Securing your financial future, whether during a period of ill health or at the end of your life, is absolutely essential. There are many ways that you can do so, and one such way is by implementing a durable power of attorney. A durable POA is a financial document used to secure your financial assets and give power over to another individual.
In this article, we will take a closer look at durable POAs, what they do, and how they can benefit you and your financial future. Learn more below.
What is a Durable Power of Attorney?
A durable power of attorney is a type of power of attorney that often remains in place until the death of the principal (the individual whose assets are being controlled) or until the document is revoked.
When creating a durable power of attorney, the durability of it needs to be explicitly stated. It will remain in place even when the individual can no longer make personal decisions. The main difference between a DPOA and other POA types is the durability clause. Incapacity of the principal can lead to a revocation of other kinds of POA.
In a DPOA, the principal gets to dictate the extent of the agent’s (the person with POA) authority. This means they can dictate what the agent can and cannot do with their money. A POA can typically give the agent authority over a range of things, including managing finances, making healthcare decisions, selling property, and handling other legal matters for the principal.
Often, the agent is required to keep details of financial transactions and other records of any action taken on the principal’s behalf. This is to safeguard the principal and their interests.
A DPOA must be witnessed and notarized to ensure legal validity.
How Does Durable POA Protect My Financial Future?
A durable POA has many benefits for your financial future. These include the following.
- Financial management: The main purpose of a DPOA is the continuity of financial management. If you become incapacitated due to illness, a POA ensures that your bills are still paid, investments managed, and all other financial transactions are handled.
- Avoid mismanagement: A trusted DPOA can ensure that your finances aren’t mismanaged by unauthorized parties who may try and take advantage of your incapacitation.
- Decision making: During a period of incapacitation or declining health, there will still be financial decisions that need to be made. With a POA, these decisions will be made promptly, helping to avoid delays.
- Asset protection: A POA essentially ensures the protection of your assets. This could include investment management or safeguarding your financial interests.
- Tax management: Unfortunately, taxes won’t stop while you’re ill, but a POA can handle tax-related matters and ensure compliance with tax laws. This helps you avoid any legal issues with tax authorities.
- Debt management: If you have any outstanding debts, your agent is able to keep making payments and meeting financial obligations for you. They can ensure you don’t get late fines, penalties, or damage to your credit score.
- Estate planning: A POA can ensure that after you pass, your estate is distributed according to your wishes.
- Peace of mind: A POA can also give you peace of mind, which can make things easier to accept and leave you feeling that your loved ones will be taken care of once you can no longer care for them.
When Might I Need a DPOA?
There are many scenarios when a durable POA may be used. These could include any of the following.
- Medical incapacity: When facing serious illness or injury, you may not be able to make medical or financial decisions for yourself. A DPOA can be incredibly useful here in ensuring the continuity of financial management.
- Advanced age: As you get older, health issues can affect your abilities. A DPOA can provide a safety net in this case.
- Military service: When on active duty, some personnel choose to appoint a DPOA. The agent can handle their financial matters during deployments and extended absences.
- Business ownership: As a business owner, it is important to secure your financial situation. Appointing a DPOA can ensure that someone you trust is in control of your finances and business decisions should you suddenly become unable to make those decisions. It can give peace of mind and a sense of safety to your business.
- Long-term care planning: Often, people choose to appoint a DPOA when planning for long-term care or assisted living. It means that finances can be allocated properly.
- Travel: If you’re someone who frequently travels, you may use a DPOA to cover you while you’re out of the country.
- Unforeseen emergencies: We can’t ever know what is going to happen, so having a DPOA in place can keep your finances safe in the event of sudden illness or an accident.
Final Thoughts
Securing your financial future is easy when you use a durable power of attorney. They can make decisions for you when you’re not able to and ensure the continuity of good financial management. Always choose an agent you trust to become your DPOA and ensure that durability is written into the contract with specific terms.
