One of the essential – but often overlooked – elements of a well-prepared estate plan is a durable financial power of attorney. The purpose of a power of attorney is to authorize a trusted person to serve as your “agent” in financial transactions that you are unable to attend to for any variety of reasons. The most important and most common use for a power of attorney is to ensure that decisions can be made without too much friction if you become incapacitated. Without a power of attorney, it may be necessary to have someone named as your guardian, a process that necessarily requires court intervention. Given that a person is significantly more likely to suffer from an unexpected incapacity than to experience an early death, incapacity is, on its own, sufficient reason to execute a power of attorney.
With that said, there are many other uses for a power of attorney. Many parents encourage their college-age children to obtain a power of attorney, naming the parent as agent, to ensure that financial transactions involving the child can be made in the child’s absence. Frequently, people also use powers of attorney to facilitate loan closings, vehicle purchases, and other scenarios in which the purchaser or borrower is not able to be present.
There are obvious risks in executing a document that authorizes someone else to perform financial transactions on your behalf, so it is critical that you seek counsel about the specific powers you authorize. Importantly, you should never execute a power of attorney under pressure from someone wishing to act as your agent. Finally, downloading standard-form powers of attorney online is fraught with risk, as you should obtain guidance about the specific powers to be authorized in a power of attorney, whom to name as an agent, and the proper procedures for executing the power of attorney.