Establish Power of Attorney BEFORE it’s needed
Posted on March 31, 2011 by bob in MoneyWise
Every day, people suffer debilitating injuries and are incapacitated by medical events like strokes and heart attacks. When the victims survive, they may be unable to manage their personal finances for an indefinite period of time. With advance planning, a trusted designee can handle the disabled person’s affairs with relative ease. Without prior preparation, the cost and hassles can be considerable.
The preferred method of preparing for such a need is a durable general power of attorney. A power of attorney is a document signed by one person (the principal) authorizing someone else (the attorney-in-fact) to carry out prescribed business on the principal’s behalf. The “attorney-in-fact” need not be a lawyer—just a person deemed competent before the law. The document is “durable” because the appointment continues until the principal rescinds it; it is “general” because it covers a wide range of duties.
You may have used powers of attorney with limited scope and duration in the past.
For instance, when buying a car from a dealer, you may have signed a form giving the dealer limited power of attorney to apply on your behalf for a new tag or title.
While you may be comfortable giving a limited power of attorney for specific purposes to someone you do business with, you should be cautious when conveying broader, longer lasting powers of attorney. In the eyes of the law, there is no difference between you and your attorney-in-fact when it comes to handling matters permitted in the empowering document. Clearly you only need to give such power to someone that you have good reason to trust. Most
commonly a married person will designate his/her spouse; parents with adult children often designate one or more of them.
A durable general power of attorney can have benefits even when no incapacity from accident or illness exists. For example, it can allow your designee to handle a real estate closing, banking, investment or other business on your behalf if you are travelling or otherwise unavailable to handle the transaction personally. Military personnel are often wise to use such an arrangement during deployment or TDY.
Your power of attorney can either take effect immediately, so that your attorney-in-fact can act on your behalf the same day, or you can use what is called a “springing” power. A springing power is one that only takes effect (springs into being) when certain conditions are met. For instance, you might sign a power of attorney appointing someone to act on your behalf, but only if you are (a) incapacitated or incompetent or (b) missing and cannot be located after a diligent search. If you are around and functioning normally, your attorney-in-fact has no authority.
If you feel the need to have a general durable power of attorney in place, (and you probably should), most attorneys can prepare an appropriate document for you at minimal cost. If you do not know an attorney or want to use someone with particular knowledge in this field, I suggest that you refer to the attorneys listed in the member directory of the Montgomery Estate Planning Council at their website: www.montgomeryepc.org.
Having a trustworthy attorney-in-fact waiting in the wings, just in case, will enhance your peace of mind, regardless of whether you ever need them to act on your behalf.
Alan Wallace, CFA, ChFC, CLU is a Senior FInancial Advisor for Ronald BLue & Co.’s Montgomery office, 334-270-5960, alan.wallace@ronblue.com
