Got a Will? That’s Not Enough.

It always surprises me when I encounter individuals, often those who are highly educated, who do not have a will or any other estate planning documents.  They procrastinate and talk about it, and procrastinate some more, and somehow it never gets done.  Once, I notarized a will for a person who was on his deathbed.  He was an attorney but never took care of his own estate plan!

If people take any action to plan ahead, they think the most important thing to do is to write a will.  While a will is very important, it only takes effect after a person’s death.  What every adult needs is a document that will protect their property while they are still alive.  This document is a financial power of attorney.         

What is a financial power of attorney?

A financial power of attorney (POA) is legal instrument that allows someone to make financial decisions on your behalf.  You can grant someone this power in a legal document, and they become your agent or attorney-in-fact.  In everyday speech, we often use the term “POA” to denote the document as well as the person who is serving as the agent. 

There are several kinds of POAs, such as durable, general, springing and non-springing.  Financial POAs are also different from medical POAs, which allow others to make medical decisions for you.

What is the difference between durable and general powers of attorney?

A durable financial power of attorney allows your agent to make financial decisions for you if you become incapacitated or unable to make them for yourself.  It can go into effect while you are still living normally, but the important fact is that it will continue until your death or until you revoke it.  In contrast, a general POA will be invalidated as soon as you are deemed to be incapacitated (no longer of sound mind).

What is the difference between springing and non-springing powers of attorney?

A springing POA will only go into effect after some condition is met.  This condition is spelled out in the power of attorney document.  It is common to have conditions such as one or two doctors must certify that the principal (the person who created the POA) is mentally incapacitated, comatose, or otherwise unable to act for himself or herself.

A non-springing POA becomes effective as soon as the document is signed.  Choosing to create a springing POA can be helpful if you plan to continue managing your own finances for the foreseeable future, but it can be problematic when you need it to go into effect.  There can be delays when trying to get a doctor’s certification or in accessing  protected health information.  

How do I get a POA written?

There are both free and paid options to prepare a financial power of attorney document.  We recommend getting help from an experienced estate planning attorney. While there is a cost for this service, an attorney can make sure your plan is sound and the document has no errors.

If you do want to do it yourself, there are numerous free forms available online and from banking or health care institutions.  Make sure your form is from a reputable source and that it will work in your state.

After completing the form, you will need to sign it and have it notarized.  Some states require that the agent sign the document and some states also require a witness to be present.  The witness could be your lawyer or doctor or someone on their service team.

Who can be named an agent?

The only legal requirements for an agent are that the person be of sound mind and at least eighteen years old.  It should be someone you trust, and who is prepared to take on the responsibility of looking after your finances.  You can name an alternate agent who can assume these duties if your primary agent dies, becomes incapacitated, or refuses to fulfill their duties.  Many attorneys do not recommend naming more than two agents, but a parent with three children could decide to give them all a power of attorney.  The parent can also decide whether or not they can act independently or if they must all agree.  An estate planning attorney should guide you when creating a POA with more than one agent.

What can an agent do?

You can give your agent any powers you like but it is common to give agents the power to:

●     Pay bills

●     Pay medical expenses

●     Pay taxes

●     Collect retirement benefits

●     Access financial accounts

●     Invest money

●     Manage real estate

●     Operate a small business

●     Buy insurance

●     Sell or transfer assets

●     Hire someone to represent you in court

Some people allow their agent to give away their money as personal gifts or charitable contributions and some do not.  It is important for the document to be clear on whether gifting is allowed.

How often should a POA be updated?

It is recommended that you update a financial power of attorney document every three years, or whenever there is a significant change in your plans or finances.  Some financial institutions will reject powers of attorney that are too old.  When updating the form, you can use the same language and have it signed again with a witness and notary.

Where should a POA be stored?

Both you and your agent(s) should keep originals or certified copies.  It would also be a good idea for your attorney to retain an original. The document itself should be kept somewhere secure, such as a safe.  It is not recommended that you store your only original in a safe deposit box since it is will not be easy for your agent to retrieve it when it is needed.  Another option is to use a secure digital document storage service, such as Everplans or LifeSite.  This also makes it easier for family members or your agent to find important documents right when they are needed.

When does a financial power of attorney end?

A durable financial POA will last until your death, but it can also be ruled invalid by court, or become invalid through divorce if your agent was your spouse.  It could also end early if only one agent is named and they die, become incapacitated, or refuse to fulfill their duties.  An experienced estate planning attorney will be able to write a document for you that takes these possibilities into account, if necessary.

Where can I go to get more information?

Nolo Legal Encyclopedia: Durable Financial Power of Attorney

Elder Law Answers:  Decisions to Make for Your Power of Attorney

Estate Planning:  Durable Financial Power of Attorney   

If you are in the metropolitan Washington, DC area, Everyday Money Management can provide referrals to local estate planning attorneys who can help you create this important document.  Call us at 301-801-2294 and get your financial power of attorney written today!