Your financial well-being is essential to your quality of life. Managing and protecting your finances is even more important in your later years. But many people are unable to make important financial decisions for a variety of reasons. A financial power of attorney (POA) is an ideal solution that allows another individual to make these decisions on your behalf.
Knowing what a POA is, the benefits it provides, and how to put one in place is an important step in protecting your financial future.
Understanding the Financial Power of Attorney
A financial power of attorney lets you designate an agent who has the authority to make financial decisions for you.
These include actions related to the withdrawal of funds from a financial institution and signing financial documents related to a variety of transactions. Third parties such as banks often rely on a financial POA to execute these and other financial decisions. As the principal of a POA, you are required by law to adhere to the terms of your financial POA when your agent submits it. Many states provide the official form needed to implement a financial power of attorney. The POA can be made effective at the time of a designated future event or immediately after the form has been processed. A financial power of attorney is often used when individuals are incapacitated or otherwise unable to make financial decisions. But they can also be used in cases where a person may not be present to authorize a particular financial action.
Benefits of Having a Financial Power of Attorney
The primary benefit of having a financial power of attorney is that it allows another individual to pay your bills in the event that you’re unable to do so. For people suffering from health issues, a financial power of attorney helps them make the necessary decisions related to personal finances and one’s estate.
Those suffering from dementia and other cognitive health issues are unable to make these decisions.
Designating an agent in advance prevents the confusion that can arise when a person is no longer able to express their preferences in relation to their personal finances. A financial power of attorney can also give your financial advisor the ability to intervene in important matters and protect you and your family’s financial future.
If a financial power of attorney isn’t established in advance, it could prevent your financial advisor from taking a wide range of actions that may protect you.
Getting a Financial Power of Attorney
Establishing a financial power of attorney is easy and inexpensive. A simple document must be completed and signed by you and a witness. Many financial institutions provide their own POA forms for clients, which may make the process easier.
When addressing real estate issues, some lenders and title insurance companies may need you to use their own POA forms. Having multiple POA forms may be necessary depending on your financial situation and needs.
The requirements for establishing a financial power of attorney can vary between states. Some state laws require the agent to accept their position through signature along with that of a notary public.
The scope of authority you grant your agent is determined by you. Full or partial authority can be established to meet a wide range of needs. A financial POA may also be used for one financial transaction.
This provides you with a high level of flexibility for addressing current and future financial decisions.
A financial power of attorney provides many benefits to you and your family. By authorizing an agent to make financial decisions on your behalf, you can have the peace of mind in knowing that your financial wellbeing will be fully protected now and in the future.