Power of Attorney
What is a Durable Power of Attorney for financial decisions?
A durable power of attorney for financial decisions gives another person (the agent) the authority to make financial decisions for the principal (person signing the POA). It does not remove authority or power from the principal. It does not give the agent power “over” the principal.
The powers may be limited or broad. The language in the document controls the agent’s power and authority. The “durability” aspect of a power of attorney means that it remains effective even if the principal becomes unable to handle his or her financial affairs.
If a person lacks capacity, then she is no longer able to sign a legal document such as power of attorney. In those cases, we may have to petition the court to have a conservator appointed. See “Conservatorship” on our website for further explanation.
What are some things to look for in a Durable Power of Attorney for financial decisions?
The document should state when it is effective. It may be effective immediately or only upon the principal’s disability. It should provide for a successor agent(s) in the event the first agent cannot serve; an accounting clause such that the agent must account to someone else regarding how he is managing the funds; the specific language required by the IRS to sign tax returns; authority to conduct litigation; authority to make property transfers; authority to establish trusts and make transfers to the trust; authority to make gifts, the authority for your agent to access your digital assets.
When should I obtain a Durable Power of Attorney for finances?
Anyone eighteen or older should have a Durable Financial Power of Attorney. Why? There may be a time that the young adult is disabled, and his agent (usually his parents) need to gain access to his checking account, savings account, sell his car or access his digital assets. It may also be necessary when a parent wants to discuss the young adult’s health insurance with an insurance representative.
The same is true with adults of all ages. Many spouses think that since they are the beneficiary on a life insurance policy or an Individual Retirement Account (IRA) or other types of retirement accounts, that she will be able to access those funds. That is not true. For any asset titled only in a spouse’s name, the other spouse needs a power of attorney to gain access to those accounts.
For example, Monica served as guardian ad litem in a conservatorship case. The disabled spouse had a pulmonary embolism and was in a persistent vegetative state. His wife needed to access his IRA in order to pay for care at home. Unfortunately, their attorney drafted wills for them, but failed to advise them of the need for a financial power of attorney or healthcare advance directive. Therefore, the wife had to petition the court to be appointed her husband’s conservator for financial and healthcare decisions. She had to have the court’s permission to access those funds, and she had to advise the court as to how she spent his funds. This process only added to the stress, grief, and emotional trauma she suffered due to her husband’s illness.
As the old saying goes, an ounce of prevention is worth a pound of cure.