A financial power of attorney is a simple and inexpensive way to arrange for someone to manage your finances if you become unable to make decisions for yourself. If you become unable to decide matters for yourself and have not prepared a financial power of attorney, a court proceeding will likely be necessary. Your spouse or relatives would then have to ask a court for authority over your financial affairs.
A financial power of attorney can be drafted so that it goes into effect when you sign it. Many spouses have financial powers of attorney for each other. You should specify that you want your power of attorney to be “durable.” If you do not, it will automatically end if you become incapacitated.
Alternatively, you can provide that the power of attorney does not go into effect unless a doctor certifies that you have become incapacitated. This is called a “springing” durable power of attorney. When you create and sign a durable power of attorney, you give another person legal authority to act on your behalf. That person is your agent.
You can give your agent as much or as little power as you would like. You may want to give your agent authority to do some or all of the following:
- pay your everyday expenses and those of your family
- buy, sell, maintain, pay taxes on, and mortgage real estate and other property
- collect government benefits
- invest money
- handle bank transactions
- buy and sell insurance policies
- file and pay your taxes
- operate a small business
- claim property
- transfer property to a trust
- hire someone to represent you in court, and
- manage your retirement accounts
The agent has “fiduciary” responsibilities to act in your best interests, maintain accurate records and keep your property separate from his or hers.
If you require assistance in preparing a financial power of attorney, consult with an experienced estate planning attorney.