An important part of your lifetime planning is the power of attorney. The power of attorney gives one or more persons the power to act on your behalf as your agent. The power may be limited to a specific activity, like closing the sale of a home, or they can be be more general in application.
The power may take effect immediately, or only upon the occurrence of a future event, usually a determination that you are unable to act for yourself due to mental or physical disability.
1) What is a financial power of attorney?
A financial power of attorney is a personal legal document appointing someone (“agent”) to handle financial matters on behalf of the person who signed the document (the “principal”). Usually, the document is drafted in such a way that it only becomes effective because of the principal’s incapacity.
A financial power of attorney is also called a general power of attorney or permanent power of attorney. The term “general” describes the nature of the document, which is intended to deal with all possible financial matters. The term “continuous” describes the validity period of the document, which lasts for the entire period of incapacity or disability.
2) Who should have a financial power of attorney?
Financial power of attorney is suitable for all adults regardless of age, net worth or health.
3) What are the consequences of not having financial authorization?
Without a valid financial power of attorney, caregivers of an incapacitated person may find it difficult to provide financial and medical support until a local court appoints someone as conservator. This process can be expensive, time-consuming and public.
The risk is reduced if the disabled person is married and the spouse is co-owner of all the property. However, having a financial power of attorney can benefit many potential situations. For example, the employer may refuse to give the spouse the right to make changes to or withdraw from the company’s pension system. A financial power of attorney can solve this problem.
4) Is the financial power of attorney valid for medical treatment?
No. A separate health care power of attorney must be used to appoint a representative to make health care decisions on behalf of the representative.
5) When is a financial power of attorney valid?
A financial power of attorney is usually created as a “springing” power. The “springing” power of attorney takes effect after discovery of formal incapacity. The document contains the procedure for making this decision and requires the need to file a declaration of incapacity.
6) How often should the financial power of attorney be renewed?
It is best practice to sign a new financial power of attorney at least every 3 to 5 years.
