What if, in later years, you become unable to pay bills, manage investments or access your bank accounts due to an unexpected illness? A power of attorney (POA) can ensure that a trusted individual you appoint will handle these tasks for you. But what exactly can your chosen agent do with this authority?
A POA can cover a range of financial activities
With a valid POA, your agent can:
- Paying bills: Your agent can manage and pay your bills. This includes utilities, mortgages and credit card payments.
- Managing bank accounts: They can deposit and withdraw money, manage funds, and close accounts if necessary.
- Investing: An agent can buy or sell stocks, bonds and other securities on your behalf.
- Real estate transactions: They can buy, sell or manage property you own.
- Filing taxes: Your agent can prepare and file your tax returns.
- Collecting benefits: They can manage your retirement and government benefits, such as Social Security and Medicaid.
- Managing business interests: If you own a business, your agent can handle business-related financial matters.
Agents must act in your best interests and adhere to the particular directives specified in the POA document. They must also keep accurate records of all financial transactions and avoid commingling your funds with their own.
There are limitations to their broad financial powers. An agent cannot change your will or trust, vote on your behalf, make medical decisions (unless specified in a separate healthcare POA) and engage in self-dealing.
You can customize the scope of an agent’s authority in the POA document. You can limit their powers to specific tasks or grant them full control over your finances.
Is a POA the right tool for your specific situation?
It is important to note that a standard POA becomes ineffective if you become incapacitated. For continued authority in such situations, you will need a durable POA, which remains valid even if you lose mental capacity.
California law also allows for the creation of a springing POA. This document only takes effect when a specific event occurs, such as your incapacitation as certified by a physician.
If you are unsure what estate planning tool best suits your needs and wishes, make sure to consult a skilled attorney. They can help you create a well-drafted POA that will give you peace of mind, knowing that your financial affairs are in capable hands.
