If you're unavailable or you become incapacitated, have someone handle your financial and other legal matters on your behalf.
A power of attorney (POA) is signed by a person when they are mentally capable to decide who they want to take care of their finances if they become incapacitated. Duties include dealing with common expenses and taxes, banking transactions, managing real estate, collection social security or Medicare benefits, and managing retirement accounts.
You can grant a financial POA agent as much or as little control as you wish, as long as it’s all outlined in the agreement. There are different types of power of attorney arrangements and they’re based on when they begin and end. These are the three common types of power of attorney agreements:
Conventional POA: This begins when the principal (the person who is appointing a power of attorney or agent) signs the agreement and ends if the person becomes “mentally incapacitated.”
Springing POA: This is the most flexible option of the three, as it begins only when the circumstances you outline in the document take place. For example, you could set it up so it “springs” into effect when you’re incapacitated. The drawback is that if you haven’t defined the circumstances clearly enough, it can be a long process in court to determine if a POA can justifiably be put into effect.
Durable POA: This type begins when the document is signed and lasts through the principal's lifetime. However, the principal has the option of canceling it. It remains in effect even if the principal becomes incapacitated.
It’s important to note that all of these powers end when the principal passes away. The executor handles things after you have passed away in keeping with your will.
It’s a good idea to have a financial power of attorney in case something unexpected happens, so the person can have their bills paid, their finances taken care of. The benefit of a financial power of attorney is that everything is spelled out, so your loved ones don’t have to figure it out amongst themselves. And, if you don’t have children, you can appoint a close, trusted friend to handle your finances.
Choose someone you trust as they will be making important decisions on your behalf. Your agent doesn't have to be a financial expert; just someone you trust completely who has a good dose of common sense. If necessary, your agent can hire professionals (paying them out of your assets) to help out.
Make sure you have an estate plan and that a power of attorney is a part of it.