A durable power of attorney for finances enables someone you have designated to manage your finances when you are no longer able to make financial decisions. A family estate planning attorney will tell you that this document is very important to your family, whether they know it or not. Should you become incapacitated without a durable power of attorney for finances, your loved ones will likely end up in court, asking a judge to allow one of them to pay bills, deposit checks, and manage your financial matters.
The person you designate with a durable power of attorney is called your agent (or attorney-in-fact). You may want to consider your agent as your backup and permit him or her to manage your finances when you are mentally capable, but unavailable due to traveling or some other circumstance. Spouses sometimes do this for one another.
In Pennsylvania, this means your agent is empowered to sell your real estate or other property without informing you or getting your permission.
When does it take effect?
Drafting this document is best handled by an attorney for will preparation. He or she can draft your durable power of attorney for finances, so it goes into effect when you sign it. Or, the document may stipulate that the power of attorney becomes activated only after a doctor has certified that you are incapacitated. Called a “springing” power of attorney because it springs into effect after a doctor certifies that you cannot make your own decisions.
This might sound like the best approach, but it does present these potential problems for your agent:
- Delay. It might take days or weeks for a doctor to certify your incapacity, and during this time your agent cannot manage your finances.
- HIPAA/Privacy issues. Your agent needs proof that you permit the doctor to legally release information about your condition. Make sure you have signed a release form prior to incapacitation.
- Definition of incapacity. This definition is not clear-cut. Your document will need to clearly define incapacity.
What your agent does
In your durable power of attorney, you can define your agent’s powers as to whether they are broad or limited. Some of the powers you assign may include:
- Paying your personal and household expenses;
- Buy, sell and mortgage real estate;
- Collect benefits from Social Security, Medicare, and others;
- Invest your money in the stock market;
- Do your banking and other financial tasks;
- File tax returns and pay taxes;
- Run your business;
- Manage your retirement savings and accounts.
There are safeguards, as the agent is obligated to act in your best interests, keep accurate records, maintain your property separately from his or her own, and avoid conflicts of interest. As long as you are not incapacitated, you may revoke a durable power of attorney at any time.
When does it end?
If you do not revoke it, a durable power of attorney stays in effect during your lifetime. When you pass away, the durable power of attorney ends. If you want your agent to handle your finances after your death, you would need to name the agent as the executor of your will.
Read more on why you need a will here.
Establishing a durable power of attorney is an important part of estate planning. Be sure to schedule a consultation soon with Perna & Abracht LLC.