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Will Your Power of Attorney Work for Your Retirement Plans?

Disability Planning for Your IRAs, 401(k)s and Annuities

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Today many people have accumulated a significant amount of wealth in 401(k)s, IRAs and annuities. But the reality is if you become mentally incapacitated and lose the ability to manage your finances, then your loved ones won't be able to access your assets, including IRAs, 401(k)s and annuities, without a Power of Attorney. And to make matters worse, even if you do have a Power of Attorney, chances are if it's more than a few years old, then it won't contain the appropriate language to allow your attorney in fact to manage your 401(k)s, IRAs and annuities.

Can the Successor Trustee Named in Your Revocable Living Trust Manage Your Retirement Accounts?

If you have a fully funded Revocable Living Trust, then you may mistakenly believe that you're covered for all of your assets if you become mentally incapacitated. But unfortunately you're not because IRAs, 401(k)s and annuities can't be funded into a Revocable Living Trust - otherwise the retirement plan assets will become immediately subject to income taxes - only the beneficiaries of these types of assets can be changed to the trust. As a result, you need to have a Power of Attorney with applicable language to allow the attorney in fact of your choice to manage your retirement accounts.

What You Should Do

If you have any of your investments inside of an IRA, 401(k) or annuity and you don't have a Power of Attorney, then meet with an estate planning attorney to get one in place that will allow the attorney in fact of your choice to manage your retirement accounts if you become mentally incapacitated. And be sure to make it clear to the attorney that you want your agent to be able to manage your IRAs, 401(k)s and annuities so that the attorney is sure to include the applicable language in your Power of Attorney.

If you have any of your investments inside of an IRA, 401(k) or annuity and you already have a Power of Attorney, then even if it's just a few years old ask your estate planning attorney to confirm that it will work to manage your IRAs, 401(k)s and annuities, otherwise your agent's hands may be tied during a difficult time.

It is also a good idea to check with the company that is acting as custodian for your retirement accounts to determine if the company has it's own Power of Attorney form. If so, then complete the form and keep it with your general Power of Attorney.

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