As we get older, our ability to manage our financial affairs on our own can get difficult. We forget critical information, such as account numbers, usernames, and passwords, and that can lead to frustration. That’s why you should plan for every contingency, which is where a Durable Power of Attorney comes in.
You may be familiar with what a Power of Attorney (POA) is, which is when you appoint a trusted individual to manage certain aspects of your life, including financial and health issues. Today, we are going to focus on the financial aspects of what a Power of Attorney can or cannot do, depending on the powers that you grant to them, as well as the differences between Limited and Durable Power of Attorney.
1. Limited vs. Durable Power of Attorney
The term “durable,” when used in this context, means that when you become incapacitated, the powers that you grant to someone, your Agent or Attorney-In-Fact, will survive beyond your incapacity. A Limited POA is good only when you are capable of providing direction and insights into your financial affairs, but may need or want someone else to assist you. A Durable POA will survive beyond your incapacity, all the way up until you die.
2. Durable Power of Attorney does not extend beyond death
The terms that you set when you create a Durable POA will only extend until you pass away. This means that your Durable POA will be able to handle your financial affairs while you are alive, such as opening and closing bank and brokerage accounts, paying bills, and ensuring that your standard of living does not suffer from inattention and neglect.
3. Only trusted individual(s) should become your Durable Power of Attorney
Because the powers granted to an Agent in your Durable POA are broad and sweeping, you should only appoint someone who you trust explicitly to handle your affairs. There are so many heartbreaking stories of family members and friends taking advantage of their aging parents for their own financial gain. Elder abuse is a growing concern in our society, and while there are laws that prevent the misuse of funds for personal gain, those laws cannot always protect you from financial loss. It could take months or even years to resolve, time that you may not have while you are still living.
Protect yourself from unscrupulous actions by only appointing someone you trust, such as a spouse or child, or another family member. There are ways that you can require an accounting of their transactions to a disinterested third party so that you can have the peace of mind that your affairs are being handled appropriately.
4. Understand the powers that you grant to your Durable Power of Attorney
Everyone has a unique financial situation that can be complicated, from different real estate properties to brokerage and investment accounts to annuities and insurance policies, so it is vital that your Durable POA document be comprehensive in its scope. This means that you should sit down with an estate attorney to draft a Durable POA that includes every possible tangible or intangible property that you own. The state laws that are in effect where you execute your Durable POA may need to be explained to you by someone who understands the nuances and vagaries of the law, so we recommend finding someone who is experienced in estate law to draft your Durable POA.
While you may be able to find a Durable POA document online for cheap, those forms could leave critical holes in the powers that you grant so as to be ineffective in certain circumstances. A common mistake is to not grant the ability to update beneficiaries on brokerage accounts. In most states, that power must be expressly granted, but too many Durable POA documents leave that part out or are silent.
5. You control when the powers that are granted in your Durable Power of Attorney go into effect
There is a provision in state laws that will allow your Durable POA to become effective immediately or only after you have become incapacitated. If you choose the latter option, the Durable POA instrument that you sign will “spring” into action only when your incapacity has been determined, thus the term “springing” is used to describe when the Durable POA goes into effect.
This provision can be helpful if you worry about relinquishing too much control immediately, or if you need time to gather your account statements together before putting those powers into effect. Remember, you control every aspect of your Durable POA, including when it becomes active.
There are many other details about setting up a Durable POA that you should know about, and a qualified estates attorney can help answer any and all questions that you might have. Hopefully, this article has sparked your interest in implementing a Durable POA so that you can have the peace of mind that comes from knowing that your financial affairs are in order.
For a limited time, at Lawson & Breuder, we offer a free 30-minute consultation where we discuss at a high-level any issues about your estate. We will then come up with a game plan to move forward.
There is no obligation, and I promise that you will come away from that consultation knowing what your next steps are to financial security.
So call us now at 817-821-8120 and ask for a free 30-minute consultation. Our staff will set up an appointment with you to visit with one of our certified estate attorneys at a time that is convenient for you.
P.S. When you call, don’t forget to ask about our complimentary guide entitled “How to avoid the 7 most common pitfalls of retirement.” This report is made available to all of our callers, absolutely free, even if you are unable to schedule an appointment at this time.
You owe it to yourself and your family to put your financial affairs in order, so call us today at 817-821-8120.
We look forward to hearing from you soon!