Durable Power Of Attorney For Financial Management
A durable power of attorney for financial management is a simple, reliable way to nominate someone to make your financial decisions in the event you become unable to make them yourself.
A durable power of attorney for financial management is a document executed by a “principal.” The principal appoints another person, the “agent,” to act on behalf of the principal to manage the principal’s financial affairs without resorting to court proceedings (such as a conservatorship).
Definition Of A Springing Power Of Attorney
While the principal can manage her own affairs, the document is dormant. If the document states that the power springs to life on the principal’s incapacity, or at some other specified future time or contingency, it is a springing power of attorney.
Determination Of When The Power ‘Springs To Life’
The principal can assign one or more persons the power to determine her incapacity. Physicians may be granted that power.
Consequences Of Not Executing A Durable Power Of Attorney For Financial Management
If a person becomes incapacitated without having executed a durable power of attorney for financial management, a court proceeding (a conservatorship) is probably inescapable. The person’s spouse, close relatives or companion must request authority from the court to manage at least some of the person’s financial affairs.
If the incapacitated person’s loved ones go to court to have a conservator appointed to manage the person’s financial affairs, they must ask the judge to rule that the person cannot take care of his own affairs. Since the court proceedings are public, this could be embarrassing.
Although a conservatorship is not necessarily permanent, it can only be ended by the court.
Advantages Of A Durable Power Of Attorney For Financial Management
- A durable power of attorney for financial management enables you to nominate the person who will make important financial decisions for you, should you be unable to do so yourself.
- A durable power of attorney for financial management may help avoid the requirement of a conservatorship – thus saving you and your family money while protecting your privacy.
Duties Of The Agent
Usually, the principal gives her agent broad powers over her finances. However, the principal can give her agent as much, or as little, power as she wishes.
Following are some things agents are usually given the authority to do on behalf of the principal:
- Use the principal’s assets to pay the principal’s everyday expenses and the expenses of the principal’s family
- Sue or defend legal proceedings and claims on the principal’s behalf
- Collect benefits from Social Security, Medicare or other governmental programs for the principal
- Invest the principal’s money
- Buy, sell, maintain, pay taxes and mortgage on real estate and other property for the principal
- Transact with banks and other financial institutions for the principal
- Buy and sell insurance policies and annuities for the principal
- File and pay the principal’s taxes
Responsibilities Of The Agent
No matter what powers the principal gives the agent, the agent must:
- Act in the best interests of the principal
- Keep accurate records
- Keep the principal’s property separate from the agent’s
- Avoid conflicts of interest
Characteristics Of A Good Agent
Selecting an agent under the durable power of attorney for financial management is an extremely important decision.
The agent must have:
- Capacity: The agent must have the capacity to execute a contract. The agent must be an adult
- Common sense in making discretionary and business decisions
- Intellectual and emotional fortitude
- Willingness to carry out the principal’s wishes