A durable financial power of attorney is a document that allows you to choose someone to manage your financial affairs for you. That person is called an agent or an attorney-in-fact. Your agent’s power typically begins when you sign the document and ends when you revoke the document or pass away.
Having a durable financial power of attorney can protect you and your assets as you age. However, many people do not take advantage of the benefits a power of attorney can provide because many people believe the popular misconceptions that surround this document.
What powers will the agent have?
Often, people misunderstand the actions an agent can or cannot take. A common misconception is that an agent will be able to do whatever he or she wants with your money or assets. However, an agent is legally responsible to act based on your wishes and your best interests. Your agent legally cannot act in his or her own best interest instead of yours. However, due to the nature of the position, it is still prudent to choose someone you trust to be your agent.
Some of the actions your agent may be able to take on your behalf, include:
- Using your money to pay your bills and taxes
- Completing banking transactions
- Managing or selling your property or assets
- Hiring someone to represent you
When should a power of attorney be created?
One of the most common misconceptions about powers of attorney involve when the document should be created. Many people believe that they should hold off on creating a power of attorney until they become incompetent. However, a power of attorney is a legal document, and, like most legal documents, you must be of sound mind when you sign it. If a durable power of attorney is not created before you become incompetent, your loved ones may need to seek a judgement of interdiction, which can be expensive and time-consuming.
How can a power of attorney affect your rights?
Another misconception about powers of attorney regard the effect this document could have on your rights to make your own decisions and manage your own finances. Although your agent could begin his or her duties as soon as you sign the document, your agent’s rights do not limit your own. With this in mind, people sometimes benefit from creating a power of attorney before it is needed. This allows someone to manage his or her own finances alongside the agent and teach the agent the way in which he or she wants the affairs managed. Alternatively, someone could manage his or her own affairs until the agent's help is desired.
Determining which documents to include in your estate plan is ultimately up to you. However, it is important to have all of the facts as you consider your options. Do not let common misconceptions prevent you from choosing the best documents for your situation.