Who will manage your affairs?

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Q. I’m not sure which of my children to pick to make decisions for me if I can’t make them myself. I’m afraid that picking both will mean they will fight. Any suggestions?
— Trying to prepare

A. This is a very important decision to make.

You’re talking about appointing your children as agent(s) for financial decisions with a Durable Power of Attorney (DPOA).

Andrew Novick, a certified financial planner and estate planning attorney with The Investment Connection and Brookner Law Offices in Bridgewater, said while this document is often neglected, it’s just as important as a will.

“If you are injured, become ill, or suffer from dementia, it can be difficult and time consuming to get someone appointed to address your finances without a properly executed DPOA,” Novick said.

Deciding who to name as agent on your DPOA can be a challenge. Certainly, it has to be someone you trust because your agent will have significant powers over your finances, Novick said.

“It is preferable to name a family member, such as a spouse, a child, or sibling; however, friends or professionals, such as your attorney or accountant are sometimes needed,” Novick said. “Keep in mind that I also recommend naming at least one alternate so you won’t have to update your DPOA if the primary agent can’t act due to death, incapacity, or resignation.”

In fact, he said, updating the DPOA may not even be possible if you are incapacitated, so naming a successor agent ensures continuity.

From a practical standpoint, it is always simpler to name one agent at a time, Novick said. With one named agent, it is clear who has authority to make decisions on your behalf.

Looking to your children as potential candidates is common.

“When there are multiple children, I suggest naming the most responsible and/or local child as the initial agent and the others as successive alternates,” Novick said. “Hopefully, you can avoid any hurt feelings by explaining your rationale to your children.”

However, you can certainly name more than one agent to serve together as co-agents, and this also has some appeal.

With co-agents, Novick said, the ability of an agent to take advantage of the position is reduced because there is oversight from the co-agent. Additionally, you can avoid claims of favoritism between family members when you name multiple agents. Ideally, your agents will also coordinate how your finances are being handled – the two heads are better than one argument, Novick said.

Naming co-agents can cause problems, too.

Novick said many — but not all — financial institutions will not honor a DPOA if the co-agents have to agree on every action. He said in today’s world, where so many financial transactions are done online or over the telephone, there is no easy way to determine if both co-agents are in agreement.

“The banks and brokerage firms want to be able to take instructions from any authorized party to avoid liability,” he said. “In this way, the banks and brokerage firms treat co-agents similarly to joint account holders and any joint account holder can authorize transactions without the approval of the other.”

So he said he generally avoids language in the DPOA requiring co-agents to agree.

Still, in certain situations it may still be preferable to require co-agents to act together, such as in real estate transactions where old-fashioned signatures are required.

“Perhaps more worrisome, is the issue you point out – that your co-agents won’t agree on a course of action or act independently but in contradiction to each other,” he said. “As such, I prefer one agent at a time.”

Note that a similar situation exists when determining who to name as your healthcare agent in your Advanced Healthcare Directive. Perhaps you can name one child as your agent in the DPOA and the other child as your healthcare agent to diffuse any fighting, Novick said.

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This story was first posted in January 2016.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.