A power of attorney for finances, also known as a financial power of attorney or power of attorney for property, allows another person, known as the agent, to act on your behalf or in your place on financial matters. For example, the agent can sign checks, pay bills, collect income, execute deeds and leases, and sell assets such as real estate, personal property, and stocks.
A durable power of attorney for finances remains in effect if the maker, known as the principal, becomes incapacitated or incompetent. If the power of attorney document does not expressly state that it is durable and survives the principal's incompetency or incapacity, the agent will not be authorized to manage the principal's affairs during that time. See
dementia and wills. When making a power of attorney as part of an estate plan, most people want the security of knowing someone can step in if they are unconscious, suffering from dementia, etc. Therefore, most people make a durable, rather than a non-durable, power of attorney. However, only a lawyer familiar with your unique circumstances can advise you on which type of financial power of attorney should be used in your estate plan.
How to Make a Power of Attorney
Once you decide whom to appoint as your agent, the next step is to make a power of attorney. To get started, go to:Power of Attorney ChecklistPower of Attorney Forms
Note: Although you can use estate planning software to print a financial power of attorney document, you should have your power of attorney prepared by a lawyer licensed in your state for several reasons. If your power of attorney is not prepared in strict accordance with applicable state law or is not properly executed, banks and other financial institutions may not honor the document or allow your agent to access your accounts, property, etc. Financial institutions typically scrutinize power of attorney forms very carefully. A power of attorney is one of the most complex types of estate planning documents, so you need an attorney to ensure you execute it properly.This article was updated on December 22, 2018.
Why Do I Need a Power of Attorney?
The following is list of reasons you may want to make a durable financial power of attorney to authorize an agent to act on your behalf if you become incapacitated or disabled: 1. You are a senior and realize your health and mental state may change as you age. 2. You are a single parent and want to ensure someone is authorized to pay bills and make other financial decisions that affect your minor children. 3. You have a chronic disease, debilitating condition, cancer, or other health condition or want to plan in advance for any future health care issues that may arise. 4. You run a company or small business and want to ensure there is no interruption in service to your customers or payment of vendors. 5. You are concerned about the rights of your partner under the law and want to ensure he or she has certain legal rights to make financial decisions if you cannot do so. 6. You have more than one adult child and want to ensure a particular child is the one authorized to manage your affairs rather than allowing a court to decide. 7. You have substantial investments that require monitoring and a delay in oversight could cause financial damage. 8. You want to authorize another person to pay your real estate taxes, mortgage, and other bills and expenses if you are disabled or incapacitated.These are just a few of the reasons you may want to make a durable power of attorney for finances. If you lose the capacity to manage your affairs and don't have this type of estate planning document in place, your family member or partner would have to go to court to ask for authority to manage your affairs, either through conservatorship or guardianship. This is expensive, time consuming, and stressful.
Although many people think estate planning is only for seniors, adults of all ages should plan for disability and incapacity, especially if they are responsible for minor children, other dependents, a business, pets or other animals.A tragic accident or serious illness can occur at any age. If there is no financial power of attorney in place, those who rely on you may be at risk of losing their home or quality of life. In addition, your own medical care and financial well being could be impacted.
Power of Attorney Questions
Despite the advantages of having an agent act on your behalf in certain circumstances, making a power of attorney is something that merits careful consideration. When you grant another person authority over your property, it comes with significant risks. Carefully consider whether the person you plan to name in your power of attorney is a trustworthy person. Before granting power of attorney, review the following:1. For an overview of the risks and a list of steps you can take to protect yourself, see power of attorney risks.2. To find out the types of powers agents typically have under a financial power of attorney, see agent powers.3. To learn more about drafting a power of attorney and the types of powers you may wish to withhold, see granting power of attorney.4. For answers to other important questions about powers of attorney, see questions about POAs.
What About Medical Decisions?
In addition to making sure someone can take care of your property and financial obligations, you may be concerned about medical procedures, treatment, and end of life care. Making a financial power of attorney or a power of attorney for finances does not take care of issues related to your health care, such as incapacity, dementia, terminal illness, do not resuscitate orders or being taken off life support. Separate estate planning documents are required to address these issues. For a list of steps required to make a power of attorney for health care and advance directives, go to living wills
and health care POA.
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