People who are going through the estate planning process usually get advice on the importance of advanced directives such as a living will or a durable power of attorney to accompany their will or trust. But as part of planning for the future, it is wise to consider naming a financial power of attorney (POA) as well when considering their assets.
A financial POA will oversee the financial health of the estate, including the estate’s income, assets and liabilities, as well as business or property transactions. Unfortunately, many Americans do not have vital documents in place that will direct end-of-life decisions.
Although half of people 65 or older have an updated will, 55% of Americans of all ages die without either a will or estate plan in place. Even though 83% of elderly people aged 72 or older have a medical POA, less than half have created a financial POA.
The role of the financial POA in an estate plan
Knowing what a financial POA is will help to understand what it does. A financial POA is a legal instrument granting one person the authority to act on behalf of another in either a restricted or more comprehensive manner regarding financial matters.
The person whose estate the financial POA will administer, called the principal, delegates responsibilities to another, called the agent, to manage such financial concerns as investments, the purchase or sale of property, managing bills or signing documents. The agent may even oversee the operations of a small business, buy insurance or collect retirement benefits.
Types of financial POA in Arizona
For residents of Southern Arizona, there are several different types of POA’s with different purposes and durations:
- A general POA is just that, for general purposes at any time.
- A limited POA is for a specific purpose, such as the purchase of real estate or signing of legal documents.
- A durable POA comes into effect when the principal becomes incapacitated, continuing unless the principal regains capacity and revokes it.
- A springing POA comes into effect only in the event of incapacity.
When creating a financial POA, it is important to carefully consider the character of the person who will act as fiduciary to the estate. The agent should always act in the best interest of the principal, and have the qualities of integrity, honesty and attention to detail that will help them to competently manage complex financial transactions.