A durable power of attorney for finance is a legal document that gives another person authority to conduct your finances on your behalf. That person is often referred to as an “agent” or “attorney-in-fact.”
Having a durable power of attorney for finances is an integral part of good estate planning and can save your loved ones extreme hassle in the event you become incapacitated. If you do not have a durable power of attorney for finances and become unable to manage your own financial affairs, your loved ones would need to ask a court for authority over at least some of your finances in a procedure called a “conservatorship proceeding.” This process is both time-consuming and expensive.
The powers granted to your agent in a durable power of attorney are completely within your discretion. Basic financial matters, such as depositing checks, paying bills, and routine maintenance are standard, however you may grant your agent broader powers as well. Those may include investing money in stocks or bonds, buying and selling insurance policies, operating a small business, or buying and selling real estate.
When Does a Durable Power of Attorney Go into Effect?
A durable power of attorney may either take effect immediately upon signing, or only after a specified event occurs (most often, incapacitation of the principal). The latter is otherwise known as a “springing” power of attorney. Although it may feel less risky to have a springing power of attorney, it is often more detrimental. In order to have a springing power, you must name a person in the document that will declare in writing that you are unable to manage your finances. It is often a lengthy and complicated process for your agent to obtain this declaration of incapacity.
If you opt for a regular power of attorney that takes effect immediately, your agent is granted the authority upon signing but may wait until you are incapacitated, according to your wishes, to exercise authority. Thus, if you trust your agent, there is no real drawback and in fact, a considerable advantage to choosing a regular power of attorney over a springing power.
After you have drafted your power of attorney for finances, it is advisable for you to have it notarized. Some states also require witnesses to your signing. Although not every state requires notarization, it is a custom that should be observed. Many financial institutions will not readily accept a power of attorney unless it has been notarized, regardless of state law.
Once the documents have been duly executed, copies should be provided to financial institutions with which you have accounts. If you want your agent to handle your banking needs, your agent should obtain an authorization form and signature card from the bank. Giving your agent access to your financial accounts is not the same thing as becoming “joint owners” of your accounts. The agent does not own any of your property, but only has the authority to control your property on your behalf.
If you are interested in creating a durable power of attorney for finances, or have questions about previously drafted durable power of attorney documents, contact Hannah Sargent, Alameda County probate and estate planning attorney.