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Durable financial powers of attorney are an uncomplicated way to plan for another person to handle your financial affairs.
A durable financial power of attorney — is an uncomplicated, economical, and faithful way to plan for someone to handle your financial affairs if you come to be incapacitated (no way to make decisions on your own).
A financial power of attorney is a beneficial document to create for yourself, but it is also a great blessing for members of your family. When you become unable to make decisions on your own and you haven’t devised a durable power of attorney, court proceedings are probably unpreventable. Your spouse, closest family members, or partner will have to request a court for management over partially of your financial affairs.
When a Financial Power of Attorney Become Effective
A financial power of attorney can be created so it becomes effective immediately after you sign it. (Many people have effective financial powers of attorney for one another in the case of something happening to one of them — or when one is out of town.) You need to declare that you wish your power of attorney be “durable.” If not, in many states, it will unavoidably end if you later come to be incapacitated.
On the other hand, you can stipulate that the power of attorney won’t become effectual unless a doctor confirms that you have become incapacitated. This is referred to as a springing durable power of attorney. It allows you to retain management over your affairs unless and/or until you become incapacitated, when it “springs” into effect. Despite that, springing powers of attorney can cause serious interruptions and difficulties for your agent.
Your Agent’s Responsibility
When you devise and have signed your durable power of attorney, you’re giving another individual the legal authority for acting on your behalf. This individual is referred to as your agent or, in some states, an attorney in fact.
Usually, people provide their agent with broad authority for handling all of their financial issues. However, you are able to provide your agent as little or as much authority as you deem fit. You also might want to provide the agent authority to do some or all of the below:
- utilize your assets to pay your day to day costs and those of your family
- purchase, sell, maintain, paid taxes on mortgage real estate and other properties
- gather Social Security, Medicare, or other governmental benefits
- invest your capital in stocks and/or bonds, and mutual funds
- manage transactions with financial institutions
- purchase and sell insurance policies and annuities for you
- file and pay taxes
- manage your small business
- declare property you inherit or are otherwise in line for
- transfer property to a trust you have previously devised
- hire an individual for representing you in court, and
- oversee your retirement accounts.
Your agent is required for acting in your best interests, maintaining accurate records, keeping your property separated from his or hers, and avoiding conflicts of interest.
Creating a Financial Power of Attorney
To create a legally binding durable financial power of attorney, all you are required to do is correctly complete and sign a form that is a couple pages long. Many states have their own forms, but you’re not obligated to you use them.
Some financial institutions and brokerage firms have their own durable power of attorney documents. When you want your agent having an easier time dealing with those institutions, you might need to create 2+ durable powers of attorney: one for you and ones provided by the institutions in which you conduct business.
You are required to sign the document in the presence of a notary public. In many states, witnesses are also required to observe you signing it. If your agent is going to have authority in dealing with your real estate, you are required to put a copy of the document on file at you local land records office. (In 2 states, North Carolina and South Carolina, you are required to record the power of attorney at their land records office enabling it to be durable.)
When a Financial Power of Attorney Ends
Your durable power of attorney systematically ends at your death. That means that you are unable give your agent authority to deal with things following your passing, like paying your debts, creating funeral and/or burial arrangements, or the transference of your property to the individuals that are going to inherit it. When you wish your agent to have authority to wrap up your affairs following your passing, utilize a will to designate that individual as your executor.
Your durable power of attorney also ends when:
- You have it revoked. Provided that you are mentally sound, you can revoke your durable power of attorney any time you wish.
- You get divorced. In a small number of states, when your spouse is your agent and you get divorced, your ex’s authority is systematically concluded. In other states, if you want to conclude your ex’s authority, you are going to have to revoke your current power of attorney. Regardless, it’s a good idea to make a new document once you file for divorce.
- A court nullifies your document. It’s uncommon, but a court may express your document nullified if it comes to reason that you were not mentally stable when you signed it, or that you were the victim of deception or coercion.
- Lack of agent is availability. To bypass this issue, you can appoint an alternate agent in your documentation.
Source:
Shae Irving, J. D. (2020, August 11). Durable financial power of attorney: How it works. www.nolo.com. Retrieved January 10, 2022, from https://www.nolo.com/legal-encyclopedia/durable-financial-power-of-attorney-29936.html
