A financial power of attorney or a durable power of attorney gives someone the authority to handle your finances in the event that you’re unable to make decisions. When planning for emergencies, many people recognize the benefits of having a life insurance policy, health insurance and perhaps a medical durable power of attorney. Yet, many do not create a financial power of attorney. With this document in place, a family member or close friend can come to your aid and assume responsibility for your financial affairs. This document is useful in many different situations. Maybe you work out-of-town or overseas and need someone to manage your finances while away. If you become incapacitated, setting up a financial power of attorney can ensure that your personal finances remain intact.
Role of Your Agent
The person chosen to handle your financial matters is called an agent. Designating someone for this role doesn’t give this person total control over your financial life. In fact, you can decide how much power to give your agent. For example, you may give the agent authority to access your bank account to pay your living expenses, such as your mortgage, utilities and other bills. The person may have power to sell your home, file and pay your income taxes, transfer property, manage your retirement accounts or manage your business. It’s a weighty role, thus you need to choose someone who will make decisions in your best interest.
Create a Financial Power of Attorney
Setting up a financial power of attorney is a simple and quick process. You can obtain the appropriate document from a brokerage firm, your bank, a lawyer or download state-specific forms online. Most documents are fill-in-the-blank, and you simply indicate the name of the person designated as your agent, as well as the degree of his financial responsibility. You can also specify conditions in which the power of attorney takes effect. For example, you can state that your power of attorney will only take effect if you’re impaired or mentally unable to make decisions for yourself. The document is legally valid the moment you sign your name. However, most states require signing before a notary public.
Revoking a Financial Power of Attorney
A financial power of attorney is not a will. Unfortunately, the person assigned to handle your financial affairs while living cannot legally manage your finances after you die. A power of attorney ends at death, but you can specify an executor of your estate in a will. The person chosen as your executor can be the same person named as the agent for your financial power of attorney. As an executor, this person has authority to make decisions regarding your debts, funeral plans and property.
But you don’t have to die to end a financial power of attorney. This is your document and you can cancel or name a different agent at any time, providing that you’re mentally competent. Several situations justify choosing another agent. Maybe you want to remove your ex-spouse as agent, or maybe a chosen agent no longer wants the responsibility.