Power of Attorney and Retirement Accounts: Who Can Manage Your IRA If You Can’t

A Different Problem From Beneficiary Planning

Our beneficiary designation and blended-family guides cover what happens to a retirement account after death. This is the living-incapacity version of the same problem: if you become unable to manage your own affairs, who can actually access and manage your IRA or 401(k) while you’re still alive?

Durable vs. Springing Power of Attorney

A durable power of attorney takes effect immediately and continues even if you later become incapacitated. A springing power of attorney, by contrast, only takes effect once incapacity is formally documented — which sounds safer but can create real delay at the exact moment access is needed, since a custodian may require medical certification before honoring it.

The General POA Often Is Not Enough

A general financial power of attorney does not automatically guarantee a retirement account custodian will honor it. Custodians frequently maintain their own proprietary power of attorney forms specific to retirement accounts, and will ask for that form — completed and on file — in addition to, or instead of, a general POA document drafted by an attorney.

What to Actually Do Before It’s Needed

Contact each retirement account custodian directly and ask whether they require their own POA form. Complete and file that form with the custodian while you’re still able to, rather than assuming a general estate-planning POA will be accepted at the moment it’s needed. Confirm explicitly that the POA document grants authority over retirement accounts specifically — a general POA can be drafted to withhold that power even while covering bills and other finances, so the scope has to be checked, not assumed.

The Bottom Line

A power of attorney that is not on file with the specific custodian, in the custodian’s preferred form, can fail exactly when it is needed most — incapacity planning for retirement accounts requires action with each institution individually, not just a signed document in a drawer.

Written by Samuel, Certified Public Accountant

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