Preparing your affairs in advance can be a wise decision and can ensure that your financial portfolio and estate are handled appropriately in the case you can no longer manage it yourself. Sometimes, though, something unexpected happens before you or a loved one can make the appropriate arrangements such as creating a power of attorney. If that happens, you’ll have a number of options — but there will be additional obstacles.
A financial advisor could help you plan and prepare for your future needs. Make sure to ask about the following questions and plan for contingencies.
What Is a Power of Attorney?
A power of attorney (POA) is a written, legal document that authorizes one person to act on behalf of another. The person giving the power of attorney is called the principal and the person authorized to act on the principal’s behalf is called the attorney-in-fact or agent.
There are several types of power of attorney:
- General. This power of attorney gives the agent broad power to do almost anything for you. It may grant the agent the authority to make medical decisions as well, although medical authority is generally granted in a separate medical or health-care POA.
- Limited. This type of power of attorney only grants the agent specific powers as laid out in the document.
- Durable. This power of attorney means that the document will remain in effect if you later become mentally incapacitated. Under certain states’ law, a general power of attorney may automatically terminate in case of mental incapacitation, so a durable type helps to bridge this gap.
- Contingent. This type of power of attorney specifies an effective date or occurrence along with other limiting language.
When it comes to managing your finances, a durable financial power of attorney can ensure that someone will manage your finances and property in the event you’re unable to do so yourself. These tasks could include paying bills, making bank deposits, collecting benefits and more on your behalf. An agent cannot make a will for you, however.
A financial POA is often general and broad in scope. It is important to note that in some states a financial POA will automatically become durable in the case a principal is incapacitated, while in other states it will automatically terminate. You should always double-check the language included in your document before signing.
How Do You Obtain Power of Attorney?
A power of attorney can only be granted and become valid if the principal is legally competent. POAs generally need to be signed, witnessed and notarized, after which they become valid. In some cases, you may also have to file the POA with the local land office.
For you to legally act on someone else’s behalf, the principal must create a power of attorney and name you as the agent. Furthermore, the principal must grant this power of their own free will. If pressured or coerced into this decision, the POA will not be legally valid.
The grantor must also be able to make important decisions and understand their impact. That’s why it’s important to make a POA while you’re healthy and competent. Once you’ve become incapacitated, there is no way for your heirs or caretakers to become your agent. Instead, they will have to gain legal responsibility through the court.
Can You Get Power of Attorney Without Consent?
Like all estate-planning documents, it’s always recommended to have a power of attorney set before you need it. In the case that your family member did not grant you power of attorney and has since become incapacitated, you will need to appeal to the courts to grant you legal responsibility over their affairs.
Again, you cannot obtain a power of attorney if the principal is not legally competent. If your family member or loved one is unable to consent, you will need to petition the Circuit Court to appoint you as an adult guardian or conservator. This process can be expensive and slow, and you will need to pay court fees and wait for a court hearing. It is also possible that the court will not appoint you as the guardian or conservator but someone else deemed more appropriate. Additionally, the guardian or conservator may be required to file documents with the court on an ongoing basis. As such, it’s always preferred to prepare your affairs in advance.
Bottom Line
A durable financial power of attorney can be very useful to you if you ever become temporarily or permanently unable to handle your business and personal affairs. Your appointed agent can then step in and take care of your estate for you without delay.
It is important to prepare a power of attorney while you’re still healthy and competent. If you do not, your family members or caretakers will likely need to appeal to the courts before being able to help you and manage your affairs.
Tips for Estate Planning
- Preparing your estate can be time-consuming and difficult. For a solid, long-term plan, consider speaking with a qualified financial advisor. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s free estate planning guide to get a good idea of how to protect your assets.
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