Learn How a Power of Attorney Works

POAs and your Revocable Living Trust

If you have formed and funded a revocable living trust, you may mistakenly believe that all your assets are covered if you should become mentally incapacitated. One of the advantages of a revocable living trust is that the individual you name as successor trustee can take over for you as trustee and continue to manage your financial affairs for you if you become incapacitated.

Unfortunately, this does not apply to retirement plans like IRAs, 401(k)s and annuities. These plans can’t be funded into a revocable living trust without becoming immediately subject to income taxation. You’ll need a power of attorney in place that includes applicable language allowing your attorney-in-fact to manage these accounts for you if a time comes when you cannot do so yourself. Your successor trustee will not be able to access them.

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