Investor Education | Q's and A's on Power of Attorney
At some point in time, you may face the possibility that you could become incapacitated. How will you handle your financial affairs? Who will make your decisions? Where will you live? These important issues must be addressed. One idea is to establish a durable power of attorney. Here are the answers to several key questions about this planning technique.
Q. What exactly is a power of attorney?
A. It is a legal document authorizing another person to act on your behalf. The power can be either specific (e.g., limited to having someone sell your home or car) or broad. It is no longer valid if you become incapacitated.
Q. What is a “durable” power of attorney?
A. This special type of power of attor ney r emains in effect if you be come incapacitated. It terminates upon your death.
Q. Do I have to name an attorney as the person to act on my behalf?
A. No. You can name any per son as the “attorney-in-fact.” However, keep in mind that the attorney-in-fact should be (1) someone you trust and (2) well-versed in financial matters. It could be a professional, friend or relative.
Q. Can I set up a durable power of attorney to take effect at the time I become incapacitated.
A. It depends. This so-called springing power of attorney is not authorized in all states. Find out the applicable state law from an experienced attorney.
Q. What if I change my mind about granting a power of attorney?
A. While you are competent, you may revoke a power of attor ney (whether or not it is durable) at any time for any reason. The best thing to do is to notify the attorney-in-fact in writing. Also, notify other parties who may be affected.
Q. Can a durable power of attorney be used for health care decisions?
A. Yes. For instance, you can establish the terms for deciding whether or not you are incapacitated. In addition, it is important that you discuss these matters in detail with the attorney-in-fact to give him or her more guidance.
Q. How is this different from a living will?
A. A durable power of attorney gives another person the power to make decisions in your best interests. In contrast, a living will provides specific directions concerning terminally ill patients.
Q. Can I set up a durable power of attorney for a relative who is no longer competent?
A. No. A durable power of attorney is binding only if the grantor of the power was competent when it was drawn up. However, just because someone has been diagnosed as having a specific disease does not mean that he or she is incompetent. For instance, if an elderly person is suffering from Alzheimer disease, it still may be possible to utilize a durable power of attorney.
Estate planning cannot be done in a vacuum. A power of attorney should be coordinated with other aspects of your estate plan.
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Investment Consultant
Tam Hubert, CFP®, CFA
Investment Assistant
Kristi Remus
