Durable Financial Power of Attorney
The durable financial power of attorney is simply a way to allow someone else to manage your finances in the event that you become incapacitated and are unable to make those decisions yourself. The power is granted in a document, and is not only useful for you, but can really help your family in times of crisis. More precisely, it grants someone legal authority to act on your behalf for financial issues. This person's official name depends on the state you live in, but is often referred to as your agent or as an attorney-in-fact.
Your Financial Agent's Tasks
You can set the limits of your agent's power, granting as much or as little power as you think is appropriate. When deciding whether to set limits, consider the kind of tasks your agent will likely be asked to perform:
- Paying your bills
- Paying your taxes
- Paying medical expenses
- Managing your real estate assets
- Accessing your financial accounts
- Investing on your behalf
- Collecting any retirement benefits
- Transferring and selling your assets
- Buying insurance for you
- Operating your small business
- Hiring someone to represent you
Your agent cannot do whatever he or she wants to do, but must act in your best interests. One area of potential conflict to keep in mind is in regards to paying for medical expenses. Often, people also name a medical agent who can make medical decisions for them. If your financial and medical agent aren't the same person or disagree on medical care, the financial agent can make receiving medical care difficult.
Creating a Durable Financial Power of Attorney
Most states have simple forms to fill out to make someone your financial agent. Most states don't require that you use these forms, but it is always a good idea to do so.
Generally, the document must be signed, witnessed and notarized. If your agent will have to deal with real estate assets, some states require you to put the document on file in the local land records office. Finally, many banks have their own forms, and while not strictly necessary, it will make the process much easier if your bank knows who your financial agent is.
When it Begins
The first distinction to keep in mind when you are granting a financial power of attorney is whether or not to make it "durable". Durability simply means whether the power is always there, but it has significant consequences that may not be apparent. The best way to illustrate this is by example.
For example, if you grant it but don't make it durable, then when you are incapacitated, your agent will have the power to make financial decisions as you would expect. However, if you recover, that power is now gone. This means though, that if you are then incapacitated again, that person is no longer your financial agent since the power was given but then extinguished by your recovery. So decide whether you want to make the power durable or not.
Generally, it goes into effect the second you sign it. If you do not want this, you should create a "springing" financial power of attorney. This means that the power is not granted to your agent until you are incapacitated (and certified as such by a doctor). Springing powers can be durable or not.
When it Ends
The financial power of attorney is automatically extinguished upon your death. That means that your agent can only make financial decisions for you while you are alive and incapacitated. To deal with financial matters after your death, you need to name an executor in your will. Other ways it can be extinguished include divorce, the event that your named agent is unavailable, or if a court invalidates your document or you revoke it. Because there are many ways for the power to end that you can't plan on, it is helpful to name alternate agents.
- Power of Attorney for Financial Matters (Elder Law)
- Health Care Power of Attorney
- The Power of Attorney, Living Will, and Your Healthcare