A financial power of attorney (also called durable power of attorney or general power of attorney) is an important part of your estate plan. If you become incapacitated and are unable to act and make decisions for yourself, a financial power of attorney authorizes another individual to act for you. In the document, you are the “principal,” and the individual you appoint is your “agent under power of attorney”. With a financial power of attorney, your agent would be able to pay bills, open and manage accounts, and contact financial institutions on your behalf.
Some financial powers of attorney include the authority for the agent to gift the principal’s assets to others, possibly including to himself or herself. This power is essential to long-term care planning for asset protection. If you become incapacitated and your financial power of attorney document specifically includes this power, your agent may be able to work with an elder law attorney to protect at least a portion of your assets from expensive long-term care costs, such as nursing home costs.
However, and as the name implies, powers of attorney can be “powerful” documents, especially if gifting authority is included. When deciding whom to name as your agent, consider that person’s ability to responsibly handle your finances, his or her willingness to serve, and, most important, that person’s trustworthiness and loyalty to you.
The cost to execute a financial power of attorney is small compared to the savings it can provide to you and your family in the event you become incapacitated. For more information about financial powers of attorney, consider the following article: Financial Powers of Attorney.