Financial Power of Attorney also called a Durable Power of Attorney gives an agent the power to take care of your finances if you become incapacitated or you are unavailable to do it. When you are incapacitated for either a short or a long period of time you will need someone to pay your bills, do your banking, make investment decisions and deal with taxes. In other words, handle your financial matters. This person is called your Agent.
A common example is: Dad gets dementia and can no longer remember to pay his bills. This document will allow one of his children to take over paying his bills, filing his tax return, doing his banking and even managing his money.
Another example is between spouses. Perhaps one spouse has a job that requires a lot of travel. The couple is selling their home. Using a Power of Attorney, the wife can sign her husband’s name.
Power of Attorney can be effective immediately or upon his becoming incapacitated. The choice depends on the age of the client and of course personal circumstances. Does the client travel a lot for work? Is the client comfortable giving someone that power immediately?
Financial Powers of Attorney are among the most abused documents. There are countless stories of Agents to take money for their own use. Son takes mom’s money when she is in the hospital and buys himself a new house. Mom makes a miraculous recovery and then has to get her money back.
We recommend a lot of thought be put into choosing the Agent. This person has a lot of power.
Types of Power of Attorney
Limited Power of Attorney is usually for a specific purpose and time period. This document can be executed to accomplish a single goal like sell a house. It would only have the specific power needed to accomplish the goal. A Limited Power of Attorney could also be used for a specified power of time. We have many clients who are stationed overseas during that period it makes sense to give someone a Limited Power of Attorney for the period they will be gone to deal with assets left in the US.
This is a very important document. Sometimes people have a very old version of the document or the estate plan they did 30 years ago did not include a Power of Attorney. If you or your loved one becomes incapacitated and you do not have this document the only way to gain control over the incapacitated person’s finances is to get a conservatorship through the court. This is an expensive process and after it is over there is court oversight over the incapacitated person’s finances. Making sure you have an up to date Financial Power of Attorney can avoid all of that.
There is also a new law regarding Financial Power of Attorneys. Virginia recently enacted the Uniform Power of Attorney Act. The idea is to have similar law throughout the US so state to state the Powers of Attorney will be honored.