1. Advanced Estate Planning: Introduction
  2. Advanced Estate Planning: Information For Caregivers And Survivors
  3. Advanced Estate Planning: Setting Up Your Will
  4. Advanced Estate Planning: Healthcare Documents
  5. Advanced Estate Planning: Durable Power Of Attorney For Finances
  6. Advanced Estate Planning: Using Trusts
  7. Advanced Estate Planning: Child Care Documents
  8. Advanced Estate Planning: Reviewing Life Matters And Planning
  9. Advanced Estate Planning: Final Arrangements
  10. Advanced Estate Planning: Executor Selection And Guide
  11. Advanced Estate Planning: Conclusion

By Steven Merkel

If you become seriously ill or unable to handle your own financial matters for another reason, a durable power of attorney for finances allows you to name someone that you trust to handle these affairs for you. In most states, this person is known as your agent or attorney-in-fact.

The wording between "durable" and "non-durable" is important, as durable POAs will continue to be in effect if you should become incapacitated; however, non-durable POAs end upon incapacitation. The person you name as your attorney-in-fact can manage your expenses, pay your bills, make deposits and withdrawals at your bank, monitor your investments and handle several of your other financial affairs. (For more insight on the importance of a power of attorney, read 6 Estate Planning Must-Haves.)

Naming an Attorney-in-Fact and Successors
When it comes to managing your finances, it's typically best to just name one person to represent you. This person should be someone that you trust completely. The potential for conflict by naming multiple attorneys-in-fact can be avoided if you simply select one responsible individual. That said, it's always a good idea to name an alternate as well, but full authority should be given to your primary choice from the start.

If you do not name an attorney-in-fact and you become incapacitated or mentally incompetent, a state judge will choose someone to make financial decisions for you. This has several disadvantages, such as:

  • Relatives will have to prove to a judge that you cannot handle your affairs
  • Your problems become part of public records
  • It's time consuming and expensive, especially if lawyers must be hired
  • It can cause family disputes as to who will serve as guardian of your affairs
To avoid the pitfalls above, you should consider a durable power of attorney for finances and name your own attorney-in-fact and alternates. Another big advantage of naming your own attorney-in-fact is that you can avoid the cost of a court-assigned guardian having to prepare reports and other documents for the court, which can also lead to additional losses of time and money.

Powers Granted
As you think about the powers that you'll want to grant to your attorney-in-fact, you'll have the option to give them authority to make decisions on things such as your real estate, transfer of property to your trust, tangible items (vehicles, electronics, jewelry, etc.) as well as your intangible items (bank accounts, stock investments, etc.) and business interest decisions.

Some of the more common powers that are granted under a durable power of attorney for finances are listed below for your consideration:

  • The power to monitor expenses and pay bills
  • The power to review and make changes to retirement accounts
  • The power to operate your business
  • The power to handle banking transactions
  • The power to collect pension and other retirement benefits on your behalf
  • The power to invest in stocks, bonds, options, etc.
  • The power to manage annuity and insurance transactions
  • The power to initiate estate gifting of property and other assets to family members/charities
  • The power to collect Medicare, Social Security and other government benefits on your behalf
  • The power to transfer property to existing trusts already established by you
  • The power to file and pay local, state, and federal income taxes on your behalf
  • The power to hire legal representation if/when you need it
  • The power to maintain your real estate property, including buying, selling and pay taxes
In some cases, where state law may dictate or where you want to satisfy other family members, you may require your attorney-in-fact to prepare financial reports for your beneficiaries or other business-interested parties. If you elect to do this, you should be very specific as to the type of reports you will require (e.g. balance sheets, income and expenses, etc.) and clarify if audited accounting is required.

Special Terms and Features
In special cases, you may wish to compensate your attorney-in-fact for services that they provide under the terms of your durable power of attorney. This might include a provision in your document allowing compensation for time spent in accounting operations for your business or just payment for the time spent to handle all of your financial matters. Be very clear in your document concerning payment (if any), and discuss this with your attorney-in-fact in advance. Examples of different terms could be a flat rate of $5,000 per year or $15 per hour. In determining this figure, consider the time required and the complexity of your situation.

While having this document completed in advance will help handle several of your financial issues, it's important to note that most financial institutions will NOT honor your document alone in granting someone else privilege to your account access. In most cases, each financial institution has its own paperwork and procedural process for adding an attorney-in-fact to your accounts. This means that you'll need to contact all of your banks, brokerage firms, and other financial institutions to obtain their paperwork and requirements for making your attorney-in-fact official for access to your personal accounts.

Finalizing Your Document
As a final step to completing your durable power of attorney for finances, most states will require that you have at least two witnesses sign the document in front of a notary and have the document notarized.

As your document applies to real estate, you must record your document with the local land records office if either of the following applies to you:

1. You are giving your attorney-in-fact power over your real estate, or

2. You are a resident of South or North Carolina, the two states that require recording of the documents in order to ensure durability.

Lastly, you should have a letter drafted for your attorney-in-fact that contains helpful information outlining their duties as your agent. You should include a paragraph on legal obligations and the avoidance of commingling personal assets with your property and avoiding any other conflicts of interest. You should discuss when the person's job as your attorney-in-fact ends and include a resignation form, just in case the person is unable or unwilling to accept the responsibility when the time comes.

Advanced Estate Planning: Using Trusts
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