What Is a Power of Attorney for Finances?
As part of the estate planning process, typically you will sign a power of attorney which deals with your finances.
A power of attorney is a legal document in which you appoint one or more people to be your agent. You’re called the principal and your agent is sometimes called your attorney-in-fact.
What’s the purpose of power of attorney?
The purpose of signing a power of attorney is so that your agent has the legal authority to take certain actions on your behalf. It comes in handy if you become incapacitated and need tasks handled like managing your money.
There are many types of powers of attorney for many purposes. Your attorney can suggest the right type for your specific situation.
What’s a “durable” power of attorney?
It’s common in estate planning to use what’s called a general, durable power of attorney. This type of power of attorney gives your agent broad, sweeping powers to do anything you yourself could do.
It’s “durable” because it remains effective if you become incapacitated after you sign it. It also takes effect as soon as you sign it and give it to your agent—whether or not you are incapacitated.
What’s springing power of attorney?
A springing power of attorney still gives your agent broad and sweeping powers to do anything you could do yourself. But, the difference is that it does not “spring” into effect until a specified condition happens. This typically happens when you become incapacitated, as certified by your doctor.
This is a good option if you’re not comfortable with the idea of your agent being able to act when you’re aren’t incapacitated.
There have been many cases of agents abusing their authority under a power of attorney. That’s why it’s vitally important that you have a high level of trust in the person you name as your agent. Your prospective agent must also understands what he or she can and cannot do as your agent.
This applies no matter what type of power of attorney you use.
Excerpt from the book Estate Planning for the Savvy Client: What You Need to Know Before You Meet With Your Lawyer by Mary L. Barrow, Esq.
Copyright ©2020, 2017 by Mary L. Barrow
THIS EXCERPT IS A BRIEF SUMMARY FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE USED AS A SUBSTITUTE FOR THE ADVICE OF COMPETENT LEGAL COUNSEL FROM AN ATTORNEY ADMITTED OR AUTHORIZED TO PRACTICE LAW IN YOUR JURISDICTION. YOU SHOULD ALWAYS CONSULT YOUR ATTORNEY BEFORE IMPLEMENTING OR CHANGING ANY ESTATE PLANNING STRATEGY.