On behalf of Sayer Regan & Thayer of Sayer Regan & Thayer, LLP posted on Wednesday, October 5, 2022.
You may already know that a power of attorney is a legal document specifying a person you trust to make specific decisions on your behalf if and when you are unable to do so. This may be due to an illness, accident, or even old age and dementia; in any case, you may not be able to tell doctors what you want for medical treatment, or you may become unable to properly manage your financial affairs. That’s why there are two main types of power of attorney: medical and financial.
A financial power of attorney is a legal document appointing someone you trust to manage your finances and property on your behalf. This may involve paying your bills, making deposits at the bank, collecting insurance benefits, and more. These tasks can range from simple, one-time transactions (perhaps closing a real estate deal). Or, they can be quite complex and allow the designated person to manage all financial affairs over a long period of time if you become incapacitated under a “durable power of attorney for finances.”
Because a financial power of attorney is a legal document, you should have an estate planning lawyer draw it up for you.
When Does it Take Effect?
You can draft a financial power of attorney that goes into effect the moment you sign it. It’s not uncommon for spouses to designate financial powers of attorney for one another in the event something happens to one of them or the other spouse is out of town.
Another alternative is to say the power of attorney can’t go into effect unless and until a doctor deems you incapacitated. Known as a “springing” durable power of attorney, this means you can retain control over your affairs until you become incapacitated. That’s when it “springs” into effect. However, this type of document can cause delays and problems for the person you have designated as your power of attorney.
What is the Agent’s Job?
When signing a durable power of attorney, you are essentially giving another person the legal authority to act on your behalf. This person is your agent. Most times, people give their agent a broad range of power to manage all of their financial affairs, but you can specify as little or as much power as you are comfortable with.
Typical tasks your agent has the authority to handle include:
• Using your assets to pay your and your family’s everyday expenses
• Selling, buying, maintaining, and paying taxes on property
• Collecting Medicare, Social Security, and other government benefits
• Investing money in stocks, bonds, and/or mutual funds
• Handling transactions with banks
• Buying and selling insurance policies and annuities
• Filing and paying taxes
• Operating your small business
• Claiming property you inherit
• Transferring property to an existing trust
• Managing your retirement accounts
• Hiring a lawyer to represent you in court
The agent you appoint will be required to act in your best interests, avoid conflicts of interest and maintain accurate records.
The financial power of attorney automatically ends after your death. Translation: your agent may only make decisions on financial matters while you are alive and incapacitated. To address financial matters that need tending to after your death, you will need to name an executor and this person must be outlined in your will.
How to Establish a Financial POA
(1.) Determine need. First, ask yourself if you actually need a financial POA. You may not need one right now if you are married and have joint assets. Also, if you have a Living Trust and you have appointed a Trustee to make decisions on your behalf, you may not need a financial POA right now. That said, it can’t hurt to have one in place.
(2.) Choose an agent. Put a lot of thought into who you choose, as this should be someone you trust, such as a family member, attorney, or counselor.
(3.) Have an estate planning attorney draw up the document. Choose an experienced estate planning attorney to guide you through the process and fill out all proper paperwork.
(4.) Review periodically. It’s a good idea to look over your financial POA periodically to make sure you still want the appointed agent and that the agent is still willing and able to act on your behalf. Make updates with your attorney as needed.
Contact Sayer Regan & Thayer
Got more questions about financial power of attorney in Rhode Island? Please contact us toll free at 866-378-5836 or 401-324-9915 for a free consultation.
These materials have been prepared by SRT for informational purposes only and are not intended and should not be construed as legal advice.