by Kate Rhoten
Last month, I covered the first component of the financial checklist: wills and trusts. This month, we are staying in this same area with an overview of the power of attorney (POA) document.
Most people that work with a lawyer to write their last will and testament will have the POA and proxy included in their legal document binder. After working in the banks for a number of years, I can tell you that there is confusion surrounding the POA.
The power of attorney is the legal document that gives another individual the ability to make financial decisions on your behalf if you are unable to do so due to illness or accident. Financial activities will include banking, investments and property transactions.
In order to assign the POA, one must be medically capable of selecting the individual and completing the legal document indicating the person. Once assigned and the permissible transactions have been formally outlined in the POA document, the named person can start acting on behalf of the account/property owner. This designee accepts fiduciary responsibility to make decisions and act in the owner’s best interest. Per the Merriam-Webster Online Dictionary, the definition of fiduciary is:
In law, a person in a position of authority whom the law obligates to act solely on behalf of the person he or she represents and in good faith. Examples of fiduciaries are agents, executors, trustees, guardians and officers of corporations. Unlike people in ordinary business relationships, fiduciaries may not seek personal benefit from their transactions with those they represent.
A person asked to handle the financial affairs of another must keep this in mind. The POA does not give an individual the right to use the money personally or make decisions that do not involve the best interest and well-being of the POA designator.
Another area that creates confusion is when the POA designation ends. When a person passes away that has a POA document in place, the person acting on behalf of that individual no longer has legal right to make decisions or access accounts for that person.
I can tell you that I had many people believe that with the POA, they could still access the accounts of someone that has died. This is not the case. Bank personnel are required to notify the correct department of an account owner’s passing. The bank will place a note on the account for any branch employee to see, should someone try to access a decedent’s account.
A person’s passing terminates the POA, and the will comes into play. You may never need to use the POA, but nonetheless, it is a necessary component of financial planning.
Life is full of promises, but there is not a promise of us living healthy for 80 plus years and passing in our sleep. Plan accordingly and live life fully.
Next month, we will move to another area of financial planning. Have a great Thanksgiving!
Kate is a financial expert of what to do and not do with money as well as owner of 4 Walls Money Coach, A Coaching-Focused Company. She has attended and completed Dave Ramsey’s Counselor Training. Follow Kate on Twitter 4WFCoach, reach out to her via email at kate.4walls@gmail.com or visit www.4wallsmoneycoach.com. Feel free to share ideas or questions for future articles.
