A Power of Attorney is a vital part of the estate planning, but what exactly is a power of attorney and why is it necessary to establish one?
The term power of attorney has been defined by Merriam-Webster's Dictionary of Law as “an instrument containing an authorization for one to act as the agent of the principal that terminates especially upon revocation by the principal or death of the principal or agent called.”
I define a financial power of attorney as a document that allows others to handle certain financial transactions for you when you cannot handle them yourself. We will discuss powers of attorney for health care in another article.
A power of attorney is a document which the principal (you) sign, that appoints a competent individual (an attorney-in-fact) to act on another individual's (the principal) behalf. Generally, the power of attorney performs many legal actions the principal cannot complete himself or herself.
Although most commonly established among older people, power of attorney can be beneficial in the lives of many people. Some people with critical illnesses establish power of attorney for the eventuality that they will not be able to handle their finances. But really, everyone should consider establishing a power of attorney. We never know when an accident or sudden illness will occur, rendering us unable to act on our own behalf.
Even if you don't think you need a power of attorney, establishing one is never a bad idea. Choose someone you trust, and that person does not need to be a family member. However, a lot of thought needs to go into who should be your financial agent under a power of attorney.
We see a lot of problems caused by a poor choice of an agent for a power of attorney. By following these three guidelines, you can avoid problems altogether.
High Integrity – You want someone you can trust. If the person isn't trustworthy, you open yourself up to outright theft of your assets, depriving your heirs of their rightful inheritance or depriving you of the care you need if you become incapacitated.
Financial Competence – Your agent may have to make a lot of hard financial decisions. You need someone who understands finances and that markets go up and down. You don't want someone who will be taken by a fraudulent scheme or someone that will try to double your money in 90 days, and end up losing everything.
Financially stable – Since your agent could end up managing all of your money, you need to select someone who is financially stable, who will not be tempted to make “loans” to him or herself, says Von Tungeln. These loans are virtually never repaid.
If you would like more information concerning powers of attorney or any aspect of estate planning, contact Antelope Valley estate planning law firm Thompson | Von Tungeln (TVT) at (661) 426-2499 or visit their websites at www.EstatePlanningSpecialists.com and www.Medi-CalHelp.com. www.EstatePlanningSpecialists.com is a comprehensive online resource for personal wealth management solutions through wills and revocable trusts. www.Medi-CalHelp.com is a comprehensive online resource for long term nursing home care for the middle class. As Board Certified Specialists in Estate Planning, Trusts and Probate as certified by the State Bar of California Board of Legal Specialization, partners Mark E. Thompson and Kevin L. Von Tungeln are expertly equipped to serve clients with the creative, effective and custom solutions they demand.