What Is a Financial Power of Attorney Document?

What Is a Financial Power of Attorney?

A financial power of attorney is a document that designates a specific person or organization to make financial decisions on your behalf. You can choose either to specifically identify certain financial decisions you want to allow someone else to make or to have the document cover any and all financial decisions.

Are Power of Attorney Documents Effective Immediately?

It depends on how the document is drafted. Some versions, referred to as springing power of attorneys, require that the person be unable to participate in financial decisions as determined by two physicians or a physician and a psychologist in order for the power to be given to the person identified in the document. Other versions provide immediate ability to make decisions on behalf of the person identified.

Why Do Some Power of Attorney Documents Use the Word "Durable"?

Adding "durable" to the power of attorney document means that the designated power to make decisions lasts- i.e., it's durable- even when the person giving that power becomes incapacitated.

Financial Power of Attorney Documents and Dementia

One of the many challenges when someone is diagnosed with dementia is that he might not have all of his legal affairs in order. While this topic may be difficult to discuss, it's critically important that financial and legal issues are addressed in the early stages of dementia (if they haven't been previously) so that the person's individual preferences and wishes are certain to be honored. 

Along with a living will and a power of attorney for healthcare decisions (also called a patient advocate or healthcare proxy), it's important to designate a financial power of attorney. This person should be a trusted individual who knows you well and will carry out your wishes. The financial power of attorney may need to sign contracts for the care of the person with dementia, access bank funds for payments, sell real estate or pay bills of the person's behalf.

Do I Need to Have a Lawyer Prepare the Power of Attorney Form?

Using a lawyer for this task is highly advisable but not required. There are some documents online where you can simply designate your choice for power of attorney in writing and have the document signed and witnessed by a notary. However, you are taking a significant risk that those forms are not complete or accurate for your situation.

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