Market Memo – Planning Article
April 2023 – By Tom Rueger, J.D., CFP®
A Power of Attorney is an important part of lifetime planning. A Power of Attorney is a document that allows you to choose who will act for you, when they can act for you, and what their decision-making authority will (or will not) be. In a worst-case scenario, if you do not have a Power of Attorney and you are unable to manage your affairs, a court will have to appoint one or more people to act for you, costing time, money, and potential lost opportunity.
A Power of Attorney is an agreement between 2 parties; a Principal and an Agent (also referred to as an Attorney in Fact). A Power of Attorney gives one or more Agents the authority to act on behalf of or in place of the Principle. The Agent can take any action, manage any tasks, or make any decisions that are permitted by the Power of Attorney.
A Power of Attorney may be limited to a specific activity, such as signing documents at the closing on the Principal’s home, depositing checks into the Principal’s account, handling investments or taxes, or the Power of Attorney can be general in nature giving very broad powers to the Agent. A Power of Attorney can give the Agent temporary or permanent authority to act. A Power of Attorney may take effect immediately, upon the occurrence of a certain event such as the deployment away from home of someone in the military, overseas travel, the determination of mental or physical disability, or on a specific future date. A Power of Attorney remains in effect until the task is done (such as closing on a house) or until it is revoked by the Principal, and it will always end at the death of the Principal.
A “Durable” Power of Attorney means that the Agent has the authority to act on behalf of the Principal when the Principal is no longer “competent” to make their own decisions. Often a Durable Power of Attorney will be drafted so that it “springs” into existence upon the determination that the Principal no longer has the mental capacity to make their own decisions.
Most often people choose a spouse, a family member, or a close friend to act as their Agent. No matter who you choose, it should be someone that you can trust, and that has the ability to handle the task(s), and that it cannot be a minor. It is wise to name one or more successor Agents in case the Agent you appoint is unable to act when needed.
Specific rules and requirements for a Power of Attorney can differ from state to state so we recommend that you use an attorney for handling your Power of Attorney needs. If you would like to know more about estate planning or need help finding a qualified attorney, please contact your Wealth Advisor and they can assist you.
This material is for informational purposes only. It is not a recommendation or solicitation to buy or sell any securities. Vantage Financial is not a tax advisor or estate planning attorney; please consult your tax advisor or estate planning attorney prior to making any decisions. Vantage Financial is an Investment Advisory Firm registered with the Securities and Exchange Commission (“SEC”). SEC registration does not imply any particular level of skill or expertise.