Powers of Attorney

 Financial Powers of Attorney

 

What is a power of attorney?

A power of attorney is a written document in which you (called the principal) appoint someone else (called the agent or attorney-in-fact) to act for you. Your agent can do any legal act you ask your agent to do.

 

Why is a power of attorney important?

Everyone should think about having a power of attorney. Having one can be more important to your personal well-being than a will. It allows you to pick someone you trust to handle your affairs if you cannot do so yourself. It gives you peace of mind, knowing that in an emergency someone you choose will have the authority to act for you. If you don't have a power of attorney and you are suddenly incapacitated, your family may have to go through an expensive and time-consuming court action to appoint a guardian or conservator.

 

Are there different types of powers of attorney?

Yes. Powers of attorney can differ depending on when you want the powers to begin and end, and how much responsibility you want to give to your agent.

 

A durable power of attorney begins when you sign it, but it stays in effect for your lifetime, unless you cancel it.  A springing power of attorney begins only when a specific event happens, such as when you become incapacitated. Your attorney must carefully draft a springing power of attorney to avoid any difficulty in determining exactly when the "springing" event has happened. 

 

All powers of attorney come to an end at your death. Your agent will have no power to make any decisions after you die. 

 

Responsibility

You can select the responsibilities, or powers, you want your agent to have. You can authorize your agent to do one thing, such as sell your car. Or you can give your agent the authority to do any legal act you could do yourself. You can give a wide range of powers, such as having access to bank accounts, selling stocks, and managing real estate. You may want your agent to sign your income tax return, apply for benefits, and make gifts. You should design you power of attorney to fit your anticipated needs.

 

What type of power of attorney is best?

In most cases, durable power of attorney is best. Conventional powers of attorney become useless just when you may need them the most when you are unable to make decisions on your own. Springing powers of attorney can create problems in determining when they become effective. The best way to draft a power of attorney is to state the broadest range of powers you feel comfortable giving to your agent. This will allow your agent to take care of all matters, even those you cannot foresee now.

 

Will my agent be able to do my banking?

If you want your agent to have access to your bank account, be certain to get your bank's authorization form and a signature card for your agent. Usually a bank uses its own form to give your agent access to a particular account. If you don't contact the bank before you become incapacitated, the bank may not want to honor checks and withdrawals your agent signs. It doesn't give your agent broader powers. Giving your agent the authority to have access to your bank account is not the same thing as making a friend or relative a joint owner of the account.

 

Are there any risks associated with a power of attorney?

The risks of appointing an agent are small. The most important way to reduce any risk is to carefully choose your agent. Select someone you trust completely. The power of attorney doesn't mean that your agent owns any of your property. It allows your agent to make financial decisions when you can't. You can withdraw a power of attorney whenever you want as long as you are competent. Appointing someone as agent doesn't mean you give up your right to manage your own affairs.

 

Who should I choose as my agent?

No one can tell you whom to choose as your agent. The person you choose needs to be someone you trust, as well as someone who can do the job. Many people select their spouse as their first choice, and a child or other relative as a substitute. But, if your spouse is ill, inexperienced in financial matters, or for some other reason wouldn't be able to handle the responsibilities, pick someone else. Pick the one you trust the most. Between two equally qualified persons, the one who lives closet to you is generally the best choice.

 

Can I name my two children as co-agents?

The law permits you to appoint co-agents. However, it's not necessarily a good idea. To make decisions, both must agree. If they disagree, they may have to go to court. This is really expensive, time-consuming and defeats the major reason for having a power of attorney. You could appoint one to make financial decisions and the other to make health care decisions. This is your choice. Don't be talked into selecting anyone other than the person you want.

 

I already have a will. Can't my executor handle my affairs?

No! Your will determines how your property will be distributed after your die. Your executor has no authority to act before your death. Your power of attorney deals with how to manage your property during your life. Your agent has no authority to act after you die.

 

I own everything jointly with my spouse (or adult child). Why do I need a durable power of attorney?

Many people think their spouses or other relatives are automatically authorized to make decisions for them if they become incapacitated. A joint account holder on certain types of joint bank accounts has access to joint funds. Close relatives may be allowed to make ordinary medical decisions for you if you can't make them yourself. However, this is not enough. If you become incapacitated, a spouse or joint owner may not have authority to handle certain transactions, especially those involving real estate and stocks (even if they are jointly held). You need a financial power of attorney so someone has clear authority to act for you in all situations.

 

Can I still manage my own affairs if I sign a power of attorney?

Even if you sign a power of attorney, you can still manage your own affairs. You are not giving up anything. Instead, you are taking steps today so you agent will be able to act when and how you have directed, when it becomes necessary.

 

Can I cancel a power of attorney after I sign it?

Yes. You can cancel, or revoke, a power of attorney at any time by tearing it up, signing a new one, or writing that you want to cancel it. You don't have to give any reason. If you do cancel, it's a good idea to let your agent and anyone your agent has been dealing with know that you have canceled the agent's authority.