In our last article, we discussed the level of decision-making authority that a healthcare proxy can have. These proxies get their power from an advanced healthcare directive, sometimes erroneously called a “medical power of attorney.” (Many states do use this term, but California generally does not.)
This week, we will discuss the decision-making authority of an actual power of attorney. In California, power of attorney gives one adult authority over another adult’s finances.
The very thought of losing this control can be scary and uncomfortable. People like making their own decisions. However, injury, illness, or mental health issues could render you unable to make such choices. Your financial life could go forward while you remain physically or emotionally stagnant. In such a situation, you need someone who can help make important money decisions for you.
Choosing your power of attorney should not make you nervous. With careful planning and a well-crafted document, your power of attorney will have only the amount of authority that you allow.
Here are some examples of financial decisions your power of attorney can control.
Powers of Attorney Can Sell Property for You
Your power of attorney can sell property in your name. This property can range from small items to big, real estate deals. If you are rendered incapable of receiving an income, selling assets may be necessary to keep you afloat.
To be clear, your power of attorney should be working only toward your benefit. They should be giving you all the profits from the sale. If they work on your finances full-time, they may have the right to pay themselves through your estate. However, they should not be fattening their pockets by selling your property.
Powers of Attorney Can Buy Property in Your Name
If your estate is large and healthy enough, your power of attorney can help it grow. They can acquire property in your name, adding it to your assets. Someone with your best interests in mind could acquire real estate for you or make other worthwhile purchases that will help sustain you.
Once again, your power of attorney should be buying this property for your benefit. If they are personally profiting from this arrangement, you must make a change to your agreement.
Powers of Attorney Can Invest for You
Just as they can use your money to make purchases, powers of attorney can make investments with your dollars. They can buy stocks and bonds; they can invest in a business or invention; etc. If these investments pay off, the money should go right back into your estate.
Powers of Attorney Can Take Out Loans in Your Name
If you get strapped and need a boost, your power of attorney can take out a loan for you. Once more, it’s important to acknowledge a power of attorney’s responsibility and ethics.
This person should be borrowing only when they know your estate can pay off the loan. They should not be keeping any portion of the loan for themselves, and they must be fiscally responsible with your money.
Limiting a Power of Attorney’s Authority
There may be areas of your financial life that you don’t want anyone to access. For instance, you may have savings designated for your retirement or for your kid’s college fund.
To repeat, your plan can create limitations on a power of attorney’s authority. It can make parts of your estate off-limits, such as the savings described above. If you are uncomfortable with the idea of someone buying, selling, investing, or taking loans in your name, you can deny them these rights.
Furthermore, you should consider a durable power of attorney. This is a form of power of attorney that you can change. If your power of attorney is active, and the situation is not working out, you can modify the plan.
Clearly, power of attorney should go only to someone you trust to work in your best interests. You should always include an attorney in any estate plan, especially those dealing with powers of attorney and advanced healthcare directives. You need a lawyer who can vet the recipients of these authorities. An attorney can also keep an eye on these people in intervene if they see abuses of power.
Furthermore, a lawyer can help make your documents sound from the onset. They can use direct language that is hard to challenge. This can help keep your power of attorney from disputing your wishes or gaining more authority over you.Trust our firm to help you plan for incapacitation. We can craft solid power of attorney documents and advanced healthcare directives for you. For a free consultation, call us today at (916) 299-3936 or contact us online.