A durable power of attorney is probably the most important estate planning document persons can have in their arsenal of estate planning tools. It allows persons to pick who will manage their financial affairs if they are not able to do so due to some physical or mental incapacity such as a sudden stroke.
If a person does not have such a power of attorney, then the family will need to have a conservator appointed to manage financial affairs. This may not be the person that the incapacitated person would have picked. This court process is time consuming, slow, costly, inefficient and open to public scrutiny. The conservator must file annual reports with the court.
A power of attorney can become effective upon the date it is executed, or it can become effective when the person has become incapacitated. If it is effective only when the person becomes incapacitated it is called a “Springing” or a “Standby” power. For an agent to act after the person has become incompetent, the power of attorney must be “durable.” The document must expressly state that the agent will have the authority to act when the person is incompetent.
The powers should be crafted to fit the individual. A person may want to limit the powers given to the agent. It is a tool for selecting and empowering a person to manage financial affairs. Its advantage is cost, efficiency, privacy and choice of agent. Its disadvantage is the possibility of abuse of power by the agent.
Are you concerned with your financial affairs? Always feel free to contact us for a financial consultation.