Things to Consider When Drafting Your Financial Power of Attorney
A Financial Power of Attorney (FPOA) is a crucial legal document that authorizes someone else to make financial decisions on your behalf. This can include paying your bills, filing tax returns, or accessing your bank and retirement accounts. Properly drafting this document ensures your financial matters are handled according to your wishes if you become unable to do so yourself. Here are some key points to consider:
Choosing Your Agent
Typically, married couples name their spouse as their primary agent, and if they have adult children, they often name them as backup agents. However, if you’re not married or don’t have adult children, you can appoint a trusted parent, sibling, adult niece or nephew, or another close family member. It’s crucial to select someone you trust completely, as they will have significant control over your financial affairs.
Effective Immediately or Springing Power?
You have two options when drafting your Financial Power of Attorney:
Effective Immediately: Once signed, the document is active, and your agent can exercise all powers specified in the document. This approach is common for married couples or trusted adult children.
Springing Power of Attorney: This version only becomes effective if you are deemed incapacitated. In most cases, a doctor’s certification of your incapacity is required before your agent can act on your behalf. This option provides an added safeguard to protect your financial accounts from unauthorized access.
When to Consider a Springing Power of Attorney
In practice, most FPOAs are effective immediately. However, if you are appointing someone who is not a spouse or an adult child, you may want to consider a springing power. This provides a layer of protection, ensuring that your financial accounts and assets are safeguarded until you are medically certified as incapacitated. This is especially useful if you are entrusting your finances to someone outside your immediate family.
Appointing Co-Agents
If you prefer to appoint more than one person simultaneously as your financial power of attorney, they are known as co-agents. When naming co-agents, you must specify whether:
They must act jointly, meaning they must make all decisions together.
They can act independently, allowing either agent to make decisions without the other’s approval.
This distinction is critical for dealing with banks and other third parties. If not clearly specified, institutions may impose restrictions, creating unnecessary complications and delays—defeating the purpose of the document, which is to allow someone to act on your behalf without obstacles if you become incapacitated.
A Financial Power of Attorney is an essential component of your estate planning. By thoughtfully considering who to appoint, how the powers are activated, and whether to name co-agents, you can ensure your financial affairs are managed smoothly and according to your wishes. For personalized advice tailored to your situation, consider consulting an estate planning attorney to draft a Financial Power of Attorney that best suits your needs.
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