There are many aspects of your estate plan designed to protect you in the event of incapacity. A financial power of attorney is one such document. Not only does it provide you with peace of mind, but it can go a long way in keeping your finances in order if you’re unable to manage them yourself.
Through a financial power of attorney, you name an agent who has the power to make financial decisions on your behalf. While this is a big responsibility and a lot of power, remember this: The person doesn’t have the ability to do whatever they want. They must always act in your best interest.
One of the primary benefits of a financial power of attorney is the ability to set limits in regard to the power of your agent. You don’t have to give them full control over your finances, unless you feel comfortable doing so. It’s up to you to decide what types of limits to set.
Here are some of the responsibilities you may want to place on your agent:
- Paying your bills and taxes
- Managing your home and other real estate
- Paying medical expenses
- Collecting retirement benefits, such as Social Security
- Accessing your financial accounts, such as retirement accounts and bank accounts
- Buying insurance policies on your behalf
- Operating your small business to keep it running as expected
No matter what types of limits you set, you’re still giving your agent a lot of responsibility. And for that reason, it’s critical that you choose a person who is trustworthy, good with finances and has the availability to help. An estate planning attorney will discuss additional factors to consider in naming the right person for the job. The good news is that you can always revoke or change who you name at any time. Remember, the document is meant to give you peace of mind.
You are under no obligation to create a financial power of attorney, but it may be something you want to add to your estate plan. It’s your hope that your agent never has to step in and manage your finances, but the future is unknown.
As you move through the process of creating a financial power of attorney, make sound decisions with the idea of protecting yourself and your assets in the future.