If someone in your life is considering naming you their power of attorney, it's important to understand what you're signing up for, and to ask any relevant questions beforehand.
First, what is a power of attorney (POA)? In a nutshell, it's a document that lets you name someone as an agent who can make decisions on your behalf, such as if you're incapacitated.
There are several different types of power of attorney, and they vary based on factors such as how long they're in effect, when they spring into action and how much control they give the agent.
There's the technical side, and the emotional side. On one hand, you'll probably want to understand what your responsibilities will entail, and what the expectations are of you as the POA. Will you be managing this person's finances? What are the circumstances under which you'll be called to act, or is this more of a worst-case-scenario thing?
Then you'll probably also want to gain a sense of the emotional expectations. What does this person value in their lives? What guiding principles would they want you to keep in mind as you're making decisions on their behalf?
If a family member names you as his or her POA agent, here are some things you’ll want to discuss beforehand:
What aspects of your finances am I responsible for?
Am I also being named as successor trustee (the person who takes control of a trust fund after the initial trustee dies) on any trusts you’re setting up?
If I’m managing finances for your long-term care, which options have you looked into? What kind of care do you prefer, such as transitioning to a nursing home versus hiring an aide for in-home care? How long will this account be able to fund it?
Are you planning to manage your finances independently until you legally can’t, or do you want me to take on any responsibilities before then?
It’s important to note that you might not know if you’ve been named the agent! A good first step if you know your relatives are doing estate planning is to check whether you’re named on any documents.
Power of attorney enables you to handle critical financial matters for your loved ones if they can’t. It can even protect their spouse from being financially trapped if something happens to them.
Of course, this whole process might get you wondering whether you need a POA, too. You’d probably want someone you trust to handle medical decisions for you if you couldn't speak for yourself. Similarly, it's a good idea to consider who will keep the money side of your life from crashing in an emergency.
Power of attorney can make it easier for a loved one to pay your bills, keep you out of debt and make sure your dependents are provided for. If you're called upon to do that for someone you love, it is a high honor, responsibility and sign of trust.
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Fabric by Gerber Life exists to help young families master their money. Our articles abide by strict editorial standards.
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There are a number of different types of POA, which vary according to how much control they grant the agent, how long they last and when they take effect.
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