A POA, or power of attorney, is a common estate planning device that allows you to name an attorney-in-fact to handle your financial assets if needed.

Attorney-in-fact

When you create a Power of Attorney, you will have to decide what family member or friend is best suited for the position of Attorney-in-fact. If you are married, you may choose your spouse. You should, however, always choose someone who is organized and a good financial manager.

You must also choose someone who is trustworthy and will use the duties of attorney-in-fact for your benefit and not for his or her own benefit. Depending upon the size of your estate and your preferences, your attorney-in-fact’s responsibilities may include: income, expenses, financial accounts, investments, retirement accounts, personal property and real estate.

Use in Everyday Life

You can use a Power of Attorney in your everyday life if you wish. In order for your POA to be active as soon as you sign it, it must be Durable. A Durable Financial Power of Attorney allows your attorney-in-fact to act on your behalf anytime he or she is needed. These duties may range from signing a single document to running your business while you are out of the country.

Disability Planning

If you don’t have a need for a Power of Attorney in everyday life, or if you prefer to keep full control of your assets, you should still consider a POA for disability planning. A “Springing” Financial Power of Attorney is often used for incapacity arrangements. Your attorney-in-fact will not have control of your assets until you become incapacitated and unable to manage your own affairs. Then the POA “springs” into action and allows your attorney-in-fact to pay your bills and provide a way to pay for medical care. However, I usually do not recommend a springing power because of the potential difficulty in proving that the springing event has occurred. The only thing worse than not having a power of attorney is having one that is not recognized, and the more contingencies that are placed in a document, the more likely that it will not be recognized by an institution.

Tags: disablity planning, durable power of attorney, financial power of attorney