They say that the only certainty is death and taxes. And we can really do a lot of planning around those two eventualities. But one big possible event is incapacity. Not many people knowingly plan for that potential risk. You may have disability insurance through work, or possibly a long-term care insurance policy; both of which can help financially at incapacity. But, what about the legal and practical issues surrounding a time when you may not be able to act on your own behalf? This is what a power of attorney can address.
What is a power of attorney?
A power of attorney is a legal document that allows someone you trust to make decisions on your behalf. This person will be legally able to take care of important matters in your place, such as paying your medical bills, accessing your bank accounts, and managing your property.
How is this done?
- A power of attorney (POA) is a legal document that gives an individual, called the agent or attorney-in-fact, the authority to take action on behalf of someone else, called the principal.
- The agent can have either extensive or limited authority to make legal decisions about the principal's property, finances, or healthcare, depending on the terms of the POA.
- Types of POA include conventional, also known as a limited power of attorney; durable, which lasts for a lifetime unless you cancel it; springing, which only comes into play for specific events, and medical, also known as a durable power of attorney for healthcare.1 A durable POA is effective from the moment you sign it and does not expire; a non-durable POA is only effective for a limited period of time; and a springing POA will not become effective until you’re declared incapacitated. 1
Who Should Be Your Attorney-in-Fact?
Put simply, it should be someone you trust. Depending on the type and wording of your POA, the person you select will have access to make important decisions about your home, business affairs and financial accounts. You may also name more than one person in the document and ask that they work together. Keep in mind, however, that they may not always have the same view of what needs to be done. And geographical logistics can be more difficult if they are not close by. Also, you can name a successor to the agent in the event that your original selection cannot serve.
It is important to know that signing a POA does not deprive you of control over your own personal affairs, but rather it is a contingency document that becomes a powerful instrument only when needed.
When should I get one?
Many people will think that this is an “old age” action. However, younger people also have a likelihood to become disabled. So, any age can be applicable.
Where do I start?
Part of the process of doing your wills with your attorney should be to have a financial power of attorney and a living will or “Advanced Directives". A power of attorney is accepted in all states, but the rules and requirements differ from state to state. 1 If you move, generally, a power of attorney that is valid when you sign it will remain valid even if you change your state of residence. Although it should not be necessary to sign a new power of attorney merely because you have moved to a new state, it is a good idea to take the opportunity to update your power of attorney. 1
What if I have an incapacity and do not have a Power of Attorney?
If you do not have a power of attorney and become unable to manage your personal or business affairs, it may become necessary for a court to appoint one or more people to act for you. People appointed in this manner are referred to as guardians, conservators, or committees, depending upon your local state law. If a court proceeding, sometimes known as intervention, is needed, you may not have the ability to choose the person who will act for you. 1
How does Ameriprise make this simpler for your accounts with us?
Ameriprise has a form which you can sign that will apply only to your Ameriprise accounts that will let you appoint your “attorney-in-fact”. In most states that we service, if the POA does not grant authority to the agent to change beneficiaries of financial accounts, no notarization is required. There are various situations that may fall outside of this simple method which you can discuss with us.
While none of this is an easy issue to confront, helping to ensure that you and your loved ones have the necessary “must have” documents can make these issues as seamless as possible.
As always, to discuss your – or a loved one’s –personal situation, your advisors at Penn Wealth are here for you!
1. National Council on Aging. “ What Is a Power of Attorney (POA) 2024? (ncoa.org) ”
We're here to help you feel more confident about your financial future.
Learn more about us
Read more articles by Gerald Barlow