A Durable Financial Power of Attorney protects you in the event you are no longer able to make your own financial decisions, whether due to age, illness, or injury. It allows you, in advance, to select a person of your choice (your “Agent”) to make many different financial decisions for you. These decisions range from paying your bills, to buying and selling property, to applying for insurance coverage for you. Having a valid power of attorney in place will avoid the need for your loved ones to petition a court for guardianship over your finances.
Why is it called a “Durable” Financial Power of Attorney?
The “Durable” in a Durable Financial Power of Attorney means that it remains valid even in the event that the creator of the document becomes legally incapacitated. A standard Financial Power of Attorney, that you might sign for a limited purpose such as allowing someone to endorse a particular check or sign a particular real estate document, becomes invalid if you no longer have legal capacity. But a durable power of attorney will stay valid throughout your life time. All powers of attorney, however, expire at the moment of the creator’s death. Thus, powers of attorney cannot be used as a substitute for a Will or Trust.
How Do You Create a Durable Financial Power of Attorney?
Creating a valid Power of Attorney is relatively simple, and can be done by a competent adult. The State of Wisconsin Department of Health Services has a standard simplified fill-in-the-blank form that is appropriate for many people, and it can be completed without an attorney. The form is available for download at this website. Keep in mind the form must be signed in the presence of a Notary Public.
Alternatively, any estate planning attorney, including at Lippow Law Offices, LLC, can work with you to create a more thorough, personalized power of attorney. A personalized power of attorney, which should be part of any full estate plan, will allow you more choices as to what powers your agent has over your finances.
Who Should You Choose as Your Agent?
A Financial Power of Attorney Agent can be any competent adult, including a friend or relative. Married people often appoint their spouse as the first choice for their Agent. Adult children, siblings, and close friends are other common choices. You should always select someone who is particularly trustworthy, honest, and reliable, as you are giving them significant control of your finances, potentially during times when you will be unable to supervise or overrule their decisions. Your selection should be someone who has both the time, ability, and willingness to manage your finances. Ideally, your choice should also be a person who is relatively nearby you, so that it will be easy for them to physically access your mail and financial document.
You will always have the option to designate a primary Agent and then any number of backups, or successor agents. This way, if your primary Agent is either unable or unwilling to take on the responsibility when the time comes, someone else will be there to take over as Agent.
What Powers Can You Grant to Your Agent?
Using an attorney to draft your Durable Financial Power of Attorney allows you to customize an extensive list of powers to give to your Agent. Following are many of the categories of powers:
- Real Estate: The power to buy, sell, mortgage, and rent your home and other real estate.
- Stocks, Bonds, and Retirement Plans: The power to buy, sell, and exchange securities, mutual funds, and other such investments, and the power to contribute to and withdraw from retirement plans.
- Banks and other Financial Institutions: The power to open and close bank accounts; make transfers, deposits, and withdrawals, and have access to your bank safe deposit box.
- Operation of Businesses: The ability to manage your business, including the ability to buy or sell an ownership interest.
- Insurance and Annuities: The ability to buy, exchange, or terminate insurance policies and annuities.
- Estates and Trusts: The power to accept or sell a share or payment from an estate or trust. Note that this does not give your agent the ability to write a Will or Trust on your behalf.
- Claims and Litigation: The power to pursue and settle a claim or lawsuit against someone on your behalf, and the power to defend or compromise a claim brought against you.
- Taxes: The ability to prepare and file tax returns on your behalf, and to represent you before the IRS.
- Employment of Agents: The power to hire and fire agents and employees such as lawyers, accountants, and household employees.