Power of attorney can be used for making financial or healthcare decisions on your behalf when you are unable to do so on your own. When executing a power of attorney in either case, much thought must be given to whom you name. Here are some important facts to consider.
If the power of attorney is durable, meaning it continues in the event of mental incapacity, the person you name will have that power unless a court revokes it; this can be a long and expensive process. By that point, the damage may already have been done and all the money spent.
A financial power of attorney gives an individual the right to make financial decisions on your behalf. They can open accounts, buy items, make investments, all in your name. It is “as if” they are you. This power can be general, meaning they can do whatever they want in your name, or it can be limited, meaning they can only do certain things on your behalf. For instance, some financial advisors have limited powers to put trades through or debit fees from client’s accounts.
A healthcare power of attorney gives the holder the ability to make healthcare decisions when you cannot. For example, if you are mentally incapacitated, say in a coma, you won’t be able to decide what care your medical team may provide. In this case, the person you named would work with doctors and nurses and decide what care you will receive.
Finally, these powers can be durable, non-durable or springing. Durable means the power continue even after the person giving the power becomes mentally incompetent. Non-durable means the power would cease at mental incompetency. Springing means the power does not take effect until mental incompetency occurs.
These powers are obviously very important and you should only name someone after very careful consideration. Any decisions should be made in accordance with an overall estate plan constructed with your estate planning attorney.
If you haven’t recently reviewed your financial plan you should contact your CERTIFIED FINANCIAL PLANNER™ Practitioner.