Wise incapacity planning usually includes the execution of a power of attorney.
This is a document that appoints an agent who can legally sign checks, pay bills and make other financial decisions on your behalf, as the principal, in the event incapcity by illness or an accident.
A power of attorney is also used when the principal is unable to be present to sign necessary documents.
The designated agent can be given broad legal authority or limited authority to make decisions about the principal’s property, finances, or medical care.
FedWeek’s recent article entitled “Putting an Incapacity Plan in Place” suggests that, rather than a “regular” power of attorney, you may prefer one of the following:
A durable power of attorney can name a trusted friend, relative, or advisor to sign papers, if you are unable to make knowledgeable decisions.
These documents remain in effect if you become incapacitated.
Springing power is a durable power of attorney that will go into effect only if there is incapacity. One or more doctors must declare that you are incompetent or that you cannot perform some “activities of daily living,” such as being able to get dressed and go to the bathroom.
A springing power will not go into effect as long as you are competent.
Some financial institutions also may not accept your power of attorney because they require the use of their own forms.
Send a copy of your power to each of your banks, brokers and other accounts to see if there is an issue. Some companies will also not recognize old powers.
Add an expiration date on the document and update it every year or two, so it expresses your current wishes.
A power of attorney can also end for a number of reasons, such as when the principal revokes the agreement or dies, when a court invalidates it, or when the agent can no longer carry out the responsibilities outlined.
In the case of a married couple, the authorization may be invalidated if the principal and the agent divorce.
Reference: FedWeek (Feb. 1, 2022) “Putting an Incapacity Plan in Place”