Understanding and selecting a financial power of attorney
by Shannon Lee
Choosing power of attorney for financial affairs can mean great peace of mind for your family and friends. It ensures that even if you are unable to make decisions for yourself, someone else will have access to your finances and can make decisions on your behalf.
What Does Power of Attorney Mean?
When you choose to sign a Financial Power of Attorney, you are allowing someone else to take care of your financial situation. Assigning power of attorney must be done with a legal form, signed in front of a notary, and possibly in the presence of witnesses, depending upon your state laws.
If you want to handle all of your finances until a time when you become incapacitated, a "springing" power of attorney will ensure your wishes are upheld. This simply means the POA will "spring" into effect when needed. A "durable" power of attorney means your designation will stay in effect until the moment of your death.
Financial POA versus Medical POA: What is the Difference?
A financial power of attorney lets a person you trust have access to your financial life. A medical power of attorney allows someone to act as your health care agent and make medical decisions for you during a time when you can't make those decisions for yourself.
The financial POA and the medical POA do not have to be the same person. However, the people you choose might need to work together to make certain that their decisions on your behalf don't contradict one another. For instance, if your medical POA makes the decision to enter you into nursing home care, your financial POA has to disclose financial information and help fill out the necessary forms.
The Benefits of Power of Attorney
Giving financial power of attorney to someone you trust allows them to access and handle all or some of your finances, depending upon how much power you want to give them. Your permissions must be made very clear, in writing, for them to be upheld in court.
You can designate your POA to handle some of any of the following:
- Investments in mutual funds, stocks, bonds, and property
- Claim, sell, or transfer property on your behalf
- Handle taxes and small business operations
- Pay your day-to-day expenses
- Handle mortgage payments, retirement funds, insurance, and the like
- Deal with government benefits, interest payments, and bank transactions
- Hire legal counsel to represent you
Choosing the Right Person for Power of Attorney
When choosing someone to serve as your financial power of attorney, trust is paramount. Make sure it is a person who has your best interests at heart. Avoid those who have dealt with serious financial issues in the past, and steer clear of anyone who has a personal grudge against any of your family members. Discuss your financial situation and wishes with the person you choose before you sign the document.
Take your time in choosing the best person for your financial power of attorney, and enjoy the peace of mind that comes from a well-thought decision.