A durable power of attorney for finances allows you to designate someone to make financial decisions on your behalf should you become incapacitated.
What happens if I don’t have a durable power of attorney for finances?
If you do not have a durable power of attorney and you become incapacitated, your loved ones will have to go before a judge to request authority to handle your financial affairs. When this occurs, the probate court must hold a public hearing to determine what is most certainly a very private matter. Like any other court proceeding, the process can take a significant amount of time and require lawyers and considerable expense.
If and when the court appoints an agent to handle your finances, your right to manage your own finances ceases to exist. Even after the court appoints an agent, referred to as a conservator, there are other hurdles to overcome. Your conservator will likely need to post a bond, which serves as insurance in case he or she steals or mishandles your property. In addition, the conservator will need to receive court approval for certain financial transactions conducted on your behalf.
Put simply, a durable power of attorney saves your loved ones a lot of headaches, time and money, and helps ensure the person managing your assets is the person you want.
How much power does my chosen agent have over my finances?
That depends on the terms of your durable power of attorney. Many people give their financial agent broad power over their finances; however, you can give your agent as much or as little power as you wish.
For example, some people limit their agent’s ability to distribute money and property to him/herself or others.
When does a durable power of attorney for finances go into effect?
That also depends on the terms of your durable power of attorney.
There are two types of durable powers of attorney:
- An immediate durable power of attorney goes into effect as soon as you sign it. The person you designate as your agent can immediately make financial decisions on your behalf, even if you are able to make them yourself.
- A springing durable power of attorney only goes into effect after one or two doctors indicate that you are incapacitated.
When does the durable power of attorney for finances end?
If it is a springing durable power of attorney, it ends when you either recover or die. If it is an immediate durable power of attorney, it ends when you die. Your agent’s authority over your financial affairs ends upon your death. You will need another estate planning document (typically a will or trust) to pick up where the durable power of attorney leaves off.
If you have any additional questions about a durable power of attorney for finances, schedule a complimentary, no-obligation consultation and learn more about how Creative Planning can help you.