Updated: March 27, 2014
There are times when I get questions from readers about financial matters that require a legal perspective.
As I am not a lawyer, I simply give common sense advise and encourage them to consult a professional about their problem because it’s the best thing to do.
One of the more common inquiries I get is about the durable power of an attorney, whom an individual elects to make their legal and financial decisions, especially when they pass away.
A friend based in the US who works for a legal firm sent me this article, which I’m sharing with you today.
I hope you find this informative.
A power of attorney allows you to elect an individual (who you trust) to make important legal and financial decisions on your behalf when you are not able to do so yourself.
This legal procedure puts another person in the authority seat of your financial and legal livelihood; therefore, it’s imperative you elect a person you trust.
Whether you’re drafting your own power of attorney or you’re researching before hiring an attorney, it’s important to understand how these work and how they’ll impact you and your loved ones.
Why a Durable Power of Attorney?
A durable power of attorney is a good document to have not only for yourself, but for your loved ones and your property.
If for any reason you’re unable to handle your own matters on your own and you don’t have a durable power of attorney prepared, the courts will decide on your behalf who handles your estate and legal matters for you.
In most cases this can be a spouse (if you’re married). But, leaving it to the courts means you won’t have any control over who is elected to make decisions on your behalf.
Use a Form or Hire an Attorney?
You don’t have to hire an attorney to write a durable power of attorney, but you might want to hire one to at least review anything you write. You can use legal sites like Nolo or LegalZoom to obtain the necessary forms or get in touch with an estate planning attorney for assistance.
Even though writing one yourself can save you money, it doesn’t necessary mean your power of attorney form will protect your family in the way you intend it to.
State laws can be difficult to understand; therefore, having an attorney review your document can ensure it won’t be contested or thrown out in court.
When a Power of Attorney Goes Into Effect
A durable power of attorney can become active from the moment you sign it. For example, if you are married and you want your spouse to be in charge of your financial and legal matters, he or she can take care of something on your behalf while you’re out of town or if something happens.
You also can have a durable power of attorney only take effect once you’re certified incapacitated by a physician.
This is referred to as a “springing” power of attorney, because it allows you to have control over your estate unless you’re medically deemed incapacitated. Once you’re no longer incapacitated, you’re back in control of your estate.
What Your Agent Will Do
Your agent will have a big role; therefore, you want to select someone you trust and someone who can be impartial. You’re giving a single personal the legal authority to make decisions on your behalf. In your document this person is named as your agent or attorney-in-fact — depending on your state.
Most people give their agent a broad range of power so that they can adequately manage the estate and finances. However, it is up to you how much power you want your agent to have. Some of the tasks you can assign or not assign include:
- Using your assets to pay debts, everyday expenses and even taxes.
- Buying, selling or maintaining your properties.
- Collecting payments from Medicare, Social Security or other government agencies.
- Investing your money.
- Handling all transactions with banks, credit cards and other financial institutions.
- Filing and paying any taxes you owe.
- Buying and selling insurance policies as needed.
- Operating your business.
- Inheriting any property you’re given while incapacitated.
- Hiring an attorney to represent your estate.
- Managing your retirement funds.
Regardless of the tasks you allow your agent to perform, he or she is required by law to always act in your best interest, maintain records accurately, and keep your property and finances separate from his or her own.
Your agent must also avoid any conflicts of interest. If one arises, he or she must find a secondary agent to handle these conflicting situations.
Creating Your Document
A durable power of attorney is something you can write at any time — though most consumers write them while also drafting their wills.
You can use online legal sites, like LegalZoom or other legal advice sites to obtain forms or ask questions from professionals. Once your document is created, it can only end if:
- You pass away.
- You revoke it.
- You get divorced.
- The court says the document is invalid.
- There is no agent available.
A financial power of attorney is a serious document, but one that protects your best interests and the interests of your family.
Therefore, add a power of attorney to your to-do list as you create your estate plan so that your estate is protected while you’re alive and long after your death.
This article is written by a friend based in California, Atty. Howard Mendoza.