Why You Need a Power of Attorney

Why You Need a Power of Attorney
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Tribune News Service
By Ella Vincent From Kiplinger’s Personal Finance

It’s not pleasant to think about, but someday you may be unable to make decisions for yourself. Designating a power of attorney will protect your interests.

A durable power of attorney gives someone you designate, known as your agent, the authority to make decisions if you become incapacitated. An agent who has durable power for health care, sometimes known as a health care proxy, can make decisions about your medical and end-of-life treatment. An individual who has durable power of attorney for finances has the authority to handle your money matters, such as paying bills and managing your property. You can give the same individual both medical and financial power of attorney or name separate agents, based on their expertise.

Selecting a power of attorney should be part of your estate plan, says Ashwani Prabhakar, a trust and estate lawyer with Davidoff Hutcher & Citron. While many people assign power of attorney to an adult child or other family member, it’s not necessary to pick a relative—and it’s not always wise. You can, for example, choose your financial adviser to manage your investment decisions if you don’t think a family member would be able to handle that responsibility.

Once you’ve selected your agent (or agents), you can have an estate attorney draft a form identifying the kind of power of attorney that individual will have. Legal fees vary, but the average cost of having an attorney draw up power-of-attorney paperwork ranges from $200 to $300. You can also find power-of-attorney forms on do-it-yourself websites such as LegalZoom (www.legalzoom.com), Nolo (www.nolo.com), and Rocket Lawyer (www.rocketlawyer.com). You’ll pay about $40 to create the forms online.

Regardless of how you draw up the power-of-attorney document, you should have it notarized to make the arrangement official (some states require this). Estate attorneys can act as notaries if they’re commissioned by the state where they’re practicing law, Prabhakar says. He recommends that you also arrange to have a witness when you and your agent sign the form.

Some banks and brokerage firms use their own power-of-attorney form, or they may not honor a power of attorney unless certain conditions are met. Make sure you and your agent complete the paperwork required by your financial institutions and ask them to keep a copy on file.

Selecting a trustworthy agent is critical because an individual with power of attorney has broad authority over your finances and health care.

If you suspect an individual who has your power of attorney may make decisions that aren’t in your best interest, you can revoke the agent’s authority as long as you’re mentally competent. It’s a good idea to include a provision in your power-of-attorney document that states you reserve the right to change the agent at any time.

To avoid legal challenges, you should document any change on a power-of-attorney revocation form. Go through the same process you went through initially, such as having the document notarized, and inform the previous power-of-attorney agent of the change.

(Ella Vincent is a staff writer at Kiplinger Personal Finance magazine. For more on this and similar money topics, visit Kiplinger.com.) ©2023 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.
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