by Shae Irving

Almost everyone can benefit from a durable power of attorney for finances.

Creating a durable power of attorney for finances -- sometimes called a financial power of attorney -- is a good idea for almost everyone with property or an income. It's particularly important, however, if you fear that health problems may make it impossible for you to handle your financial matters.

Why Sign a Power of Attorney

Making a durable power of attorney ensures that someone you trust (usually called your "agent") will be on hand to manage the many practical, financial tasks that will arise if you become incapacitated. For example, bills must be paid, bank deposits must be made, and someone must handle insurance and benefits paperwork.

Many other matters may need attention as well, from handling property repairs to managing investments or a small business. In most cases, a durable power of attorney for finances is the best way to take care of tasks like these.

Avoiding Conservatorship or Guardianship Proceedings

If you don't have a durable power of attorney and you become incapacitated, your relatives or other loved ones will have to ask a judge to name someone to manage your financial affairs. Depending on where you live, the person appointed to manage your finances may be called a conservator, guardian of the estate, committee, or curator.

Conservatorship or guardianship proceedings can be expensive and embarrassing. Your loved ones must ask the court to rule that you cannot take care of your own affairs -- a public airing of a very private matter. Court proceedings are matters of public record; in some places, a notice may even be published in a local newspaper. And if relatives fight over who is to be the conservator or guardian, the proceedings will surely become even more disagreeable, sometimes downright nasty. All of this causes costs to mount up, especially if lawyers must be hired.

If You Think You Don't Need a Durable Power of Attorney

You may not think that you need a durable power of attorney for finances if you're married or if you've put most of your property into a living trust or you hold it in joint tenancy. But the truth is that in all of these situations, a durable power of attorney can make life much easier for your family if you become incapacitated.

If You Are Married

If you are married, your spouse does have some authority over property you own together -- for example, to pay bills from a joint bank account or sell stock in a joint brokerage account. There are significant limits, however, on your spouse's right to sell property owned by both of you. For example, in most states, both spouses must agree to the sale of co-owned real estate or cars. Because an incapacitated spouse can't consent to such a sale, the other spouse's hands are tied.

When it comes to property that belongs only to you, your spouse has no legal authority without a durable power of attorney.

Example: New York residents Michael and Carrie have been married for 47 years. Their major assets are a home and stock. The home is owned in both their names as joint tenants. The stock was bought only in Michael's name, and the couple has never transferred it into shared ownership. Michael becomes incapacitated and requires expensive medical treatment. Legally, Carrie cannot sell the stock to pay for medical costs.

If You Have a Living Trust

A living trust isn't a complete substitute for a durable power of attorney for finances, but it can be helpful if you become incapable of taking care of your financial affairs. That's because the person who will distribute trust property after your death (called the successor trustee) also, in most cases, has authority to take over management of the trust property if you become incapacitated.

However, the successor trustee has no authority over property not held in the trust. Few people transfer all their property to a living trust; most transfer only assets that are expensive to probate, such as real estate and valuable securities. A durable power of attorney ensures that someone will be on hand to take care of other property, as well as day-to-day financial tasks.

If You Own Joint Tenancy Property

Joint tenancy is a way that more than one person can own property together. When one owner dies, the other owners automatically inherit the deceased person's share of the property.

But if you become incapacitated, the other joint tenant owners have very limited authority over your share of the joint tenancy property. For example, if you and someone else own a bank account in joint tenancy and one of you becomes incapacitated, the other owner is legally entitled to use the funds. The healthy joint tenant can take care of the financial needs of the incapacitated person simply by paying bills from the joint account. But the other account owner has no legal right to endorse checks made out to the incapacitated person. In practice, it might be possible to get an incapacitated person's checks into a joint account by stamping them "For Deposit Only," but that's not the easiest way to handle things.