Constructing and Updating Your Financial Power of Attorney
When was your financial power of attorney last updated? As with all aspects of your estate plan, it’s important you keep track of your financial power of attorney and update it regularly so that it remains current, in tune with your desires for your future. Don’t push back this chore—it could have a far greater impact on your future than other easily-pushed-back tasks like organizing your closet or taking down Christmas lights. Today we would like to discuss what a financial power of attorney is, the importance of constructing it properly, and how often it needs to be updated.
The Financial Power of Attorney
If you were not aware, in creating a power of attorney, you are choosing who you would like to act on your behalf if you become incapacitated. The person creating the document is called the principal and they appoint an agent (also known as an attorney-in-fact) to act in their place if certain circumstances should arise. A financial power of attorney (as you might have guessed) gives the agent the right to make financial decisions for the principal if they are physically or mentally incapable.
How to Construct It
When you create your financial power of attorney, you can decide a number of different details. For example, you will choose which powers the agent will receive, when they will receive those powers, and when the powers will be taken away. Powers can include the ability to sell stocks, access and manage bank accounts, sign tax returns, manage real estate, and make decisions to safeguard assets from the nursing home, amongst other abilities. Your attorney can help you decide which powers to include and how to organize the document. You will also need to decide what type of power of attorney best suits your situation:
- Conventional Power of Attorney: A conventional power of attorney begins when it is signed by the principal and ends when the principal becomes mentally incapacitated or dies.
- Springing Power of Attorney: A springing power of attorney begins when a specific event has occurred (specified by the principal in the document) and ends when the principal dies. The event must be described well to avoid confusion and mistakes in the execution. Usually, the specified event is when a doctor determines that you are disabled.
- Durable Power of Attorney: A durable power of attorney begins when it is signed and ends when the principal cancels the document or dies. This is a very popular choice because it does not become void when the principal becomes incapacitated and it doesn’t rely on a specified event.
When to Update Your Financial Power of Attorney
Try to update your power of attorney at least every three years. The process won’t take long and you’ll feel more confident and secure in your future if you know your estate plan is up-to-date. You will need to change your power of attorney if your agent passes away, your relationship with your agent changes, or you simply change your mind. So please—don’t hesitate to call your attorney if you haven’t recently looked over your financial power of attorney! You won’t regret it.