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Why do I need a power of attorney for finances?

| Jul 2, 2020 | estate administration & probate |

When you’re alert, healthy and able to make your own decisions, you won’t have many concerns about your ability to manage your own finances.

Conversely, if you’re incapacitated for any reason, such as an injury or illness, you won’t be able to do this. And that’s why it’s so important to create a power of attorney for finances.

A power of attorney for finances is created so that another individual can manage your finances if you’re incapacitated and unable to do so. You give this person, known as an attorney in fact or agent, the power to complete all or specific tasks related to your finances.

Even though you give your agent quite a bit of responsibility through a power of attorney for finances, they must still act in your best interest.

Here are some of the many things you may want to ask your agent to do should you become incapacitated:

  • Pay your taxes and bill
  • Pay your medical expenses and health insurance premiums
  • Manage your real estate
  • Invest
  • Access and manage your bank accounts and retirement accounts
  • Transfer and/or sell assets as necessary
  • Operate your small business

This sounds like a lot of work because it is. That’s why you need to take extra care when choosing an agent for your power of attorney for finances. You don’t want to name just anyone, because not everyone has the time, knowledge and understanding of finances to make sound decisions.

Once you have a short list of potential agents, compare the pros and cons of each individual to decide who’s your first choice. From there, you can ask the person if they’re okay with you naming them as your agent. If they are, you’re free to proceed. If they decline, continue to work down your list.

There is no law stating that you have to create a power of attorney for finances, but it’s something you should strongly consider adding to your estate plan. Not only does it give you peace of mind, but it goes a long way in taking the burden off your loved ones in the event of your incapacitation.