Common Misunderstandings

Do you know if your financial power of attorney document is a “springing” or an “immediate” authorization? Do you know what your bank or retirement account custodian would require if your financial power of attorney agent needed to transact on your account for you? Those two questions and their answers can cause a lot of confusion. Let’s see if we can clarify the terminology so you can better understand what you have in place and then talk with your estate planning attorney or financial institutions as needed.

No Wonder it’s Confusing!

In the United States, the copy of the legal document that you (hopefully) have in place to name who you want to act on your behalf on financial matters when you are unable, may be titled by many different names. The heading may say Durable Power of Attorney, Durable (Financial) Power of Attorney, General Durable Power of Attorney, Durable General Power of Attorney, General Power of Attorney, Durable Power of Attorney for Management of Property and Personal Affairs, or something similar.

I currently see all of those on my clients’ documents that they had drafted by their estate planning attorney here in Arizona. The confusing part to clients is that it may not have the word “financial” in the heading of the document at all.

Now or Later?

Whatever your document is called, it is naming someone, often referred to as an agent or attorney-in-fact, who you want to make financial decisions as well as specifying what actions they can take if you are unable. Here is a Power of Attorney Checklist to help you with that decision-making. That document also specifies when your authorization goes into effect.

Springing vs Immediate

It may only apply at the time that you are deemed incapacitated (often requiring medical confirmation in writing by two physicians). That is referred to as a “springing” power since it only “springs” into action when you become incapacitated and not before then.

Alternatively, you may state that your agent authorization applies immediately, and you give permission for that person to act on your behalf starting now. In that case, no incapacity is required, and no further documentation would be needed by a physician. Whichever one you have, the agent’s power ends at death. Upon death, the trustee/executor/personal representative would become the decision-maker.

Talk to Your Attorney

Without relooking at your document, you may not know or remember which type of financial power of attorney you have in place, “springing” or “immediate.” There is no right or wrong but the pros and cons of each, as well as the convenience and trust factors as we get older, makes for a good discussion to be guided by your estate planning attorney to help you make an informed decision.

To Each His Own

So whichever version of the financial power of attorney you have, it is also good to understand that each financial institution will have its own process if the time comes that your agent needs to take action on your behalf. You won’t know what’s required until you ask, and they may change those requirements over time.

So Many Options

Some banks, for example, will accept a copy of your financial power of attorney document and that is all that is required. Others will only accept that document if it is less than 3 or 5 years old (I have seen both). Others will also require their form to be completed, either in addition or in place of the legal document. And still others may require a notary stamp or signature guarantee to be added to the process. At investment and insurance companies, there may also be a legal department review before it is deemed approved and in place.

Do It Now If You Can

If you have an immediate financial power of attorney document, I am a fan of seeing if you can get it on file at some or all of your financial institutions in advance. That way there is less delay or paperwork required at the time an agent may need to act on your behalf. He or she will appreciate less stress in that moment by having it already in place. Some financial institutions will only allow it to be added at the time it needs to be exercised, not in advance. Again, you have to ask in order to find out.

A Copy to Your Agent

As always, when you name someone as a power of attorney, either for finances or health care, be sure you provide them with a copy of the document. That’s also the opportune time to talk with them further about your wishes including Living Arrangements for the Future and answer any questions they may have.

The “To Go” Bag

I attend and volunteer teach at a senior outreach program here in the Phoenix area, and one additional thought I learned from those audiences is something that you may want to consider too. They suggest traveling with a “To Go” bag. It may be a folder, file, zipper pouch, etc. that you bring along on your travels. And it holds important information like a copy of your financial power of attorney, health care directives documents, medication list, and I.C.E. (In Case of Emergency) contact sheet.

This all may feel a bit like a belt and suspenders approach to making your wishes known. But documents are no good if they aren’t available when they are needed!

Marie Burns is a Certified Financial Planner, Speaker, and Author of the bestselling Financial Checklist books. Find Marie on Facebook or contact her at [email protected]

This article was first published at 60 and Me – a community that helps women over 60 live happy, healthy and financially secure lives.