by Christine Steinmetz, JD
Many of us have heard of a Durable Power of Attorney for Finances, but do we really understand what it can do for us?
First, you may ask, what exactly is a Durable Power of Attorney for Finances? A Durable Power of Attorney is a legal form that allows a person, called a “Principal”, to transfer financial decision making powers to another person, called an “Agent”. You can give your agent as much or as little power if you are unable or unavailable to make financial decisions.
Most people do not anticipate a serious illness or accident that could leave one incapacitated and do not realize the need to make arrangements to handle our financial affairs in the event of a disability. A Durable Power of Attorney allows you to make decisions and designate your agent BEFORE a disability occurs. Once you are incapacitated, it is too late for you to sign a valid Durable Power of Attorney.
There are several steps that you can take before drafting a Durable Power of Attorney for Finances:
1- Choose your Agent. Choosing the agent is the most important decision you make when drafting a Durable Power of Attorney. You will want to choose someone you trust because they will be making your financial decisions. You will also want to choose someone who is able and willing to take on the task. Another consideration when selecting an agent is the geographic proximity of the agent to the principal.
2- Choose your Successor Agent. Although you have chosen an agent, it is a wise precaution to choose a successor agent in the event your agent is unable or unwilling to act. Again, take the same care when selecting a successor agent.
3- Choose the Powers of the Agent. As the principal creating the Durable Power of Attorney, you can limit the agent’s powers to certain transactions if you are unavailable, such as a real estate transaction. Or, you can make the powers in the Durable Power of Attorney very broad. Many people choose to give their agent the broadest authority when handling their financial matters in the event of a disability.
4- Choose a Guardian and Conservator. Many people do not realize that they can appoint a guardian and conservator in their Durable Power of Attorney. Although a Durable Power of Attorney is often used to avoid guardianships and conservatorships, there are situations where family members or friends may petition the court for protective proceedings. As the principal, you can avoid future conflicts between family and friends by naming a guardian and conservator in your Power of Attorney.
A Durable Power of Attorney for Finances can be a powerful document. The list above is just the beginning of the steps that you need to take when drafting a Power of Attorney. Stay tuned for Part II in our series, “Steps To Take Before Drafting a Durable Power of Attorney For Finances.”
If you have questions regarding Durable Power of Attorneys, please call the Legal Hotline for Michigan Seniors at Elder Law of Michigan at 1-800-347-5297.
For more information, please visit this web page on Advancing Smartly.
Christine Steinmetz is a Part-time Attorney at Elder Law of Michigan, and has been a member of the Elder Law team since 2011. As an attorney at Elder Law, Christine advises clients on issues including Medicare/Medicaid, wills and trusts, estate planning, landlord/tenant, and consumer law.