A power of attorney is a great option for ensuring proper management of a person’s finances when unexpected issues like incapacitation, severely disabling conditions, accidents, or other circumstances arise. While it’s difficult for anyone to imagine that a time may come when he or she will be unable to make crucial financial decisions independently, there is a possibility that such a time will come. Having a financial power of attorney in place will ensure a person is prepared for the unexpected.
Financial Power of Attorney: What Is it and Why Is it important?
A financial power of attorney is a legal agreement that enables a person (principal) to choose another person (agent) to take care of financial matters, especially if he or she is unable to do so independently. Some of the responsibilities of the selected agent include paying bills, selling properties, and managing investment accounts.
The principal spells out which powers he or she wants the agent to carry. The agent has a fiduciary obligation to serve in the best interests of the principal. Moreover, the principal can revoke the power of attorney when necessary.
Types of Financial Power of Attorney
A Durable Power of Attorney
A durable power of attorney comes into force immediately after the principal signs it. Unless the principal revokes it, a durable power of attorney stays in effect throughout the entire life of the principal.
A Springing Power of Attorney
A springing power of attorney comes into force only when a particular event happens, including when the principal is confirmed to be mentally incapacitated or attains a specific age. A medical professional must determine that the principal can no longer handle his or her affairs before a spring power of attorney takes effect.
All kinds of power of attorney expire immediately after the principal dies. Although power of attorney can offer a clear guideline on how to handle a principal’s affairs while he or she is still alive, it cannot substitute a complete estate plan that comes into force when the principal dies.
Hiring a Lawyer
With the help of a power of attorney lawyer, a principal can speed up the process of creating power of attorney. The lawyer will guide the principal on the powers that need to be passed on and incorporated in his or her power of attorney. The lawyer will also guide him or her in choosing a qualified agent.
