Financial Power of Attorney
As you begin the process of estate planning, one of the considerations you should make it who you would like to handle your affairs and make decisions on your behalf if you become unable to do so for yourself. Some of the tools available to do this include living wills and various powers of attorney, such as a durable health care power of attorney and a financial power of attorney.
While the health care power of attorney enables an agent or proxy to make decisions concerning medical treatment on your behalf, the financial power of attorney provides an agent the authority to make decisions concerning your financial estate, including decisions about how to handle your businesses, bank accounts, stocks, bonds, property and more.
If you do not choose a financial power of attorney and you become disabled, sick or otherwise incapacitated, the court will choose one for you in the form of a guardian or custodian, depending on your jurisdiction. By selecting your own financial power of attorney in advance, you retain control over the identity of the person you are entrusting your finances to and the scope of power and authority he or she will have. In the financial power of attorney document, you can set limits on:
- Which assets can be sold or transferred
- What gifts may be made
- The type of investments that can and cannot be made
- How your outstanding business should be conducted
In making a financial power of attorney, you also should select an alternative agent in case the first choice is unable to become the agent at the time required or is unable to fulfill the position for as long as required. This could happen if your agent moves out of state, becomes sick before or during the appointment or is found to be unfit to serve as your financial power of attorney.
When you are deciding whom to select as your agent, it is important that you keep in mind the scope of the duties and responsibilities of a financial power of attorney, including:
- Keeping records
- Gathering and managing your assets
- Submitting the proper tax returns to the federal and state governments
- Providing adequate protection for your assets (such as insurance)
- Making proper investments
Your agent can be held legally responsible for mismanaging your funds or engaging in self-dealing while the financial power of attorney is in effect. Thus, it is important to select a person whom you trust and who is capable of handling all of the responsibilities of being a financial power of attorney.
After you have decided whom you would like to appoint, you should discuss your decision with him or her and explain carefully what it will mean should he or she accept to be your agent. This will provide you with the time you need to make a new selection should your first choice decline.
An attorney can help you draft your financial power of attorney either in conjunction with or separately from your estate plan. You should keep a copy of all of your powers of attorney with your estate planning documents. Should you change your mind on your selection, you can change your designation at any time, so long as you still have the capacity required under law to change the document.
Financial powers of attorney can become effective either at the time they are executed or upon disability. Many people are uncomfortable with someone having immediate control over their financial affairs, especially while they still have the ability to control them themselves, so most people condition the power of attorney upon disability. Your attorney will discuss the pros and cons of each option with you so you can make the best decision for your circumstances.
Preparing To Meet With Your Estate Planning Attorney
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