Financial Power of Attorney
What is a financial power of attorney?
A Financial Power of Attorney allows you to select a trusted family member or friend who will be responsible for your finances in the event you fall ill or become injured and are unable to handle them yourself.
A Financial Power of Attorney ensures:
- bills get paid;
- tax returns get filed;
- bank and investment accounts held in your name remain accessible
- retirement distributions can continue to be requested; and
- property can be bought, sold, or managed.
As with most estate planning documents, a Financial Power of Attorney can be customized to your needs. You determine what transactions or affairs you want your agent to handle. Some of terms you'll hear associated with the Financial Power of Attorney include general, limited, springing, and durable.
A general Financial Power of Attorney is broad and typically allows your agent to do everything you can do yourself.
A limited Financial Power of Attorney allows you to limit your agent to specific transactions.
A Financial Power of Attorney can be effective immediately upon signing. Or, it can be springing, meaning your agent may only act after you have been determined to be incapacitated. For the Financial Power of Attorney to be effective during your incapacity, the power of attorney must be durable.
If you do not have a Financial Power of Attorney in place, a judge will appoint someone to take control of your assets and make all personal decisions for you through a court-supervised guardianship or conservatorship. Preparing a Financial Power of Attorney now, ensures your financial affairs will be controlled by someone you trust and who will act according to your wishes.
You may think that your assets are protected and that you do not need a Financial Power of Attorney if your assets are held jointly with your spouse, child, or family member. However, that is not always the case. Here are three reasons why you shouldn't rely on joint ownership:
- Limited power. While a joint account holder may be able to access your bank account to pay bills or access your brokerage account to manage investments, a joint owner of real estate will not be able to mortgage or sell the property without the consent of all other owners.
- Tax liability. By adding a family member's name to your accounts or real estate titles you might be saddling them with gift tax liability.
- Property seizure. If your joint owner is sued then your property could be seized in order to pay their debt.
- Medicaid disqualification. Putting a loved one's name on a joint bank account or property title can disqualify them from receiving government benefits, such as Medicaid.
Only a comprehensive incapacity plan will protect you and your assets from a court-supervised guardianship or conservatorship and the misdeeds of your joint owners. Do not rely on joint ownership as your plan—it's simply too risky and unreliable.
To discuss your Financial Power of Attorney and protect your finances during your incapacity, click below to schedule a free 15-minute Introductory Call, or use my online form.