Why You Need a Durable Power of Attorney
If you suddenly become incapacitated, perhaps because of an illness or an accident, who would take care of your finances? How would they do it? If you don’t have a durable power of attorney, it is possible that no one would be able to handle your finances without becoming your legal guardian through a court proceeding.
A power of attorney is a legal document authorizing another person (an agent) to act on your behalf to handle certain financial transactions. The transaction might be as basic as paying your bills or as complex as selling real estate and filing your tax return.
If you do not have a power of attorney, someone will likely have to petition the court to appoint a legal guardian for you. This process requires that you be declared legally incompetent and it can be a cumbersome, time-consuming and expensive process. It is also a matter of public record. Also, if your relatives disagree about who should serve as your guardian, the court may appoint someone who does not know you or your family. This is a situation most of my clients wish to avoid.
Every person age 18 or over should have a power of attorney. Parents no longer have the legal authority to act on behalf of their children when they turn 18 and spouses do not automatically have the legal authority to act on behalf of each other. You may have some assets in your name only, like a 401(k) or IRA. For accounts held in your name only, no one can access those funds to pay bills if you are unable to handle your own finances if you do not have a power of attorney.
The financial power of attorney we recommend is a durable power of attorney that becomes effective when signed by you and remains in effect until your death. Keep in mind that upon your death, all powers of attorney expire.
Certain powers must be specifically granted to your agent in the power of attorney. You have the option to limit the powers you give to your agent. As long as you are competent, you can amend or revoke your power of attorney anytime.
Be sure to periodically review and update your document so that it reflects your needs, desires and current situation.
Note: A separate power of attorney for is used for health care decisions.