Power-of-Attorney Issues

by Seymour Goldberg, CPA, MBA, JD

A power of attorney (POA) is a vital part of an individual’s overall estate plan.

Many POAs are comprehensive in nature, but many POAs may leave out important financial and tax-planning issues when retirement accounts including IRAs are involved.

A few important issues that should be addressed in a POA include the ability of the agent on behalf of the principal to:

1. Elect to recharacterize a Roth IRA to a traditional IRA if the market tanks by a certain percentage.
2. Require the agent (for the most part) to select the beneficiaries of the traditional IRA to be the same beneficiaries of the recharacterized RothIRA.
3. Permit the agent to create a spousal IRA rollover account on behalf of an incompetent surviving spouse and to select specific beneficiaries of the spousal rollover account.
4. Permit the agent on behalf of an incompetent plan participant orincompetent IRA owner to roll over the retirement account or IRA account and to select specific beneficiaries of the rollover IRA account.

Many POAs provide that the agent can consummate a rollover transaction but fail to state that the agent may select beneficiaries of the rollover IRA account.  This defect can be significant and should be addressed in the POA.

What good is creating a rollover transaction if the agent does not have the power to select the beneficiaries of the rollover IRA account?

Seymour Goldberg is the author of many manuals on the retirement distribution rules.  His latest manual in download format is entitled “Inherited IRAs:  Practice Aids and IRS Distribution Issues” and can be found at www.jklasser.com/go/downloads.