Many people have a general understanding of what a durable power of attorney offers. However, people can also be misguided by common misunderstandings.
A durable power of attorney is an estate planning document that allows you to choose someone, called an attorney-in-fact, to manage your money and property on your behalf. A durable power of attorney often becomes most valuable when the principal becomes unable to manage his or her own finances. However, this has led to a common misunderstanding about when the durable power of attorney should be created.
Waiting too long could cause problems
Many adults assume that they can wait to create a durable power of attorney until they become incompetent. However, like most estate planning documents, you must be of sound mind to sign it.
This misunderstanding can cause serious problems for individuals who wait too long to act. If an adult is legally incompetent and cannot sign a power of attorney, the adult’s loved ones may need to go to court to seek conservatorship, which can be time consuming. In the meantime, bills could go unpaid and property could go unmanaged, which may cause someone’s financial situation to go from bad to worse.
A power of attorney has many benefits
In many cases, a durable power of attorney is considered a preferable alternative to conservatorship because it allows the principal to choose any adult that he or she trusts to serve as the attorney-in-fact. If you designate someone as your attorney-in-fact, that person can pay bills, complete banking transactions, manage your property and hire someone to represent you, among other tasks. While a conservator could manage your finances for you, this person is appointed by a court and may not be someone you would have chosen.
Another benefit to a durable power of attorney is that the attorney-in-fact can begin acting on your behalf as soon as you sign the power of attorney. This can allow you plenty of time to teach your attorney-in-fact how you prefer to have your finances managed. However, you also have the option to make your power of attorney “springing,” which means that it could go into effect under specific circumstances.
If you are considering how you might plan for possible incompetence or incapacitation, make sure you have a full understanding of your options. Do not let a misunderstanding prevent you from using the best documents for your situation.