Creating a durable financial power of attorney (DFPA) ensures that someone you trust (the “agent”) will be able to make financial decisions or transactions for you—for example, pay bills, deposit/withdraw funds, fill out insurance or benefit forms, order property repairs, and so forth—which is especially critical in the event you become incapacitated. You can set limits on the scope of their authority, or establish specific time frames (e.g., while you’re hospitalized).
Generally, a DFPA is established via a document that is signed, witnessed, and notarized, and typically goes into effect the moment it’s signed. However, you can create a “springing” durable financial power of attorney, which grants financial decision-making authority only after you’ve been incapacitated as certified by a medical doctor.
DFPAs offer significant advantages over other financial arrangements. Privacy is maintained. Some proceedings (e.g., conservatorship or guardianship) can be expensive and potentially embarrassing. Court records are public and proceedings are sometimes published in the newspaper.
The spouse of an incapacitated person without a DFPA has limitations on his/her financial options. For example, most states require both spouses to agree to the sale of real estate or cars. If one spouse is incapacitated, the other spouse is stuck. A DFPA will overcome this troublesome obstacle.
A living trust covers only what is in the trust. A trustee has no authority over any property outside the trust. Again, a DFPA will be invaluable.
A DFPA is terminated upon your death. The agent’s ability to conduct your financial affairs ends immediately.
Contact an estate attorney if you are ready to create this important tool for managing your financial affairs.