Vanguard report of incapacity instead of Agent Authorization enough?

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thenow
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Vanguard report of incapacity instead of Agent Authorization enough?

Post by thenow »

I’ve read previous Bogelheads’ posts about Vanguard POA challenges and different options. I apologize and don’t mean to plow over the same topic. Yet, I wonder if there is a simple solution to the Vanguard attorney POA challenges that have resulted in major frustrations for numerous Bogelheads. Has Vanguard now made it easier with the POA implementation? As a planner I’m trying to keep it simple for my adult children. And I am frustrated on making a decision on the best future course of action.

Like some others bogelheads I wonder if I should switch the entire Vanguard accounts or some Vanguard money to Fidelity. Subsequently, I did additional research by emailing Vanguard and then with a follow up phone call about options to protect my wife and me in case we are unable to make transactions due to sickness. I wanted to make sure with both an email and then a phone call to verify their suggestions. In my research I was told the following:

1. Our adult children would fill out a “Report of Incapacity” along with the brief Vanguard “Physician’s Certification of Owners Incapacity on the Vanguard Report of Incapacity Form “. Secondly, our children would also send a copy of the attorney created POA. This process would have to be done within ninety days. This sounded so simple for our adult children.

2. In the phone conversation the Vanguard agent stated that if we went with the Full Service Agent Authorization my wife and I would have to each fill out separate forms for our individual IRA’s, and then two forms for the family trust. This seemed to be a complex process for my wife and me to do. The forms would then allow our children to then handle our transactions and bills in case of sickness. I’m unsure if the phone representative was correct with so many full service agent authorization forms to complete.

In sum, has anyone just use the “Report of Incapacity plus doctor’s Certification” along with a copy of the POA? It sounded a lot easier than the full service agent authorization process. Am I missing something and have I been missed informed?

As a side note, some of our taxable and non-taxable accounts include Wellington and Wellesley funds. It would entail a big tax liability if we sold these funds in the taxable account in order to switch to Fidelity. I would have to find out fee charges of keeping these two Vanguard funds with Fidelity. If we did switched the two funds to Fidelity we would not reinvest any dividends, interests, or LTC money back to Wellington or Wellesley. We do have the Vanguard total stock index fund to switch. (We read about switching the fund to an ETF format which would save brokerage costs with Fidelity)

Any Experiences or advice with number one listed above would be greatly appreciated. Thanks.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by Broken Man 1999 »

Would any doctor want to be a part of this?

Broken Man 1999
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BogleTaxPro
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by BogleTaxPro »

My experience was it was very very difficult to get a doctor to certify my dad's incapacity, even though he was in memory care. I think they don't want to be held liable if someone is trying to rip off the senior.
Steady59
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by Steady59 »

"In sum, has anyone just use the “Report of Incapacity plus doctor’s Certification” along with a copy of the POA? It sounded a lot easier than the full service agent authorization process. Am I missing something and have I been missed informed?"

I went through a similar process with Vanguard a couple of years ago in order to get my sister and me set up as successor trustees on our mother's trust. My Mom was in a nursing home with with complete dementia. Her Dr provided a letter and I submitted the proper forms with the letter to Vanguard. The challenge was that it took 6 months a lots of incorrect instructions from Vanguard but we did, eventually, get it done.
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thenow
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by thenow »

Thanks for everyone’s response, especially the last one about taking 6 months. Lately, I wondered if I just moved some money from Vanguard to Fidelity as an insurance policy. This would enable our children some cash flow until things are settled with Vanguard. It’s aggravating to have two different firms just because of complexities created to implement an attorney’s POA. Thanks again.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by Fremdon Ferndock »

Or, you could just give your kids with POA the login info for your Vanguard accounts. There's not any difference between that and giving them Full Authorization to access your accounts online. There's some debate over whether the POA gives the legal right to do that -- my POA specifically states that it grants this right to my agent. However, your agent probably wouldn't be able to deal with Vanguard directly without Full Auth or Report of Incapacity. I managed my mother's online accounts for years without having Full Authorization or Report of Incapacity filed; but I did have her POA. Never needed to contact them directly.

I find the fact that Vanguard won't accept attorney-prepared POAs more than annoying, and am seriously considering moving my accounts to Schwab or Fidelity for this reason.
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clip651
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by clip651 »

If you trust your adult kid(s) enough to give them transaction authority on your behalf in advance of when you need it (illness, etc), then I would recommend setting up full agent authority directly with Vanguard now.

My parents did that with me (their adult kid) back when they were starting to want help ("can you just handle my RMD for me this year, please?") but didn't necessarily need my help. Due to the timing, they were able to complete the paperwork and authorizations themselves, and I was able to get set up and do transactions at their direction to learn how to transact on their behalf.

This was a few years back, so I don't recall details of what paperwork (online and/or actual paper) was required, but it wasn't too bad. I already had my own VG accounts, and this may have made it easier, I'm not sure. They should be able to arrange access for your kid(s) even if they don't have their own VG accounts.

The advantage to this system is that I have had full access since they set this up. In the beginning, I was just helping, and we could do transactions together online. This assured us both that my access was working, as well as giving me a chance to gain experience with the interface, etc. As they aged and became less capable of managing things themselves, I was able to seamlessly do what I needed for their accounts (such as take RMDs in a timely fashion, access their 1099Rs to help with their taxes, etc). I also have their POA, but by setting up full agent authority with VG in advance, I don't need to bother with anyone recognizing the POA, and I didn't need to spend time trying to prove to anyone that they need my help while in the midst of trying to help them through their various health crises. They gave me full permission to help earlier, and it was already in place and easy to use as needed.

Again, of course this requires trust. But if you are sure you can trust your kid(s) not to abuse this access, which is hopefully true if you have them as POAs, then taking care of this now will simplify their access on your behalf in the future.

Good that you are thinking of this in advance and making preparations so they can help you when/if you need help!
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by Fremdon Ferndock »

clip651 wrote: Fri Dec 09, 2022 11:34 am If you trust your adult kid(s) enough to give them transaction authority on your behalf in advance of when you need it (illness, etc), then I would recommend setting up full agent authority directly with Vanguard now.

My parents did that with me (their adult kid) back when they were starting to want help ("can you just handle my RMD for me this year, please?") but didn't necessarily need my help. Due to the timing, they were able to complete the paperwork and authorizations themselves, and I was able to get set up and do transactions at their direction to learn how to transact on their behalf.

This was a few years back, so I don't recall details of what paperwork (online and/or actual paper) was required, but it wasn't too bad. I already had my own VG accounts, and this may have made it easier, I'm not sure. They should be able to arrange access for your kid(s) even if they don't have their own VG accounts.

The advantage to this system is that I have had full access since they set this up. In the beginning, I was just helping, and we could do transactions together online. This assured us both that my access was working, as well as giving me a chance to gain experience with the interface, etc. As they aged and became less capable of managing things themselves, I was able to seamlessly do what I needed for their accounts (such as take RMDs in a timely fashion, access their 1099Rs to help with their taxes, etc). I also have their POA, but by setting up full agent authority with VG in advance, I don't need to bother with anyone recognizing the POA, and I didn't need to spend time trying to prove to anyone that they need my help while in the midst of trying to help them through their various health crises. They gave me full permission to help earlier, and it was already in place and easy to use as needed.

Again, of course this requires trust. But if you are sure you can trust your kid(s) not to abuse this access, which is hopefully true if you have them as POAs, then taking care of this now will simplify their access on your behalf in the future.

Good that you are thinking of this in advance and making preparations so they can help you when/if you need help!
If you have granted durable POA to your kids (or others) then they have immediate rights to act on your behalf immediately. If they have your login information and the POA states that it grants online rights, then they are legally entitled to access your financial accounts and do transactions on your behalf. Vanguard might object if made aware of this, stating that they require their own POA (Full Authorization).

So, it's probably less hassle to submit the Full Authorization to Vanguard. That form authorizes one named person to have full access to your accounts. I believe you can submit multiple authorization forms, each naming an additional person. However, there is no provision to name contingent agents using the Full Authorization form; that is, persons who can act as agent in the event of the death or incapacity of the primary agent(s). That's a problem for some people, such as myself, because I don't want to grant everyone who might be my agent full authority all at once. It might not be a problem for others. With Attorney-drafted POAs naming contingent agents is quite common and many people prefer to do this.

The other shortcoming of using Vanguard's own POA is that there's no provision to create a "springing" POA that becomes effective upon the incapacity of the grantor. For that, you have to submit the Report of Incapacity to Vanguard. As others have indicated, this might be snaggy and time-consuming. By comparison, it is usually not snaggy or time-consuming with an attorney-drafted POA form, since that's handled locally by your family attorney and is generally not a problem for us average folks.
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aristotelian
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by aristotelian »

I am not familiar with the problems with Vanguard POA, but if that is a concern what is keeping you at Vanguard at all? Regarding Wellesley and Wellington, most providers will let you hold third party funds and sell at no cost, the only issue would be if you were wanting to add new purchases to these positions. I would talk to a Fidelity transfer agent to confirm but if that is all that is keeping you at Vanguard I would not hesitate moving to Fidelity.

Wherever you go, I would not want to force my spouse or kids to have to prove I am incapacitated. Would it be possible to set them up with Power of Attorney now while you are of sound mind?
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celia
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by celia »

If you file a report of incapacity, I’m pretty sure you would be locked out of all your accounts. But if you give someone full agent authorization, they will be able to access and do transactions on your accounts. You can even give them access to only some of your accounts, if you want.

For accounts owned by your trust, you can amend the trust to make someone else a co-trustee. Then they will be able to do whatever the trust defines as trustee powers. Of course, the custodian would need to see those pages of the trust along with the amendment and your signature pages.

That is what both sets of our parents did when they turned around 90 and what we plan to do (unless we want to ”quit” sooner). The advantage of this is that you can work with the new co-trustee for a year or two until they understand everything they need to know and become familar with your stated reasons for investing like you do.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by Fremdon Ferndock »

celia wrote: Fri Dec 09, 2022 12:42 pm If you file a report of incapacity, I’m pretty sure you would be locked out of all your accounts. But if you give someone full agent authorization, they will be able to access and do transactions on your accounts. You can even give them access to only some of your accounts, if you want.

For accounts owned by your trust, you can amend the trust to make someone else a co-trustee. Then they will be able to do whatever the trust defines as trustee powers. Of course, the custodian would need to see those pages of the trust along with the amendment and your signature pages.

That is what both sets of our parents did when they turned around 90 and what we plan to do (unless we want to ”quit” sooner). The advantage of this is that you can work with the new co-trustee for a year or two until they understand everything they need to know and become familar with your stated reasons for investing like you do.
It is my understanding that your retirement accounts (IRAs) cannot be owned by a trust while you are living; however, a trust can be named as a beneficiary to your retirement accounts. So, using a trust to get around the limitations imposed by Vanguard applies only to non-retirement accounts.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by Fremdon Ferndock »

I think many of our attorney posters here have suggested avoiding "springing" POAs in favor of durable POAs that grant immediate authority. That would seem to apply to Vanguard's Report of Incapacity option as well -- avoid it.
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celia
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by celia »

Fremdon Ferndock wrote: Fri Dec 09, 2022 12:53 pm It is my understanding that your retirement accounts (IRAs) cannot be owned by a trust while you are living; however, a trust can be named as a beneficiary to your retirement accounts. So, using a trust to get around the limitations imposed by Vanguard applies only to non-retirement accounts.
I think you misunderstood me. Our trusts own only the Taxable accounts (at all custodians). The Agent Authorization would apply to non-trust accounts and the beneficiaries of those accounts are listed on the accounts.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by HomeStretch »

I think a plan that requires a [edit-] attorney-in-fact/agent to get the financial institution access set up on their own after the parent becomes incapacitated is a much less desirable plan than getting the POAs in place prior to incapacitation.

Don’t put this burden on your children while they may also be acting as your health rep, your property manager and loaning you money to pay your bills until the POAs are set-up after the fact. Not to mention working a job and having their own family/responsibilities. This assumes the primary care doctor will even provide such certification of the incapacitation.

The POA/Full Agent process you described for Vanguard is similar to processes at other financial institutions. The POA set-up at any financial institution takes some time and effort. I view this as a good thing. I wouldn’t want the process to be so simple that someone could easily obtain unauthorized POA access over my finances.

My parents and my in-laws set up POA access for me/spouse at their banks, Vanguard and Fidelity. Luckily the set-up and transition of bill paying to us was done years before they became physically and/or mentally impaired. This allowed them to coach us through the transition and deal with any financial institution roadblocks we encountered. By the time they became truly incapacitated and had to have POAs acting on their behalf, we had the process and access well functioning.

When two of the parents became severely mentally incapacitated and eventually moved in-facility for care, we found Fidelity easier to deal with. I moved my parents’ long-time Vanguard accounts this year to Fidelity after encountering two issues caused by incompetent Vanguard reps. I find Fidelity online and their reps/local offices a bit easier to deal with than Vanguard.
Last edited by HomeStretch on Sat Dec 10, 2022 12:54 pm, edited 1 time in total.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by Fremdon Ferndock »

My story is taking care of my mother. She prepared a DPOA naming myself and my sister as her agents. For many years, she suffered gradual cognitive impairment and really was not able to make all the decisions necessary for her care and well-being. However, I'm sure she would not have been judged to be medically incompetent until late in the course. I say that because as she moved from one level of care to the next, each facility conducted an evaluation to determine acceptance and/or placement. She did fine, even though we were aware of her problems, until well after she had been admitted to long term care. It would have been very difficult for us to have triggered a springing POA years earlier when we needed that. Based on my experience, I'd advise to do a durable POA unless that just isn't a viable option for specific reasons. Possible cognitive issues are one of the most important considerations.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by ResearchMed »

Do you *really* trust your children, or spouse, or whomever it is you want to have authorization for your accounts?
I sure hope so! :happy

In which case, why not make them (or at least one of them) full agents/DPOA (Durable Power of Attorney).
That 'power' (and it *is* "power", no question there) takes effect immediately, and continues through any incapacity. Thus, there is no need to get a physician to sign off on any documents (or two physicians in some cases?) or to have Vanguard "accept" those documents. NONE of that is needed, once the DPOA/Full Agent authorization is completed.

And if you don't trust them enough for this, do you really trust them enough for when you may have no idea what they are doing or no ability to do anything about it, due to incapacity?

This is serious business, no surprise, and tricky.

However, presumably you trust each other enough? If so, at least get that taken care of. It's more likely that only one of you would be incapacitated than both of you.
Then you could deal with Springing Powers if that's what you arranged for the children... and with the help of the active spouse.

We are just arranging to re-do all of our documents, and to include at least one other person (other than "each other") to have that power, and yes, it's... difficult...

Also, do check and compare Vanguard's "own" "Agent Authorization" forms. They may not be quite the same as what you would be expecting or wanting from a "full power of attorney" form.
(We had the complication of a 403b with most of our money, and Vanguard has even more limitation on that so-called "fuil" agent authorization. Thank goodness that our 403b was moved out of Vanguard in 2021!)

Several years ago, Pennsylvania law was changed so that any company doing business in PA had to accept any legally executed POA (my wording may not be precise, legally), even if from another state.
When we tried to deal with that, the response, including from a very senior executive, was the equivalent of "So what!?"
I have not yet heard reports of Vanguard absolutely/fully accepting outside DPOA (or any "outside" PoA doc).

RM
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lws
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by lws »

Fidelity is now my home.
Moved almost everything there.
Love their POA features.
Ally is good too.
Setting up a POA with Ally was easy.
Having a medical team verify incapacity is a pain.
I had the POA agent setup an individual account at Fidelity.
They know my agent and me.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by afan »

We did full agent authorization for each other. Next step is doing the same for our successor DPOA. If someone needs to take over, we want to minimize the hoops through which they need to jump.

Yes, we fully trust each other and our successsor.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by JoinToday »

The problem I have is I (& wife) still have all my faculties, and children are building their lives; I don't want them to know my finances right now. But I would ideally like to have something set up where I can easily give access in the future.

VG (& probably other institutions) don't have a way for this to be implemented. I trust my children, no spendthrift issues, gainfully employed, and generally pointed in the right direction. But I don't want them to see/know my asset balance at this point in time.

I have seen on more than one instance where there is some downward health issue of relatives. In addition to dealing with health, trying to get finances in order is a huge burden on (adult) children.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by R7000 »

We set our oldest child up with full agent authority. She is a CPA and is trustworthy. The forms were a bit tedious but we got it done. Our daughter has an in-law that is no longer of sound mind and access to accounts is a problem. We didn’t want that to happen to us.

One downside I was concerned about is the cpa daughter second guessing my AA but she has agreed to not monkey with anything unless absolutely necessary.

I feel fortunate to have a professional child I can trust and I’m aware this is not necessarily to case for everyone.
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by thenow »

Thanks for all of the responses to my post. This is a journey I will share with everyone. Hopefully it might help other Bogelheads who have similar challenges.
1. Our adult kids live far apart, one on the east coast and the other on the west coast. A full agent authorization will be cumbersome for getting everything notarized and implement signatures.
2. On Saturday, today, I did a limited agent authorization for my IRAs and then the same for my wife’s IRAs. Since we wanted both kids to have authorization, we had to do it four times. Vanguard does not allow a family trust limited agent authorization to be done online. It was ridiculous since I was going to transfer the IRAS to another firm and keep the trust with Vanguard given Wellington and Wellesley holdings. But, I’m letting the Vanguard POA restrictions dictate my strategy and potential preferences.
3. My wife said do the IRAS and we could always do a transfer of IRAs later. Our current thinking is that we want our children to be able to have the ability to transfer money to our bank checking account for bills if we are unable. We read many times the limited option might solve the POA issue?
4. We are going to contact Fidelity to explore the possibility of transferring partial or all of our Family Trust monies. We don’t plan on reinvesting dividends or adding more money to Wellington or Wellesley. Plus due to the tax liability we would hate to sell them with Fidelity. Thus, the Fidelity fees may not be a problem.
5. After more research we will see about the wisdom of transferring our total stock fund to an ETF if we are going to transfer money to Fidelity.
6. We are not going to think about waiting for the potential future incapacity option. We would transfer everything to Fidelity first if the limited agent option does not meet our needs to overcome Vanguard cumbersome POA process.
7. At 80 years old I now see how decisions many years ago can impact today’s estate planning decisions. And, how it’s now critical to make investment decisions before the mental and physical capabilities decline.
8. I don’t mean to beat a “dead horse” since other treads have covered a few points on this topic. But, maybe my journey will help both young and old Bogelheads. If it helps I might give closure with this tread or a new tread by explaining what I finally did.
Any more suggestions, insight or more experiences greatly appreciated. Thanks again
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Re: Vanguard report of incapacity instead of Agent Authorization enough?

Post by clip651 »

thenow wrote: Sat Dec 10, 2022 12:57 pm Thanks for all of the responses to my post. This is a journey I will share with everyone. Hopefully it might help other Bogelheads who have similar challenges.
1. Our adult kids live far apart, one on the east coast and the other on the west coast. A full agent authorization will be cumbersome for getting everything notarized and implement signatures.
Have you looked at the actual paperwork required for full agent authority? I don't recall anything that would have been a ton more convenient if we lived close together vs. far apart. But our family did this years ago, so my memory is a bit fuzzy on details, and things may have changed with the forms as well.
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