Show #248 Airing: Suday, March 21, 2004
You absolutely, positively, without a doubt should have a financial durable power of attorney. This is the single most important legal document you can make. Here to explain why is one of my most important legal partners, Mike Solomon.
Question: What's a Financial Durable Power of Attorney?
Answer: Document that authorizes someone you trust, usually a spouse or child, to handle your finances. The agent you name can pay your bills, sign checks, sell stocks, and generally handle your finances. If you become incapacitated, unable to handle your financial affairs, your agent under the financial durable power of attorney can easily step in to handle things for you.
Question: Is this the same as a Health Durable Power of Attorney?
Answer: No. 2 different documents, both important.
Question: What if you don't make one?
Answer: If you become incapacitated for any reason (stroke, accident, Alzheimer’s, etc.) you’ll have a disaster. If you’re incapacitated, you can’t take money from your IRAs or 401(k), or sell your house, or sell stocks, or endorse checks coming in. And no one else can either!
Question: You mean your spouse can't automatically handle the finances?
Answer: Not without a financial durable power of attorney. A spouse or child can’t take money from an IRA or 401(k), even to pay the bills. A spouse can’t refinance the home mortgage or sell stocks, or sell the home.
Question: What happens is a person becomes incapacitated without a Financial Durable Power of Attorney?
Answer: A loved one must go to court to become a guardian. And that can involve lots of hassles. The Probate Court has to be involved in everything you do, and there are typically lots of legal fees. We’ve seen families pay lawyers tens of thousands of dollars for guardianships.
Question: How much is a good Financial Durable Power of Attorney?
Answer: Typically less than $150.
Question: Who should you give your DPA to?
Answer: Its a powerful document, so give only to one you trust.
Question: Can you name more than one person?
Answer: Yes, can name one, then alternates. Also can name co-agents to act together or individually.
Question: Can I name a child who lives out of town?
Answer: Yes, though it’s easier if the agent lives in town. But again, pick the person you trust.
Question: What are the downsides?
Answer: The person you give it to can take money from your bank accounts, sell your stock, sell the home. If the person’s not trustworthy, then can run away with the money. That’s a real danger, though we very rarely see a DPA abused.
If you haven’t made a financial durable power of attorney, make one. If your parents haven’t given one to you, talk to them. Do it now. Without a financial durable power of attorney, there could be a financial disaster.
