What is a Durable Power of Attorney
There is a misconception that not everyone needs powers of attorney. The truth of the matter is – anyone can and everyone should have a power of attorney. In the event you become mentally incompetent and cannot handle your financial affairs, the role of the financial power of attorney is to name someone to manage your funds and handle your expenses according to your instructions. By having a financial power of attorney, you eliminate the risk of mismanagement and help ensure your financial picture remains intact.
There are many kinds of powers of attorney and each one plays a different role. The financial durable power of attorney is specifically for finances. Powers of attorney can be general and broad in nature or address a specific time period or a specific power. If the power of attorney is not durable, however, it will not be effective if you become incompetent; in the realm of estate planning a durable power of attorney is the most important type of power of attorney.
Even in a trust-centered estate plan, the durable financial power of attorney plays an important role. In the event of your incapacity, your successor trustee will take over and manage your trust assets while your agent under the financial power of attorney will manage all non-trust assets. Assets such as life insurance, retirement plans, or annuities are not owned by the trust and therefore never managed by the trustee. Your agent should also have the authority to sign tax returns for you.
While a comprehensive estate plan is the best way to ensure all your wishes are met, durable powers of attorney for finances and health care directives are documents everyone should have at the very least. Without them, a conservatorship over your person and/or estate may be necessary if you become incompetent to make health care decisions, manage your finances or if you become susceptible to fraud or undue influence. Conservatorships are overseen by the court and very expensive to set up and maintain.
When deciding on a professional to assist you in drawing up your estate plan, make sure you choose someone who specializes in this area of law. I would be happy to assist you in reviewing your documents and helping you assure everything is in order.
