We are all vulnerable to accident, injury, sudden illness. If you fall ill from an unexpected catastrophic injury or illness that leaves you unable to care for those who depend on you or manage your financial affairs, who would you turn to for help? You would need someone you can trust, someone with the character, and the capability, to competently and reliably manage your finances.
Many people who fall victim to sudden illness or injury and are shocked to learn that a will or trust alone cannot prevent a judge or someone else from getting involved in the handling of their personal property, money and real property. The worst-case result of a catastrophic injury or illness, other than death, may be that you lose control of your assets or they are not handled properly (or even stolen).
Fortunately, there are estate planning tools to help you in situations like these. Here are examples of tools you can use to preserve your choices of who you trust to handle your finances, even when you cannot speak them yourself.
Using a Power of Attorney as an Estate Planning Tool
A legal power of attorney is a document that authorizes a specific person to have access to your accounts, assets, and property and to use this access to act on your behalf.
If you set up your power of attorney to be “durable,” the durable power of attorney means that even if you lose the ability to speak for yourself because of an inability to physically or mentally handle your affairs (i.e. incapacity), the power of attorney does not terminate. In short, they can speak for you after you cannot do so for yourself anymore. The purpose of a durable power of attorney is that the person granted power of attorney, referred to as your Agent, will maintain your affairs if you are no longer able to do so.
It’s important to understand that a person who receives the agent role granted by a power of attorney cannot do whatever he or she pleases with the power. That person is obligated to use the authority to your benefit or in a way that you have indicated in accordance with how you set up your POA in the first place. In short, a power of attorney is not ownership, it’s a tool to help others advocate on your behalf.
Within the topic of powers of attorney, these are the two general types you’ll read most about:
- Financial Power of Attorney
- Health care Power of Attorney / Healthcare Proxy
For our purposes in this article, we are only concerned with financial. A type of financial power of attorney is called “springing” in many places. This merely means that in order for your Agent to act on your behalf you have to be incapacitated. The opposite of this would mean that the moment you sign your document granting someone power of attorney on your behalf, they can act on your behalf even if you can manage your own finances.
Springing POAs are not universal across the states and are triggered after several predetermined events. You can read more about springing powers of attorney, here. For more information on types of powers you grant an agent in a power of attorney, read this article.
The Benefits of Choosing an Agent to Receive Power of Attorney
By assigning power of attorney to a trusted friend or family member, avoid what many are most concerned with: losing control of your money and things. Or worse, those things being handled improperly or not for your benefit! If you choose your own person to handle your finances, you get to think about who is trusted, who has knowledge to handle money and assets like yours, who knows how you would handle your finances or do handle your finances. In addition, if someone is handling your caregiving, finances, maybe even caring for your children, it is a very stressful situation. Knowing that you have a plan in place where they can access YOUR money to use for your benefit and the benefit of your family will take an enormous amount of stress off of them. They can focus on what matters most: your care and your family’s wellbeing. There are many benefits to making your choice is heard if you cannot speak on your own behalf.
A power of attorney for finances, a tool used in estate planning, makes sure it is heard.
To learn more about powers of attorney and other essential tools for safeguarding your estate and your loved ones, get in touch with Atlanta Wills + Trusts Law Group by Refeca Law LLC.