You may have heard of a Power of Attorney (POA), but that doesn’t mean everyone understands what it is or why you need one.

Today, we’re discussing the importance of having a Power of Attorney (POA) and why it should be a critical component of your estate plan.

While it’s not a pleasant thought, there may come a time when you cannot make important legal or financial decisions for yourself. 

In such a situation, a Power of Attorney can give you peace of mind, knowing that a trusted individual is appointed to act on your behalf.

What Is a Power of Attorney?

A POA is a legal document that authorizes someone to act on your behalf when you cannot do so. It’s a precautionary measure that can be useful in situations such as illness, incapacitation, or being out of town during a legal or financial transaction.

While it can be a powerful tool, it should be granted to only trusted individuals after careful consideration.

Why Should You Consider Appointing an Attorney?

As mentioned, there are various reasons to consider appointing someone as your attorney.

Let’s discuss the most common benefits of having a POA.

1. Out-of-Town Absence

One reason to consider appointing a Power of Attorney is if you may be out of town when a legal or financial transaction takes place. 

For example, if you frequently travel for work or leisure, appointing a power of attorney can provide peace of mind.

Suppose you’re out of the country or unavailable for any reason. In that case, your designated attorney can manage your legal and financial affairs on your behalf.

2. Aging

As you age, it’s natural for your mental and physical faculties to decline. Appointing a power of attorney ensures you have a trusted individual to manage your affairs if you become incapacitated.

3. Mental Health

Mental health issues can also impact you at any age. So whether it’s a health issue that comes up earlier or as you age, it could be hard to manage your crucial affairs.

For example, suppose you suffer from Alzheimer’s or dementia. In that case, these illnesses will eventually impact your ability to make sound financial decisions.

By appointing a power of attorney, you can have a trusted individual manage your affairs if you become mentally incapacitated.

4. Estate Planning

A Power of Attorney can also play a vital role in estate planning. 

By appointing an attorney, you can ensure that your assets are managed according to your wishes and that your beneficiaries are cared for.

More Questions? 

Call Our Experts at Insightful Wealth Group for a Consultation

Business Obligations

The final benefit of a POA we want to mention in this blog is if you own a business. In this case, you may need someone to manage your business affairs if incapacitated.

A Power of Attorney can allow someone to manage your business operations, pay bills, and make financial decisions on your behalf.

What Happens if You Don’t Have a POA?

If you haven’t appointed someone with an enduring Power of Attorney and you become mentally incapacitated, no one has the legal right to act on your behalf—not even your spouse!

Unless your finances are all held jointly with someone else, your finances cannot be used to pay your mortgage/rent, utilities, and other expenses.

If you have assets like a home or a vehicle, they can’t be sold even if you no longer live in the home or drive the car.

In such a situation, a family member or friend would have to hire a lawyer and apply to the courts for a legal appointment called a Committee, which is a costly and lengthy process.

It definitely sounds more manageable to make sure you appoint a POA!

Enduring Power of Attorney

We just mentioned an “enduring” POA. What is it, and is there a difference between that and just a Power of Attorney?

A POA is “enduring” when the attorney appointed may continue to act for the adult even if the adult becomes mentally incompetent. 

For POAs made before September 1, 2011, the document contains the declaration: I declare that this Power of Attorney may be exercised during any subsequent mental infirmity on my part.

Most POAs written for estate planning are enduring and take effect from the moment the POA is signed. 

Suppose you’re not comfortable with giving this authority right away. In that case, you may determine under which circumstances the POA may be used. 

The Power of Attorney Act changed on September 1, 2011, allowing more drafting flexibility. POAs written before September 1, 2011, are grandfathered and remain valid despite the new Act.

Revoking a Power of Attorney

One thing to note is that a POA is a revocable document. 

If you decide that the person you have appointed is no longer suitable, you may cancel or revoke his/her appointment.

A POA ceases upon death, which is when your last will takes over. Therefore, it’s important that you have all of your estate planning and documents organized!

Start Planning For a POA Now!

After learning about the benefits of appointing an attorney and the pitfalls if you don’t have one, we hope you understand how crucial planning for a Power of Attorney is.

Once you decide on a trusted individual, it’ll be a valuable safeguard in the event of incapacity, ensuring that your legal and financial affairs are managed by someone you trust. 

By planning and having a POA in place, you can avoid costly and lengthy legal processes and ensure that your loved ones are provided for, even if you cannot act on your behalf.

Contact Insightful Wealth Group or your preferred advisor if you have more questions about POA or estate planning. A financial plan forms the foundation necessary to grow, protect and transfer wealth from generation to generation. 

Our team is committed to providing information and personalized help to ensure our clients can make informed decisions.

This article has been prepared by Raymond James Ltd. (“RJL”). It expresses the opinions of the writer, and not necessarily those of RJL. Statistics, factual data and other information are from sources believed to be reliable, but accuracy cannot be guaranteed. It is furnished on the basis and understanding that RJL is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. RJL, its officers, directors, employees and their families may from time to time invest in the securities discussed in this newsletter. It is intended for distribution only in those jurisdictions where RJL is registered as a dealer in securities. Distribution or dissemination of this newsletter in any other jurisdiction is strictly prohibited. This newsletter is not intended for nor should it be distributed to any person residing in the USA. Raymond James Limited is a Member Canadian Investor Protection Fund.

The information above is from sources believed to be reliable, however, we cannot represent that it is accurate or complete and it should not be considered personal tax advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters.