Planning for unforeseen eventualities like incapacitation is necessary when formulating your estate plans. An accident or illness could leave you unable to make decisions about your finances, and you need someone to step in on your behalf.
You might think your spouse or close family members can automatically step in, but it’s not so straightforward. There could be legal hitches. You need to formally designate the person who will make these crucial decisions for you and give them the authority to do so.
You need a financial power of attorney
A power of attorney is a legal instrument that allows you to appoint another person to legally act on your behalf when you are not mentally or physically capable to do so. The person you choose is known as the agent or attorney-in-fact.
Some of their duties include:
- Handling your bills and taxes
- Managing your real estate
- Overseeing your investments
- Selling or transferring your property, among others
In essence, the agent administers your finances and carries out all transactions for you.
Choosing an agent to act on your behalf
First, you need to appoint someone capable, who you trust to do the job. An agent does not have to be family. Any competent adult, including a professional like an attorney, banker or accountant you have confidence in.
You must grant the power of attorney when you are legally competent. The form has to be signed, witnessed and notarized for it to be formally recognized. In addition, you need to be specific with the powers you give the agent since it will define what they can and can’t do.
Getting everything right
Power of attorney is an important estate planning tool that could be useful when unexpected life events occur. Therefore, you should ensure no loose ends regarding who should act as an agent and their responsibilities.
Learning more about how a power of attorney works and what you should do when drafting this crucial document will ensure you get everything right and have your finances in safe hands.