A power of attorney is a legal document that lets an individual name another person or a financial institution to handle financial transactions for another person. The person who is given power of attorney, who becomes the individual’s “agent,” has a lot of responsibility, says WMUR’s recent article, “Why you need a financial durable power of attorney.” When there is no power of attorney in place, the spouse or family will need to go to court, before they can act on their loved one’s behalf.
Whether you’re young, elderly, single or married, it’s a good idea for everyone to have a power of attorney. For married couples, while your spouse can usually take care of the basic finances, many financial transactions require both spouses’ signatures. For those assets in your name only, your spouse will have no access.
One type of financial power of attorney is a durable power of attorney, which becomes effective upon signing and stays in effect through any incapacity and until your death—unless you revoke it. This POA typically lets the agent perform a wide range of financial transactions on your behalf. If you don’t designate that your power is “durable,” it may automatically end, if you become incapacitated.
Another type of power of attorney is a “springing” power of attorney, and it usually doesn’t become effective unless specific conditions are met. Typically, a physician must certify that you’ve become incapacitated. This POA lets you to control your affairs, unless and until you can’t do so.
Work with an experienced estate planning attorney to draft the power of attorney. This document is usually created as part of your overall estate planning. Note that it’s not the same as a medical power of attorney. That document gives your agent authority for medical, not financial decisions. To be fully effective, these POAs must comply with state laws, which vary from state to state.
The typical powers granted to your attorney-in-fact or agent, are to use your assets to pay your normal expenses, collect Social Security, invest your money, handle banking transactions, gain access to your safe deposit box, manage property and watch over your retirement accounts. Aside from granting broad powers, the POA must be specific about certain rights granted to the agent. For example, the grantor gives an agent the right to make gifts on behalf of the grantor or the right to complete and file your tax returns.
Speak with your Houston estate planning attorney to see if they can hold the power of attorney for you and are able to release it if/when you become incapacitated. Just as you need to review your estate plan every few years to ensure that it is current with the laws and your life, a power of attorney should be reviewed as well.
Reference: WMUR (May 23, 2019) “Why you need a financial durable power of attorney”