Advanced Planning for Financial Decisions
Power of Attorney for Financial Decisions
A power of attorney is a written legal document that gives another person the right and authority to act on your behalf. The reason most people sign a power of attorney is to enable another person to manage their affairs if they become disabled and cannot manage their own affairs.
The scope of a power of attorney for financial decisions can be limited or broad. For example, you can authorize your agent to simply pay your bills or you can give your agent the power to handle nearly all your financial affairs.
In order for a power of attorney to be valid if you become disabled, you must create what is known as a “durable” power of attorney. A durable power of attorney states that it will be valid even if you become disabled. If it does not contain that language, your agent will not be able to use the power of attorney if you become disabled.
When you sign a Power of Attorney for Financial Decisions, you can make it effective now or make it effective only if you become disabled in the future. If you power of attorney becomes effective upon disability, you agent will not be able to do anything until and unless you become disabled. The power of attorney will usually require a doctor’s certification of disability in order for your agent to act. If you make it effective now, your agent will have the ability to handle your affairs immediately. One of the benefits of a power of attorney that is effective immediately is that your agent does not have to produce a certification of disability from a doctor every time he needs to use the power of attorney.
Some people do not want to sign a power of attorney that is effective immediately because they are afraid that they will be giving up control to someone else. The act of signing a power of attorney does not mean you need to stop handling your own affairs. If your intent is that it only be used in the future if it is needed, then that needs to be clearly communicated to your agent.
You should be absolutely certain that your chosen agent is both capable and trustworthy. Some people do not want to sign a power of attorney that is effective immediately because they do not really trust the person and want to retain control as long as possible. If you do not trust the person you are appointing, then you should not appoint them as your agent at all.
Please note, the Power of Attorney has to be executed before the principal is mentally incapacitated because it will not be valid unless the principal understands the nature and significance of the power of attorney.
A Power of Attorney only lasts as long as you are living. Therefore, when you die, the power of attorney dies with you. You can also terminate a power of attorney at anytime by revoking it or by executing a new power of attorney.
If you sign a Power of Attorney for Financial Decisions, it is a good idea to check with your bank and other financial institutions to make sure they will honor it. Some banks have their own forms they want you to fill out and will not honor a power of attorney that has been done elsewhere. Because a power of attorney does not have the same effect as a court order, a third party, such as a bank, does not have to honor it.
A representative payee is a person, agency, organization or institution that is selected by Social Security to manage the recipients funds when they are unable to do so themselves. The job of the representative payee is only to help the beneficiary with money management. Before a payee is appointed, Social Security will evaluate medical and other types of evidence in order to determine whether a recipient can manage their benefits on their own.
Please note, a power of attorney does not give someone the authority to act as your representative payee.
To apply to become a representative payee, you should visit the Social Security website at http://www.ssa.gov/payee/.