parent has a checking account in joint tenancy with an adult child, both parent and child can write checks from the account. If the parent dies, the child then owns the account. A house owned in joint tenancy becomes fully owned by the surviving joint tenants.
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