Power of Attorney
Making Financial Decisions when you can't
What you will do if financial transactions need to be completed and you cannot make decisions is another significant part of Estate Planning.
A Power of Attorney empowers your Attorney-in-Fact to make financial decisions on your behalf. This can be an active document even if you are mentally able to make a decision, but perhaps cannot be present to transact business.
An example would be if you need to be out-of-town for signing a contract to make a significant purchase, and need someone else to stand in your place. Other types of transactions that a Power of Attorney commonly allows an Attorney-in-Fact to transact for you are numerous, including the following:
- real property transactions;
- tangible personal property transactions;
- bond, share, and commodity transactions;
- banking transactions;
- business operating transactions;
- insurance transactions;
- beneficiary transactions;
- gift transactions;
- fiduciary transactions;
- claims and litigation;
- family maintenance;
- benefits from military service;
- maintaining records, reports, and statements;
Type of Power of Attorney
A General Power of Attorney is live once it is signed. Your agent can immediately act on your behalf. This can be very attractive if you are traveling or otherwise unavailable to conduct business, and you want your Attorney-in-Fact to take care of your business affairs during your absence. You must be able to absolutely trust the person you appoint as Attorney-in-Fact so business is conducted in conjunction with your wishes.
A drawback to a General Power of Attorney is that it is revoked upon disability. Thus, you may want to consider a Durable Power of Attorney. A Durable Power of Attorney will still be effective if you cannot make decisions on your behalf, and will be considered active from the time you execute the document until your death.
A Springing Power of Attorney, only takes effect upon a disability. You can set the conditions of your disability. Your Attorney-in-Fact cannot act on your behalf until the disability occurs. This gives you certainty that you will control all decisions until you are unable to do so.
However, some service providers, like real estate closers and financial institutions, will not honor a springing, or durable power of attorney, even if the conditions appear to be met. The service provider will want proof of your disability, and many times a Court Order, before they allow your Attorney-in-Fact to act.
A springing, or durable power of attorney will provide guidance on who should make decisions for you. Just know that many service providers will require your Attorney-in-Fact to file for a conservatorship to manage your financial affairs.
Traps and tricks for a Power of Attorney.
Any type of Power of Attorney is a very powerful document. After executing the document, you should be cautious where the document is stored, and who will have access to it. The physical possession of the Power of Attorney document can greatly impair or accelerate its use, sometimes beyond what you desire. The operation and future use of a Power of Attorney is a careful discussion we have with each client.
Certain Financial Institutions and Investment Firms will not honor a properly drafted Power of Attorney. The institution will require the client to sign the financial institution’s or investment firm’s documents about who can act on your behalf during your life.
Care must be taken to discuss this with all Financial Institutions and Investment Firms you conduct business with so:
- can ensure that someone can act on your behalf during your life.
- you do not sign another second power of attorney that invalidates your other primary Power of Attorney.