For many people, estate planning brings to mind thoughts about a will or a trust. However, a complete estate plan should address more than what you would like to happen after you die. Some estate planning documents, like a durable power of attorney, can address what you want to happen while you are still alive.
A durable power of attorney is a legal document that grants someone the authority to manage your finances on your behalf. This person is called an attorney-in-fact, although you do not need to choose an attorney to fill this position.
Most people select a responsible family member to serve as the attorney-in-fact. Some examples, may include a spouse, an adult child or a sibling. However, trust should be the most important consideration when choosing your attorney-in-fact.
What powers will my attorney-in-fact have?
A durable power of attorney will allow your attorney-in-fact to manage your finances on your behalf, without taking away your rights to manage your own finances. A durable power of attorney can allow your attorney-in-fact to:
- Access your bank account
- Operate your small business on your behalf
- Sign documents on your behalf
- Sell your property for you
- Use your money to pay your bills
- Maintain your property
Typically, your attorney-in-fact will gain these powers as soon as you sign the power of attorney. However, you can choose to limit your attorney-in-fact’s powers or specify when you want the power of attorney to take effect.
What could happen without a power of attorney?
Without a durable power of attorney, if you become incapacitated, your loved ones may need to seek conservatorship to be able to manage your affairs on your behalf. This can be an expensive and time-consuming process, and during this process, your financial affairs may go unmanaged. Conservatorship is often considered a last resort action because it takes away your right to control your own money and property.
Keep in mind that if you become incompetent, you cannot sign legal documents, including a power of attorney. Many people intend to create a durable power of attorney, but by the time they get around to it, it is already too late.
Determining when the right time is to sign a durable power of attorney can be quite personal. Signing a durable power of attorney early helps ensure it is ready when you need it. Signing a durable power of attorney early also allows you time to manage your finances alongside your attorney-in-fact, which can help train him or her to manage your affairs exactly the way you want him or her to.