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Powers of Attorney for Finances

A power of attorney is a legal document that allows you to choose a person you trust to take certain actions on your behalf if you become incapable of managing your financial affairs. It is an extremely important document to have because if you suddenly become incapacitated and you don’t have such a document, the probate court may have to step in.

A “durable” power of attorney means that the power of attorney remains valid even if you become incapacitated and unable to make decisions for yourself. There are several types of powers of attorney.

A limited power of attorney for finances is one that authorizes your agent to act only for a specific transaction. Suppose you are going out of the country and need someone to act for you in closing an escrow. You can execute a limited power of attorney which authorizes your agent only to act with respect to the escrow.

A general durable power of attorney is one that covers a variety of actions authorized for the agent to do: Powers such as making bank deposits, paying bills, buying or selling property, filing income taxes, making investments, operating a business, and collecting or applying for social security or Medi-Cal.

These general durable powers of attorney come in two types: springing and those that are effective immediately. A springing power of attorney typically becomes effective upon one or two doctors certifying that you lack capacity to handle your financial affairs. A power of attorney which is effective immediately upon execution means that the agent you name can act without further authorization. Often this type of power of attorney is used by spouses so that each can act immediately if their spouse becomes incapacitated.

A durable power of attorney ends at your death. At that point, the trustee of your trust takes over or your executor if you have made a will. At Scott C. Soady, A Professional Corporation, a durable power of attorney is included in your revocable living trust package so that you have the necessary documents for incapacity as well as for distribution of your estate after your death. Call us if you have any questions about powers of attorney or any other estate planning issues.

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