A durable power of attorney is a document used to give someone the legal ability to handle your financial matters for you. It can help make sure your financial interests are protected even if you become incapacitated, and it can help prevent the need for guardianship. However, a poorly planned power of attorney could leave you vulnerable.
Be thoughtful when selecting an agent
The person you select to manage your affairs, called your agent, can be responsible for a variety of actions, including paying bills, managing real estate, selling assets, accessing financial accounts and collecting your retirement benefits. Your agent is required to act in your best interests, but it is still prudent to choose an agent you trust.
People often choose adult children or other close relatives as their agents. However, you should avoid selecting an agent based solely on that person’s status, such as the status of being your oldest child.
Factors to consider when choosing an agent might include:
- Proximity to assets
- Financial ability
- Attention to details
- Willingness to accept the position
- Available time to take on duties
- Likelihood of acting in your best interests
Verify the requirements of your financial institutions
Often financial institutions have their own requirements that must be met before they will honor a power of attorney. To avoid any trouble, be sure to meet with representatives of each of your financial instructions to find out what special requirements they may have. Then work with your attorney to make sure your power of attorney meets all of those requirements.
You may also consider consolidating your accounts and minimizing the number of financial institutions you use. These actions can help create a smoother transition when your agent begins taking on his or her responsibilities. It can also help streamline your agent’s duties into the future.
Create a durable power of attorney before it is needed
Like with most legal documents, you must be of sound mind when you create any power of attorney. This means that if you wait too long you could end up in a situation where you are no longer able to create a power of attorney. This situation could force your loved ones to seek guardianship.
Although guardianship is necessary in some situations, it is often more restrictive than a power of attorney would have been, and you may not be able to choose who will be appointed to manage your affairs. Additionally, the process of seeking guardianship can be expensive and time-consuming for your loved ones, and your finances may be left unmanaged during this process.
Often, it is better to create a power of attorney early. Some benefits of this include the ability to help resolve any problems your agent encounters, and the ability to monitor your agent’s actions until you feel comfortable he or she is managing your financial matters the way you want them managed.
Every adult should consider creating a durable power of attorney, regardless of age or health. When a trustworthy agent is selected and the requirements of your financial intuitions are met, a power of attorney can help protect your financial interests and prevent more restrictive options.