As the back-to-school season approaches, it’s a perfect time to consider important updates to your financial and legal plans for your children. Ensuring your Power of Attorney is up-to-date and exploring how you can save through a 529 education savings plan can provide peace of mind and financial security for your future.
Deciding what Power of Attorney (POA) to set up for your child may seem daunting. However, it’s important to work with them to understand their needs. Whether they’re just starting college or are already a few years in, they may still need help with financial and medical matters. Having a POA can address these concerns.
Watching my kids head back to school reminds me why I’m passionate about helping families secure their financial future.
What is a Power of Attorney and why is it important to have?
A Power of Attorney (POA) is a legal document that authorizes an agent, or attorney-in-fact, to make decisions on behalf of an individual, known as the principal. The agent’s authority can be broad or limited, covering areas such as property, finances, investments, or medical care. A POA ensures that someone can manage your affairs if you are unable to make decisions yourself. For example, once your child turns 18, they are legally an adult, and you will need additional documentation to access their medical records. This is especially important if your adult children are away at school or traveling and need medical attention. A POA can help you access their records in case of an emergency.
Types of Power of Attorney
General POA: Allows the agent to act on behalf of the principal in a broad range of matters, such as managing bank accounts, signing checks, selling property, managing assets, and filing taxes.
Limited POA: Gives the agent power to act on behalf of the principal for only specific matters.
Durable POA: Remains in effect for certain legal, property, and financial matters specifically outlined in the agreement. A durable POA can pay medical bills on behalf of the principal but cannot make health-related decisions, such as taking the principal off life support.
Setting up a Power of Attorney
Setting up a Power of Attorney requires working with an attorney to draft up the right POA documents suitable to your child’s needs. Once in writing, delegating an individual who will act as the agent is next. You can choose an attorney, accountant, banker, or family member to be an agent so long as they are a competent adult who will uphold your financial and medical responsibilities.
Termination
If a Power of Attorney is no longer needed, it can be canceled by writing a letter that identifies it and states that you are revoking it. This letter should then be delivered to your former agent. Often, the letter needs to be notarized before the POA can be officially terminated.
Education Planning Solutions:
If your child isn’t in college yet, it’s never too late to start planning. A 529 College Savings Plan is an excellent way to save for future educational expenses. This plan allows parents, guardians, or grandparents to open an account for a minor that can be used for qualified expenses like tuition, books, and room and board. The key advantage is that the funds in 529 accounts grow tax-free, and letting these funds compound over time can significantly increase your savings.
Another benefit of a 529 Plan is its transferability. If you open a 529 for your first child and there are remaining funds after they finish school or if they choose not to attend those funds can be transferred to another child. Additionally if you don’t have the ability to transfer to another child you can roll over up to $35,000 into a Roth IRA. This flexibility helps you manage the educational expenses for all your children.
As you plan the next steps for your children, whether it’s higher education, medical, or financial needs through a Power of Attorney, Wisely Advised is here to help. We ensure your family is prepared and protected for the future.
