Financial Agent for Power of Attorney
The Illinois Power of Attorney Act provides, in part, that every individual has the right to appoint an agent to make property, financial, personal, and health care decisions for that individual.
However, this right cannot be fully effective unless the principal empowers the agent to act throughout the principal’s lifetime. This right includes, during periods of disability, the confidence that third parties will always honor the agent’s authority.
There are two legal Power of Attorney (POA) documents, one for health care decisions and the other for financial decision-making.
Each has its importance, and everyone over 18 should have both of these documents. For another person you choose to be able to sign your name and handle your financial affairs legally, you need to sign a Power of Attorney for Property and name an Agent.
Financial Agents Power
Considering the authority you are granting an individual to sign your name and handle your financial transactions, careful consideration should be made in choosing the right person. Periodic review is essential to ensure that a person is still appropriate and, of course, is still available.
Your agent will have a legal responsibility that provides checks and balances, called a fiduciary responsibility. However, your bank accounts can be emptied, and your finances in shambles before you can enforce that fiduciary conduct. So, choose wisely and update when necessary.
Scope of Financial Agents Power
- When: For the duration, you have a choice; your agent’s power begins immediately or only upon your disability is determined by a physician. Most couples choose to have each spouse’s power to start immediately for the convenience of use in the document if one spouse is unavailable or chooses not to handle the household finances. Or maybe one spouse can’t make the closing of real estate, and the agent can use the POA and could not do so if it was only activated on disability.
- How: The agent can use the POA for such financial transactions as:
- Pay bills, borrow transactions, and manage business operations. Banking, investing, insurance and annuities, and real estate transactions act as a Digital Fiduciary to access and manage online accounts.
- Dealing with the IRS, Medicare, Medicaid, credit card companies, Social Security, VA, employment, and military benefits. Supplemental Needs Trusts and caregiver agreements.
- Hire agents, accountants, lawyers, and financial advisors.
- Why: You can only appoint an agent and sign the POA while you have your mental capacity. It is too late to do so if you are severely injured or illness limits your capacity. Now, you are subject to a full court proceeding to have a Legal Guardian appointed. Even if you are married, having your spouse established and operating under the court’s control for the property and investments you own together is required. You do not want that to happen.
As you can see, there is no reason not to have a valid POA. Not having one can lead to financially disastrous consequences for numerous reasons.
POA of Property and Health Care should be part of a Living Trust estate plan. However, you can also obtain them separately. You can change or revoke a POA anytime while you still have capacity.
At the end of your life or incapacitation, they risk Probate if you have property, investments, or bank accounts in your name.
- A Will = Probate. The rule is no one can legally sign your name. Therefore, at your death or incapacity, all assets in your name are subject to the complete Probate process, which averages 18 months and is costly.
- Living Trust completely avoids Probate.
- A Living Trust estate plan includes Health Care and Financial Power of Attorney documents and a Last Will and Testament for guardianship of minor children and to “pour over” any assets still in your name at your death out of Probate.
- Your life insurance policies and deferred compensation accounts can name your Living Trust as beneficiary, subject to essential tax considerations.
This blog entry is for information and planning purposes. Therefore, it is not legal advice. Please do not use this blog as legal advice, which turns on specific facts and laws in specific jurisdictions. No reader of this blog should act or refrain from acting based on any information included in, or accessible through, this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the reader’s state, country or other appropriate licensing jurisdiction.