Financial Power of Attorney
What is a Financial Power of Attorney?
A Financial Power of Attorney allows you, the principal, to name someone else, the agent, to make financial decisions for you. If the document states that it is “durable” this means that your agent will be able to make financial decisions for you even if you are incapable of making your own financial decisions.
Why should I consider making a Financial Power of Attorney?
A Financial Power of Attorney that is durable allows you to control who will make financial decisions for you if you're unable make those decisions in the future. Typically this would be if your health declines to the point that you can no longer understand financial matters. The person you named as your agent under a power of attorney will have the ability to access, control, spend and dispose of your assets, such as your money, house and vehicle, in a way that meets your needs. It is vital that you trust your agent to act in your best interest.
Who needs a Financial Power of Attorney?
Any adult that has assets, such as a bank account, real estate, or vehicle, or who has credit cards, utilities or loans that would need to be able to accessed by someone else if they were ever unable to do so on their own. Generally this situation arises at a time of crisis. For example, a car accident could render you unable to make financial decisions and you would need someone to be able to access your bank account to pay your mortgage or other bills. Another common scenario is someone who is aging or has a medical diagnosis where they know in the near future they will require substantial help to manage their finances.
People who may especially want to consider creating a Financial Power of Attorney are:
- Anyone who has assets that no one else has the ability to access and having access to them in a time of crisis would be necessary for their welfare.
- Senior citizens
- People who have been diagnosed with terminal illnesses, as well as people who are worried about losing their cognitive abilities
Are there reasons why I should consider not creating a Financial Power of Attorney?
Yes. If you do not fully trust the person that you are naming as your agent, you should not create a Financial Power of Attorney. Further, if you do not understand all of the language in the document you should not sign it. Instead, you should contact a local attorney.
How do I select an agent?
Selecting the right agent is crucial. It needs to be someone that you quite literally trust with all of your money. Most people select a spouse, child, sibling, or parent. If you are concerned about someone using your money for their own benefit, you should not select them as your agent. You should never let anyone talk you into naming them as your agent.
When does my Financial Power of Attorney go into effect?
The document itself will contain language on whether the agent has authority immediately or if there is some date or event in the future, such as two doctors both certifying that you are no longer able to make financial decisions, that will spring the power of attorney into effect and give your agent authority at that time. Some states no longer allow for “springing” financial power of attorney documents and generally most documents are written so that they go into effect as soon as they are executed.
How do I properly execute a Financial Power of Attorney?
Most states require the principal to sign the document in front of two disinterested witnesses and a notary public.
How do I revoke a Financial Power of Attorney?
A Financial Power of Attorney generally must be revoked in writing, but check with your state’s specific requirements. Written notice is typically provided to the principal, successor agent, as well as third parties, such as financial institutions, that have the document on file.
Checklist for getting started
Before creating your Financial Power of Attorney, you'll want to have the following handy:
- The name, address and telephone number of the person you would like to appoint as your agent
- The name, address and telephone number of an alternative person you would like to appoint as your agent if your first choice is unable to serve