Yes, You Can Limit Financial Decisions
As we age, we are faced with issues that need our attention. We know that our wills and health care directives need to be in place. We need to have all our important documents available to our loved ones to avoid problems that we can no longer address ourselves.
One of the easiest documents to provide is the Durable Power of Attorney (POA). This document is also referred to as a Financial Power of Attorney. This document enables your finances and business decisions to be managed effectively and efficiently should you be unable to communicate your directives or you have become incapacitated. If you do not have this document, a court proceeding may be required in order for your spouse, closest relatives, or companion to have the authority to conduct your financial affairs.
You can also specify that this Power of Attorney should not become effective unless a doctor certifies that you are unable to conduct your own affairs. This is called a “springing” Durable Power of Attorney.
When you create and sign a Durable Power of Attorney, you give another person legal authority to act on your behalf. This person may also be called an agent or as an attorney-in-fact.
Here is a list of those financial decisions you may give to your agent. You may choose which ones this agent can perform or you may give the agent permission and authority for all types of financial transactions.
- To pay everyday expenses for you and your family
- Handle all types of real estate and other property transactions
- Collect your government benefits, including Social Security and Medicare
- File and pay your federal and state taxes
- Conduct your financial transactions with banks and other financial institutions
- Handle your investment portfolio and retirement plans
- Conduct all insurance transactions
- Operate your small business
- Handle any inherited property you may be entitled to
- Transfer property to and from a trust that you have created
- Hire someone as your legal representative
The agent is required to act in your best interest, maintain accurate records, avoid any potential conflicts of interest, and most importantly, maintain a complete separation between your affairs and the agent’s affairs.
It is simple to create a Financial Power of Attorney. There are standard fill-in forms that can be downloaded from the web. Some states have their own forms. Bank and other financial institutions may have their own forms which would make it easier for your agent to deal with them. Your signature must be witnessed by a Notary Public. Each state has different requirements concerning real estate and you should consult proper legal advice.
The Durable Power of Attorney ends with your passing. Your agent cannot handle any of your affairs after your death. These affairs are conducted by your trustee or the administrator/executor of your estate. You can appoint your agent to be this administrator/executor.
Your Durable Power of Attorney also ends if:
- You can revoke the document as long as you are mentally competent
- A court may declare you incompetent at the time you create this document
- You get a divorce and you no longer want your ex-spouse to have nay authority over your affairs
- Your agent is no longer available. This is a reason to also appoint an alternate agent at the time you create this Power of Attorney
As always, we advise that you seek competent legal counsel should you have any questions or concerns.
Leonard Steinberg is the principal of Steinberg Enterprises, LLC and is a United States federally licensed Enrolled Agent with an extensive tax practice. Mr. Steinberg is also a Certified Management Consultant (CMC). Steinberg Enterprises provides comprehensive tax services including returns for individuals, proprietorships, partnerships, S-Corps, C-Corps, exempt organizations, payroll, sales and use tax, estates, trusts, and foundations. He handles complex business, nonprofit, and personal tax issues including bankruptcy filings, divorce, and tax court preparation. Mr. Steinberg was involved with national tax issues through his appointment to the Federal Taxpayer Advocacy Panel from 2001 through 2004, representing individuals and small businesses for the State of New Jersey. Leonard Steinberg is a R. 1:40 qualified mediator included on the roster of New Jersey court-approved mediators. He mediates Civil, General Equity and Probate Cases. Leonard has also testified in the U.S. House of Representatives on national tax issues before the Committee on Small Business and the Sub-Committee on Regulatory Affairs
Disclaimer: The material in this blog is for educational purposes only. It is not intended to replace, nor does it replace, consulting with a physician, lawyer, accountant, financial planner or other qualified professional.