Finance

POWER OF ATTORNEY

Why should I assign power of attorney?
What would happen to your home and finances if something serious happened to you resulting in your not being able control your financial life? It is important to plan for such a possibility by making sure someone or a friend you can trust will be able to look after your best interests.

Granting someone you trust the power of attorney allows that person, known as your "agent" or "attorney in fact", to act on your behalf. They will manage your financial affairs if you are unable to do so. Your agent is authorized to sign your name and is obligated to be your fiduciary, meaning they must act in your best financial interest at all times and in accordance with your wishes.

There are different kinds of powers of attorney, but in estate planning there are two types commonly used. 

The most commonly used is the "springing power of attorney," which only goes into effect under circumstances that you specify, the most typical being when you become incapacitated. This can mean that your agent cannot act on your behalf until he or she provides doctors' letters and in some cases court orders to proving that you are incapable of making sound decisions for yourself.

The second is the "durable power of attorney." It is immediately effective, giving your agent the power to manage your finances etc. without the need to prove that you are incapacitated before signing your name.

A good attorney can help you decide which power of attorney makes the best sense for you and your family after reviewing your situation. Take great care in choosing your agent, that person should be level headed, trustworthy, and willing to take on the burden of your affairs. Someone who is financially secure should be considered..

If you choose a friend or relative as your agent, you probably won't have to pay them for their services. If you name a bank, lawyer or other outside party as your agent they will expect to be paid. You will have to negotiate the rate of compensation when you set up the agent, which can be hourly fees or a percentage of your assets paid to them annually.

If you do not have an assigned power of attorney and you become incapacitated the court will appoint a guardian. This process will cost money and can cost your family a lot of money, not to mention the cost of the guardian's annual visits to court to report on your situation. The person the court chooses may not be someone you would have ever considered or for that matter chosen..

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