The ability to make financial decisions and manage financial affairs is generally limited to account owners and individuals specifically listed in the account records. For this reason, if it becomes difficult for an individual to manage his or her own assets, it can be challenging for family members and friends to step-in and help. Just as it is important to ensure that trusted individuals can assist with medical decisions in the event of incapacity, it is critical to make sure help can be given in connection with financial issues.
A financial power of attorney, also called a durable general power of attorney, is a legal document based on state law that empowers a succession of individuals (called agents) to make financial decisions and handle administrative affairs on another person’s behalf.
When Should I Consider Signing a Financial Power of Attorney?
It is important to create a financial power of attorney when you are healthy and have the capacity to do so. If you wait until the document is needed, it may be too late. If by the time you need a financial power of attorney you become incapacitated, you will not have the capacity to establish the solution and your family members may be required to go to court to be appointed as your guardian in order to act on your behalf. Not only will the guardianship process be time consuming and expensive for your family, you will lose control over the process of selecting the person who will make your financial decisions.
A power of attorney does not have an expiration date-although it is generally recommended that you update the document every ten years or so to increase the ease of its use by your agents. To ensure that you are protected in case of an unexpected problem you should put the document in place as soon as possible,
What Can the Agent in my Financial Power of Attorney Do?
Unless the document specifically places limits on the agent’s authority, the agent in a general financial power of attorney can generally do anything for you that you can for yourself. Examples of common responsibilities carried out by an agent include paying bills, handling bank or investment accounts, filing tax returns, and managing/selling real estate.
Who Should Be Named as Agent?
When thinking about who you would like to name as agents, the following should be considered:
- Choose someone that you trust – your agent has tremendous power.
- Location of agent – it is not necessary that your agent be located physically close to you, but it could be more convenient if your agent is able to appear in person to manage your affairs.
- If you do not have a trusted family member or friend to act as your agent, professionals (such as CPAs, banks and attorneys) may serve in that role.
Given that you never know when you may need help to manage your financial affairs, it is never too early to have a financial power of attorney in place. In order to avoid court involvement during incapacity and to maintain control over the selection of your financial decision-makers, consult with a legal advisor to prepare a financial power of attorney today.