A Power of Attorney is not only an estate planning tool, it is also a life planning tool. It appoints an agent of your choice to manage your finances on your behalf while you are still living.
There are two common scenarios in which you could need an agent to manage your finances. The first is that you simply want someone to assist you with your finances; you are capable of managing your finances on your own, but you are either overwhelmed or would just like the convenience of having the extra help. The second scenario is that you become incapacitated and cannot handle your finances on your own; in that event, you will need an agent to manage your assets, to pay your bills, and to handle every other aspect of your finances (including Medicaid planning, if applicable).
Having a Power of Attorney is important because if you do become incapacitated without appointing an agent under a Power of Attorney, your family (or your nursing home, or the state, etc.) will have to petition a court to appoint a guardian over your property, which can be both a lengthy and a costly proceeding. Additionally, you in your incapacity may be unable to choose your guardian. Having a Power of Attorney avoids the need to establish a guardianship and allows your designated agent to act on your behalf without delay.
I often get the question, “can my agent run off with my money?” This is an understandable concern. To appoint an agent under a Power of Attorney is to grant someone the complete authority to manage and access your finances. Keep in mind that the Power of Attorney imposes a legal duty upon your agent to act according to your wishes and in your best interest. In most cases, agents act appropriately and the agency is effected without issue. However, the Power of Attorney cannot physically stop the agent from exercising their free will and poor judgment. If the agent violates their fiduciary duty, they would be liable and subject to legal action against them (perhaps even criminal action depending on the circumstances). Appointing a trustworthy agent is the easiest way to prevent that scenario from happening.
Please read our previous post on estate planning: Do I Need a Will?
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