Life is uncertain; no one is guaranteed tomorrow. And yet we go on as if we have forever to live. We often tend to overlook things until circumstances force us to do so, and when tragedy strikes, we are caught off guard. The pandemic certainly made us think about the precariousness of our lives. With millions of untimely deaths and many others being bedridden in hospitals, we all felt the need of having an emergency plan. And having a medical power of attorney to make crucial decisions about your life when you are unable certainly might be the first step for that emergency preparation.
However, what stays overlooked with all the chaos in a health emergency is taking care of your financial matters. When you are severely ill or hospitalized, handling pressing financial matters might not be your top priority. But that doesn’t mean you can put a halt on everything else. That’s where a financial power of attorney comes into the equation. Read on to find out more.
What Is a Financial Power of Attorney?
A financial power of attorney is a legal document that allows you to delegate all your financial decisions to someone else. If you are unable to handle your own finances, for some reason (due to severe sickness or being overseas), you can draw up a financial power of attorney and assign someone else to take care of your finances.
The person who is responsible for your finances is called the agent and you, the one that has assigned them the power, is called the principal. The document can automatically be nullified on your demise if it’s not mentioned otherwise. If the financial power of attorney continues to be in effect even after you are incapacitated, it is called a durable financial power of attorney. Depending on your state, the rules for delegating or preparing a financial power of attorney may vary.
How to Get a Financial Power of Attorney
Preparing a financial power of attorney might seem like a complex or even daunting task. If you are wondering how to get power of attorney, the process is quite simple, and often you don’t even need a lawyer to prepare one.
Know Whether You Need a Financial Power of Attorney
Durable financial power of attorney might not always be necessary for you. For instance, if you already have appointed a trustee to decide on your finances or if you have joint assets with your spouse, you won’t need a financial power of attorney.
However, your spouse can only get full access to that asset if you’re dead. If you are immobilized but alive, they can’t sell the asset. And if you have assets that are not listed in your trust, you need to appoint a financial power of attorney to take care of those.
Choose an Agent
Having the authority to make financial decisions on someone else’s behalf is a major responsibility. And choosing the right person should be well thought out so that the person doesn’t misuse that power. One error of judgment and you might be allowing someone to legally hijack your assets. To decide on an agent for the financial power of attorney, list the names of your acquaintances that you trust most. Then consider their availability for the task.
Their proximity to you should be another consideration. In case of an emergency, they need to be able to reach you fast. While most people only consider family members for a POA agent, it might not be the wisest idea. Emotions can interfere with making good decisions, and they may be vulnerable to influence by other family members. Last but not least, make sure they are willing to take up that responsibility.
Review Forms
States have official forms for POA. However, it’s not mandatory for you to use them. Banks and other financial institutions also have their own financial POA forms. Try using your financial institutions’ recommended form; it will make the process much faster.
It will also allow your agent to avoid unnecessary steps in an emergency. Before you fill out the form, make sure that it complies with the state requirements and you are well aware of each clause.
Get It Notarized
To activate the financial POA, you need to sign it in front of witnesses and get it notarized. After signing and notarizing, you need to share a copy of that document with the agent. You may also want to share it with your family members and relevant agencies. That way, they will be aware of how things should move forward when the need arrives.
Upgrade the Document Periodically
Financial matters change periodically, and your financial power of attorney should be updated accordingly. Depending on the change, you might have to cross out certain clauses or add something to the initial document.
However, if there is any major upgrade, you might need to get it re-signed and notarized to make it effective. You also need to check with your agent to make sure they are still available for the responsibility.
How Much Power Does the Agent Have?
Financial power of attorney provides you absolute flexibility when you are delegating the power. You can assign full control of your assets or delegate a part of it. The agent will only get as much power as is listed in the document.
States have official POA forms with a myriad of financial issues, and you can filter your requirements and keep only what you need. In general, those POA forms list the following financial aspects:
- Transaction of personal property
- Handling business operations on your behalf
- Handling stocks and bonds
- Insurance
- Social Security, unemployment compensation, Medicare
- Banking transactions
- Claims and litigation
- Any type of beneficiary transaction
- Charity
- Tax
- Retirement benefits
- Transaction of real estate property
If you are dubious about whether to delegate that much power to a single person, you can also consider assigning multiple agents. However, their mandates should be clearly defined.
The Bottom Line
Having a financial power of attorney might seem like a complex legal step. However, it’s nothing but a document that decides who will take control of your finances when you are unable to do so. And having a financial power of attorney is never too early. Every sensible adult should have one. The truth about having a financial power of attorney is that you can’t fully grasp its importance until it’s too late. So make sure you get one when you still have the time.
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