What is a Durable Power of Attorney for Asset Management?
Should you become incapacitated, someone will need to handle your bank accounts and pay your bills, but who will that be? It will either be someone you select, through a
Durable Power of Attorney, or a conservator whom the court will appoint on your behalf.
If you are incapacitated and have not done any estate planning, the court will appoint a conservator to act on your behalf.
If you have any friends or loved ones who are willing to accept this responsibility, they can petition the court and hope that the court appoints them. If not, the court will appoint a disinterested third party who doesn’t know or care about you. This process is very expensive and could cost upwards of ten thousand dollars and can take weeks, if not months, to complete.
On the other hand, a Durable Power of Attorney (DPOA) is a document that allows you to choose an agent to handle your financial affairs should you ever become incapable of
They’ll have the authority to pay the rent (or mortgage), credit cards bills, utilities, property taxes, and any other bills that you may have. If you have investments, they’ll have the responsibility and capability to manage those investments or hire a professional on your behalf. If you own rental properties, they’ll be responsible to collect the rent, deal with the tenants, and even sell the property if that would be in your best interest. In the unfortunate event that your disability renders you incapacitated for an extended period, they will have the authority to hire an attorney and apply for disability or social security for you. In short, this person will have the power to step in your shoes and act on your behalf when you are unable to do so.
Before establishing a DPOA, there are some questions that you should answer ahead of time.
Who’s going to be your agent?
You can elect anyone you’d like so long as they are of legal age. You should choose someone who’s responsible and whom you trust fully to act in your best interest should they be called upon. Although not critical, it will be easier for your agent if they are local to you, and they should have a copy of your DPOA in their possession. You should also elect an alternate or two in case your original agent is not available when needed.
What power do you want to give them?
You can remove all restrictions and give them unlimited power, or you can limit their authority to handling only certain affairs. If you want them to be able to pay the bills but you don’t want them to be able to amend your will or trust, your DPOA will need to state that.
Who’s going to draft the DPOA?
You can write it yourself, use a self-help service, or hire an experienced attorney. If you draft it yourself, you need to know the law because there are formalities that, if not followed, will render your final document worthless. The challenge with self-help services is that they cannot provide legal advice. You’ll probably have some questions but unfortunately, they can’t answer them. If they do, not only will you be getting legal advice from someone who is not an attorney, but they will be breaking the law. If a mistake is made, you won’t know about it until it is too late. That’s why we recommend hiring an experienced lawyer to ensure it is done right the first time.
Common Question: Is a Durable Power of Attorney Needed even if I Already have a Living Trust?
Yes, even if you have a living trust, you still need a Durable Power of Attorney.
In your trust, you’ve designated a Successor Trustee to handle your trust affairs. Their authority however is limited to assets that are titled in the name of the trust. Assets that are held outside of the trust, such as your retirement accounts, life insurance, and annuities, will be governed by the Durable Power of Attorney.
Unfortunately, an accident or medical condition can happen in a split second. If this does happen and renders you unable to handle your own affairs, your loved ones will thank you for having taken the time to set up your Durable Power of Attorney ahead of time. It will make their lives, and yours, much easier.