A common question we get is who’s going to make my financial decisions?
Well, of course, whenever you’re able to make your own financial decisions, you’re going to make them. That’s not where we’re going to spend a lot of time here today. What we want to talk about is can you appoint someone else to make financial decisions for you? You can do that in a power of attorney.
If you don’t have a power of attorney and you become incapacitated and you can’t make your decisions, then you’re going to need to have the court appointed guardian for you.
What is the power of attorney?
Power of attorney is a document that designates someone who can make financial decisions for you during your lifetime. A power of attorney does not extend beyond your life. If you would pass away, your power of attorney would no longer be effective. The power of attorney is only effective once you have executed it. To be effective, you need to sign the document in front of two witnesses who are not named in the power of attorney and in front of a notary.
In Pennsylvania all powers of attorney are deemed to be durable, meaning that if you would become incapacitated or disabled, your agent could continue to act on your behalf. The person who is creating the power of attorney or giving the power of attorneys is considered the principal. Whereas the agent is the person who is acting on behalf of the person giving the power of attorney.
Power of attorney gives your agent a lot of different powers. Essentially, the power of attorney is the most comprehensive, most important document that you will ever sign because it allows another person to effectively be you in a financial sense.
There’s a number of powers that you’re giving.
First your agent could sell real estate on your behalf, can access your bank accounts or investment accounts, can write checks, make withdrawals or deposits, and can create or amend important documents such as trusts manage your insurance products and retirement transactions, and can manage any business assets that you may have. Your agent could also make beneficiary designation changes. It’s important that you talk to an attorney about whether it’s in your best interest to allow your agent to make these changes or whether you should prohibit your agent from making those changes. There are certain powers such as beneficiary designation changes. They’re only allowed if specifically authorized in the power of attorney. So it’s really important that you talk to an attorney to make sure you get a, get a power of attorney that works best for your situation.
So what does your agent have to do for you?
Your agents main obligation is to act in accordance with your reasonable expectations. That means your agent has to act how they would expect that you would act. They do that by talking to you if you’re able to participate in the decision. And if not, your agent must talk to any other family members or advisors you relied on during your lifetime. At all times your agent must act in your best interest and in good faith at all times. This is the most important duty under Pennsylvania law and it’s non-waivable meaning that your agent must follow your reasonable expectations. It requires your agent to have very specific knowledge of your expectations. So it’s important that you have conversations with your agent about what you would expect them to do and it’s critical that your agent know that they have been appointed so that you can have those conversations.
So why is it important that you have a power of attorney?
If you have a power of attorney, in most cases you can avoid the need for a guardianship. A guardianship is a formal court proceeding that requires the court to appoint a guardian to make decisions for you if you are deemed to be incapacitated. This can create a lot of time delays and it also has the court and not you making your financial and potentially your healthcare decisions. Any major decision such as whether or not to sell a residence or other real estate or how to use certain investment assets would be decided by the court would require court approval. This means that they are going to be significant time delays increased costs because you’re going to need an attorney to go into court on a regular basis and a lack of flexibility.
You cannot make decisions or move at a moment’s notice. A power of attorney, on the other hand will allow you to maintain, flexibility a power of attorney allows you to stay in control of your finances and allows you to designate who’s going to make decisions on your behalf. If, if a guardian is appointed, it may not be the person that you necessarily want. It will be who the court deems to be the most appropriate person. You should also note that in a power of attorney, you can actually designate who you would want as a guardian in the event, tat, that would become necessary.
So what should you do?
So if you have a power of attorney, read it and make sure you still agree with it. Make sure that the person that you’ve designated in your power of attorney document is still the person who you want to be your agent. Make sure your agent knows they are the agent. That sounds like a silly recommendation, but if your agent doesn’t know that they are your agent, they can’t act on your behalf. Further, your agent has to read the power of attorney and sign a certification before it’s valid. So it’s important, not only that they know they’re the agent, but that they also have a copy or know where they can obtain the original power of attorney. If you don’t have a power of attorney, you might think really hard about getting one today.
You can certainly talk to any attorney who focuses their practice on estate planning or elder law such as we do. You can certainly give us a call or visit us on the web. We would be happy to consult with you, and let you know what, what would be, appropriate, for you with regard to a power of attorney. If you have questions, feel free to reach out to us.