Durable Powers of Attorney: Protection for the Future

Introduction

Unfortunately, most people will lose the ability to handle their own property and money at some point during their life, be it due to illness, injury, or other physical and/or mental deterioration. The thought of becoming disabled or incapacitated is unpleasant and troubling to everyone, and it is because of this that many people do not do any planning to prepare for this situation.  As difficult as it is to think about, planning for incapacity can be one of the best financial decisions you can make. A Durable Power of Attorney is one way ensure that your money and property are handled by the person of your choosing when you are unable to manage your affairs yourself.

What is a Durable Power of Attorney?

A Durable Power of Attorney is a legal document that gives the person you appoint as your agent the power to handle your financial affairs. For example, your agent could sign checks for you, pay your bills, open bank accounts or credit cards, initiate or defend a lawsuit on your behalf, sell or purchase property, etc.

Giving a person the ability to control your assets can be frightening, however there may come a time when it is necessary. You should always keep in mind that even though you have given someone these powers, that person can only use them for your benefit. He or she cannot use your money for his or her own purposes or for the purposes of anyone except you.

There are two kinds of Durable Powers of Attorney: Springing and General. A Springing Durable Power of Attorney only takes effect when your personal physical certifies in writing that you are no longer capable of controlling your finances yourself (i.e. when you have become incapacitated). A General Durable Power of Attorney is effective as soon as it is signed, witnessed, and notarized, which means that your agent can act on your behalf immediately, whatever the circumstances.

It is important to understand that just because you have appointed someone to act on your behalf financially does not mean that you have relinquished your rights to handle your own financial affairs. Unless you have become incapacitated, you may continue to manage your money yourself, and you may also revoke the powers you have granted your agent if the need should arise.

What Happens if I Don’t Have a Durable Power of Attorney?

As long as you are able to manage your own finances, nothing will happen if you do not have a Durable Power of Attorney. However, a serious problem arises if you become incapacitated. Many people believe that their closest family members will automatically be able to handle their affairs for them once they are no longer able to do so. Some also believe that the person they have appointed as their Personal Representative in a Living Will is authorized to take care of financial matters as well. Both of these beliefs are false. If you do not have a Durable Power of Attorney in place and you suddenly become physically or mentally unable to manage your financial affairs, then someone (usually a family member) must petition the court to be appointed your guardian or custodian. This can cost both money and time, during which your bills may begin to accumulate. A Springing Durable Power of Attorney will allow your agent to act on your behalf financially as soon as your doctor determines that you are unable to act yourself. A General Durable Power of Attorney accomplishes the same objective, because your agent may act in your stead as soon as you execute the document.

A Durable Power of Attorney also ensures that the person handling your money is a person that you have chosen. While it is usually a family member who petitions the court to become your guardian or custodian, this person may not be the same individual whom you would have wanted to act on your behalf.

Who Should I Choose as My Agent?

Deciding who to appoint to make financial decisions on your behalf can be a difficult choice to make. The person you select to act as your agent should be someone close to you and in whom you have complete trust. Location is also an important factor to consider. It will be harder for someone who lives very far from you to do the everyday things, such as sign checks for you or pay your bills, than it would be for someone who lives closer. You may also want to choose a person who is financially savvy, particularly if you have investments, trusts, or other complicated financial assets.

No matter who you choose to act as your agent, you should always name an alternate in case the primary agent is unable to act. Prior to executing your Durable Power of Attorney, you should discuss your decision with both your agent and your alternate in order to make sure that they are comfortable with handling your financial affairs should the need arise.

Conclusion

As difficult as it is to think about, it is very likely that someone other than yourself will be managing your finances at some point in your life. A Durable Power of Attorney is one way for you to keep control over your money and property once you have lost the capacity to handle your own affairs. A Durable Power of Attorney will give you the freedom to decide who will act on your behalf, and will relieve your family of the burden of having to petition the court to have a guardian or custodian appointed for you. If you are interested in obtaining a Durable Power of Attorney, or would like more information on the topic, please feel free to contact our office.