What happens if you can no longer make financial decisions for yourself? Do you know who would have the authority to manage your finances while you are incapacitated?
Whether you are 18, 48, or 85, you need a Durable General Power of Attorney, so that if you cannot make decisions for yourself, your trusted agents can manage your financial affairs.
What is a Power of Attorney?
A Power of Attorney is a document in which a principal grants authority to a trusted agent (usually a spouse, family member, or friend) to act on his or her behalf, as if the agent was the principal. People utilize powers of attorney for various reasons even when they are healthy (such as authorizing an agent to perform financial transactions or conduct business on a limited basis). A Durable General Power of Attorney (DGPoA) is a power of attorney with enhanced characteristics. It is “General” because it grants the agent broad authority to act in the principal’s best interest while serving, and it is “Durable” because it remains effective after the onset of incapacity. The DGPoA can be written to grant an agent the power to act for a principal immediately or require a triggering event to grant the power to act, often proof of the principal’s incapacity.
When your agent is acting on your behalf under a DGPoA, the agent must make decisions for your benefit. This is an enormous amount of authority which means it is vital to thoroughly consider your choices and ensure that you trust each person named as your agent.
What happens if you don’t have a DGPoA?
If you do not have a DGPoA in place and you become incapacitated, your loved ones will have to initiate a legal proceeding to obtain guardianship over you and any assets held only in your name. They will have to bring evidence to court that you are incapacitated, and the judge determines who will have guardianship or conservatorship over you until you are able to manage your own assets.
There is a common misconception that spouses automatically have power of attorney to control each other’s assets. This originates from the fact that, in most marriages, many assets are jointly owned by both spouses. The right of one spouse to control a jointly-owned asset arises from joint ownership of the asset, not simply because they are the spouse. If an asset is solely in the name of only one spouse, the non-owning spouse does not have an automatic authority to control that asset. Similarly, a spouse does not have an automatic right to sign a contract on behalf of an incapacitated spouse if the incapacitated spouse is the only party to the transaction. If you want to choose who can make decisions for you, and ensure that they have the authority to act as the need arises (and not have to wait for a judge), you need a DGPoA.
Who needs a DGPoA?
Every adult should have a DGPoA. That includes the 18-year-old heading off to college, the 38-year-old parent of three, and the 68-year-old retiree. Without it, you are risking a long, costly, and completely avoidable lawsuit if you become incapacitated.
What to do after you get a DGPoA
After you get a DGPoA, make sure that those you appointed as agents know where you keep the original DGPoA document and where to get a copy if the need should arise.
Also ensure that you’re regularly reviewing who you have named as your agents, especially after significant life changes such as marriage or divorce.
At Bosson Legal Group, we include DGPoAs in all of our estate planning packages because it is a powerful document that can provide peace of mind to both you and your loved ones. If you need a DGPoA or a full estate plan, check out our free resource, “Ten Steps to a Solid Estate Plan” and contact our office to begin the process.