When it comes to financial planning, you have many questions to answer. While it’s important to focus on the here and now, as well as your retirement, don’t overlook the fact that you also need to consider what would happen if you were incapacitated and unable to make your own financial decisions.
As the name suggests, a financial power of attorney gives another person the ability to conduct financial matters if you are unable to do so on your own. As noted above, this could be the case if you were to become incapacitated, such as the result of a serious illness or injury.
A financial power of attorney is not the same as other types. Instead, this is all about giving another person the power to act on your behalf in relation to financial matters.
How does it Work?
Once you come to the conclusion that you want to create a financial power of attorney, the first thing you should do is learn more about the process of making it official.
Depending on your state, there may be a standard form that you can use. Fortunately, you can discuss this detail with your estate planning attorney, ensuring that you take the required steps.
From there, you go through the process of completing the necessary financial power of attorney documents.
Once complete, you will give one copy to your agent, who will want to keep this in a safe place.
Note: the person you choose to act as your financial power of attorney agent should be responsible and honest. Remember, this person will have access to your finances. You must be confident that he or she will make decisions based on your wishes and what’s best for you.
When does a Financial Power of Attorney go into Effect?
Just because you create a financial power of attorney does not mean that it will go into effect right away. Of course, you have the option for this to happen.
It all comes down to how the documents are worded. You can opt for the financial power of attorney to become effective immediately. Or, you can opt for this to happen in the event of a future event, such as your inability to make decisions for yourself.
Generally speaking, most people don’t want their financial power of attorney to go into effect immediately. Instead, they only want this to happen as the result of a future event. This is known formally as a springing power of attorney, as it doesn’t “spring” into effect until a particular event occurs.
Responsibilities of an Agent
The nice thing about a financial power of attorney is that you can decide how much or how little your agent is able to do. This is all outlined in the document, so make sure you are clear as to the power you wish to grant.
Some of the things to consider include:
- Real estate transactions
- Bank account transactions
- Investment decisions
- The operation of a business
- Insurance transactions
- Claims and litigation
- Retirement benefits
- Tax related matters
- Making gifts to others, such as children and charities
As you can see, there is a lot to think about when creating a financial power of attorney. There is more to this than simply signing on the dotted line. You need to make a final determination as to what power you want to give your agent.
Don’t wait too Long
If you have reason to believe that a financial power of attorney could benefit you in some way, it’s a good idea to learn more about the finer details and benefits.
Some people continue to put this off, stating that they are too young to think about the future. Remember this: you never know when something bad could happen. It’s better to be safe than sorry, as this peace of mind will put you in a good place.
If you have questions about creating a financial power of attorney, if you need assistance, you can reach out to our law firm for guidance and advice.
We know how difficult it can be to make informed decisions, and that’s why we’re here to show you the way. Once you contact us, it will only be a matter of time before you feel better about the decisions you are making.
- How Estate Planning for a Family May Trap the Unwary Practitioner - September 21, 2022
- What Everyone Should Know about the New FDIC Regulations - September 13, 2022
- The Inflation Reduction Act - September 8, 2022