The durable financial power of attorney gives legal authority to another person to manage your finances and act on your behalf if you become incapacitated and cannot make those decisions yourself. The term normally used for this person is an agent or an attorney-in-fact.
Your Financial Agent’s Tasks
You can grant as little or as much power to your agent as you deem appropriate. When deciding on what limits you will set, take into consideration the types of tasks your agent will need to perform:
- Paying your bills, taxes, medical expenses
- Managing any real estate assets you may have
- Accessing your financial accounts
- Handling your investments
- Transferring and/or selling assets
- Purchasing insurance on your behalf
- Collecting any retirement benefits
- Operating your business or hiring someone to represent you
The agent will be required to act and perform in your best interests. This means that conflicts of interest may potentially arise. One such area is paying for medical expenses. Oftentimes, a person will also name a medical agent who will make any medical decisions on their behalf.
Creating a Durable Financial Power of Attorney
In most states, a simple form is required to be completed in order to make someone your financial agent. Usually these forms must be witnessed, signed and also notarized. If an agent will be dealing with real estate assets, some states will require that this document be filed with your local land records office. Also, must banks also have their own forms for disclosing the identity of your financial agent.
When Does a Financial Power of Attorney Begin?
When granting a financial power of attorney, it is best to first decide whether or not it will be “durable.” Durability means that the power is always there, but it comes with substantial consequences that may not be obvious.
For example, if you have granted financial power of attorney but did not make it durable, if you become incapacitated your agent will have the power to make financial decisions. However, if and when you recover, that power will disappear. Therefore, if you are incapacitated again, that person will no longer be able to act as your financial agent because the power was quashed by your earlier recovery. So the decision as to whether the power will be durable or not is very important.
Normally the financial power of attorney will go into effect once the required documents are signed. However, if you do not want this power to be granted until you are actually incapacitated, then you can create what is known as a “springing” financial power of attorney. Like the general financial power of attorney, the springing power may also be durable or not.
When Will a Financial Power of Attorney End?
A financial power of attorney will automatically end upon your death. Meaning, your agent can only make financial decisions on your behalf while you are still alive, but incapacitated. If you wish for them to make financial decisions on your behalf after you have died, then you will need to name them as an executor of your estate in your will. Financial power of attorney may be ended in other ways, including: divorce, a court invalidating the required documents, or if you yourself revoke it. Because there are a number of ways in which this power can end, it is best to name alternate agents.