The purpose of this article is to provide a general overview of the Durable Power of Attorney document. The Durable Power of Attorney, also known as the Financial Power of Attorney, allows you to designate someone to act on your behalf in making financial decisions if you become incapacitated or are otherwise unable to manage your financial affairs. This document is only valid during your lifetime.
Why Have A Durable Power Of Attorney?
A Durable Power of Attorney allows you to nominate an adult you trust as an “agent” to act on your behalf in taking care of your financial matters. You may also designate an alternate or back-up agent(s) if the person you chose is unavailable or unwilling to act as your agent. In our complicated world today there are many different aspects to managing your finances that we often overlook. Bills have to be paid on a regular, recurring basis. Taxes have to be filed every year. Some people have more individualized assets that need to be managed, such as stocks, bonds, and loans, as well as the simple day-to-day expenditures vital to everyday living.
What If I Do Not Have A Durable Power Of Attorney?
Some may ask why it would be important for them to have a Durable Power of Attorney. Perhaps they are young and healthy and feel that incapacity issues are very far in the future. Or perhaps they feel their finances are not complicated enough to warrant a Durable Power of Attorney even if they become incapacitated.
Consider what would happen if you become incapacitated and unable to manage your financial affairs if you do not have a Durable Power of Attorney. Without this document indicating your selection of an agent, the probate court may be called upon to designate someone to act on your behalf based on the conservatorship statutes. This may be the same person you want to act for you, but it may not. By nominating someone you know and trust to act as your agent ahead of time, you may be able to avoid the time and cost of the conservatorship process while also ensuring that the person you want and trust to manage your finances is doing it, instead of someone you would not have chosen.
Even those who have relatively few assets could benefit from a Durable Power of Attorney. For example, most people have a bank account to keep balanced, need to file income taxes every year, or have bills that they need to pay on a regular basis.
But Am I Signing My Life Away By Signing This?
A common fear we hear from people before they sign their Durable Power of Attorney documents is they are “signing their life away” by executing this document. In most cases, the Durable Power of Attorney documents are called “springing” powers. This means that the powers granted to the agent do not go into effect unless and until you are declared “disabled” or “incapacitated,” which declaration has to be made by a licensed physician. In some cases, the person signing wants their agent to have authority as soon as the document is signed. In these cases, we prepare the document to be effective immediately.
Some people fear that the person they designate as an agent will have too much power over every aspect of their life or that the agent may take advantage of the powers they are granted. Our Durable Power of Attorney documents provide for specific limitations on the agent’s power. For example, an agent cannot use his or her authority to receive any personal benefits from you unless you specifically allow your agent to receive those benefits. An agent cannot use your assets to pay their own debts or legal obligations. An agent has no authority over any irrevocable trust you may have created, any life insurance policies you may own, and cannot change the beneficiaries of your bank accounts. The Durable Power of Attorney document is meant to allow you to make decisions while you are still of sound mind about who has authority over your finances while still allowing you to set limitations on that authority. A Power of Attorney becomes void once you pass away, and as long as you are not incapacitated or disabled you may revoke or amend the document at any time.
Conclusion
Regardless of the size of your estate or your current age or health condition, a Durable Power of Attorney is an important part of a well-rounded estate plan. This document allows you to nominate someone to act on your behalf so you have assurance that if you become incapacitated, your finances will be taken care of by someone you trust. Contact us today to learn more about how you may benefit from a Durable Power of Attorney.
