The Importance of Financial Power of Attorney

When most people think about estate planning, they focus on protecting their family and passing wealth to future generations. However, there is another critical aspect that shouldn’t be overlooked, which includes who will manage your affairs if you are unable to do so.  That’s where a financial power of attorney (POA) comes in.

What Is a Financial Power of Attorney?

A financial POA is a legal document that authorizes someone you trust, called your agent to handle financial matters on your behalf. This can include tasks such as:

• Paying bills and managing bank accounts
• Overseeing investments
• Filing tax returns
• Handling other financial responsibilities within limits you set

Without a POA, if you become incapacitated due to illness or injury, your loved ones may need to go through a costly and time-consuming court process to gain authority over your finances. A financial POA helps avoid that burden and ensures continuity in managing your affairs.

Difference between a Springing vs. Durable POAs

When creating a POA, you’ll need to decide whether it should be springing or durable.

• Springing POA: Becomes effective only under specific conditions—usually when you’re declared incapacitated. Your agent typically must present the POA along with a physician’s certification to act on your behalf.
• Durable POA: Takes effect immediately and remains valid even if you become incapacitated.

Advantages of Durable POAs

• Immediate convenience: Your agent can assist with financial tasks right away, not just during incapacity.
• Faster response in emergencies: No need for physician certification, which can cause delays or disputes when quick action is critical.
• Helpful for seniors: Those who are capable but prefer assistance often find durable POAs more practical.

The main concern with a durable POA is trust, because it’s effective immediately, you must be confident your agent will act responsibly. If trust is an issue, consider safeguards such as having your attorney hold the document until needed.

Don’t Forget Health Care Decisions

A financial POA is only part of the picture. Pair it with a health care POA (or proxy), which authorizes someone to make medical decisions for you if you’re unable to do so. Together, these documents ensure your wishes, financial and medical, are honored.

Keep Your POAs Current

• Communicate access: Make sure your family knows how to locate these documents in an emergency.
• Update regularly: Banks and health care providers may hesitate to accept outdated POAs, so review and refresh them periodically.

A financial POA is a cornerstone of a comprehensive estate plan. It protects your family from unnecessary legal hurdles and ensures your financial affairs are managed according to your wishes. If you have questions or need guidance, reach out to your estate planning advisor today.