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Financial Power of Attorney | Retirement for Seniors
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You Will Never Have to Worry Again…Financial Power of Attorney

We make small financial decisions nearly every day; many of these chores are so routine that we don’t think twice about them. Paying bills, making tax payments, and depositing checks are examples of financial transactions that recur constantly. If we were to become suddenly incapacitated, however, the bills would still need to get paid. A “durable power of attorney for finances,” or simply a “financial power of attorney,” is a document that enables your designated agent to conduct these transactions on your behalf should you become incapacitated.

Joint Accounts

Many couples arrange their financial matters such that accounts are held jointly: both your name and your spouse’s or partner’s name will appear on your checking account and other accounts that you can hold jointly. Even if you’re the one who routinely pays the bills, if you should suddenly be hospitalized, your spouse can then take over that chore and sign checks without further ado. However, many financial accounts are held individually, such as Individual Retirement Accounts (IRAs), 401(k)s, and pension accounts. If you become incapacitated, your spouse or other party will need a court’s authority to manage your individually held accounts; this may take time and may involve court costs. If you prepare a financial power of attorney beforehand, your can spare your spouse or relatives the trouble of a court procedure.

Advice For Estate Planning

Financial Power of Attorney

Most couples prepare dual sets of documents and name each other the agent for each other’s financial affairs. If you are single, or if for some reason you prefer to name a person other than your spouse as your financial agent, then find a person whom you know well and whom you trust to act in your best interest. This could be a relative, an adult child, or a colleague or close friend. At the same time, prepare a detailed list of all your financial accounts, complete with account numbers, and another list of bills that need to get paid and income that needs to be deposited. In short, prepare a summary of all your assets and financial activity. Don’t forget to include automatic deposits and debits; even if these continue on autopilot, your agent should know about them. Give a copy of this summary report to your agent, or at least let him or her know where to find it.

Financial Power of Attorney Documents

Financial power of attorney documents follow a precise form, which can vary from jurisdiction to jurisdiction. You can download the forms from several websites; be sure to download the form for your state or jurisdiction, and be sure the source website is legitimate. If you split time between two states, you may need to prepare two documents. And if you anticipate preparing a complex document, granting only certain rights to your agent, for instance, then consider consulting an estate lawyer. You don’t want your agent to have trouble validating a lengthy, questionable document. Make sure that you prepare a “durable” power of attorney: if the word “durable” does not appear, the document may not have effect if you are incapacitated.

Specific or Broad Areas of Financial Responsibility

Most of these documents give the agent broad powers to handle all financial matters. However, you can specify certain financial areas only, or even create two documents naming two separate agents responsible, for instance, for your personal finances and your small business finances, respectively. Designated areas of responsibility might include using your assets to pay everyday expenses; making payments or collecting rents related to real estate that you own; collecting Social Security or other benefits; investing your money in stocks, bonds, or other investment vehicles; managing insurance policies and annuities; transferring property into and out of a trust; hiring someone to represent you in court; operating your small business; and more. If you do specify these or other areas, you may wish to include a catch-all phrase at the end of the list, to include anything you may have missed.

You might check with your bank and any investment houses where you have accounts; these institutions may have their own forms in which you name a financial power of attorney for the accounts held there. Not filling out such an institution-specific form does not mean that your overall financial power of attorney is not valid at that institution, but your designated agent will have an easier time if you fill out the bank’s form as well.

Once your form is complete, make copies, get them notarized, and store them in logical places — your bank safe deposit box, for instance, or a special sock drawer in your bedroom that people know about. Also make sure that your agent has a copy, or knows where to find one. If your agent will have authority to deal with your real estate, some jurisdictions require that you file a copy at your local land records office.

Power of attorney forms can be drafted such that they are effective immediately; spouses often draft power of attorney forms naming each other in this way. This does not mean that your spouse can override your decisions regarding your own individual accounts as long as you’re able to manage them yourself, but if you’re away on business or on an extended fishing trip with your mates and something needs to be done immediately with your IRA account, your spouse is then able to handle it. Or, the document can be drafted such that it doesn’t come into effect until a doctor declares that you are incapacitated. This is called a “springing” durable power of attorney.

Many people get by without financial powers of attorney; particularly if they have only a few accounts jointly held with a spouse and a small assortment of household bills to pay, such a document may not be necessary. However, if your financial affairs are at all complicated, naming a power of attorney will make life a lot easier for your family should you become incapacitated.

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