It is always a good idea to think ahead. Although thinking about bad things happening to you down the line is uncomfortable, it is wise to be prepared for any kind of emergency situation. Many people decide to grant a power of attorney (POA) for your assets. Often this will be a close relative or friend. You should definitely choose someone you trust to hold power of attorney.
A POA is a legal document you sign to grant someone authority to make decisions on your behalf when you will no longer be able to do so. The person you choose will have the legal right to make these decisions. In most states, it is required that power of attorney be written, witnessed, and notarized. A power of attorney could be essential in order to manage your financial affairs if you become very ill, or become incapacitated.
It is normal to be overwhelmed by the idea of power of attorney. The team at Schwartz, Fang & Keating, P.C. are here to help you. Read these 5 tips on how to make power of attorney an easier process.
You will be granting someone complete control over your money and assets. Take your time to wisely choose your agent. If anyone tries to pressure you into choosing them, and signing a POA, do not allow it. If you feel that this is happening, you can always call a financial advisor or a lawyer for a second opinion. The person you choose to hold power of attorney is supposed to act in your best interest. Unfortunately, that is not always the case. Proceed with caution.
The importance of trust in this matter can’t be stressed enough. Your chosen POA should act in accordance with your investment goals. The agent you choose should have a basic knowledge of investing and other financial matters. This does not have to be a financial expert, but the person should have an awareness of what action to take if need be.
The details of your power of attorney should be very specific. The document should spell out exactly what you want to control, and how long the document will last. The authority you grant for your investments can include anything from limited trading authority in a brokerage account, to total control over decisions related to all of your finances. It is important that you specify which accounts and asset types are in your power of attorney. If there is confusion about what your agent can control, the integrity of your POA may be questioned, therefore not honored.
Your power of attorney needs to be a durable document. This means that it remains in effect if you become incapacitated. A durable POA will provide clarity when you are not in the position to manage your finances. If it is not durable, your POA is automatically revoked if you become incapacitated. When that happens, the court will appoint someone as your agent and you will lose say over who will be in charge of your finances and assets. You may choose to create what is known as a springing POA. This is a durable power of attorney that doesn’t go into effect until a future circumstance arises.
You should consider at least one alternate agent who can step in and take over if your initial agent is unable to continue. An alternate agent, or successor agent, can also take over control if it is suspected that your initial choice is acting fraudulently. If this is a concern for you, you may appoint a POA monitor. This is someone who would make sure that all is going according to plan.
In conclusion, a power of attorney can provide clarity on how your affairs will be handled while you’re still living. However, it does not replace the need for a comprehensive estate plan that takes effect when you die. It is still wise to have a will in place even if you have a POA arranged because it will immediately terminate upon your death. For more information please contact Schwartz, Fang & Keating, P.C. We are here to answer any questions you have regarding power of attorney and estate planning.