It's not pleasant to think about, but someday you may be unable to make decisions for yourself. Designating a power of attorney will protect your interests.
A durable power of attorney gives someone you designate, known as your agent, the authority to make decisions if you become incapacitated. An agent who has durable power for health care, sometimes known as a health care proxy, can make decisions about your medical and end-of-life treatment. An individual who has durable power of attorney for finances has the authority to handle your financial matters, such as paying bills and managing your property. You can give the same individual both medical and financial power of attorney or name separate agents, based on their expertise.
Selecting a power of attorney should be part of your estate plan, says Ashwani Prabhakar, a trust and estate lawyer with Davidoff Hutcher & Citron. While many people assign power of attorney to an adult child or other family member, it’s not necessary to pick a relative — and it’s not always wise. You can, for example, choose your financial adviser to manage your investment decisions if you don’t think a family member would be able to handle that responsibility.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What are the steps to establishing a power of attorney?
Once you’ve selected your agent (or agents), you can have an estate attorney draft a form identifying the kind of power of attorney that individual will have. Legal fees vary, but the average cost of having an attorney draw up power-of-attorney paperwork ranges from $200 to $300. You can also find power-of-attorney forms on do-it-yourself websites such as LegalZoom, Nolo and Rocket Lawyer. You’ll pay about $40 to create the forms online.
Regardless of how you draw up the power-of-attorney document, you should have it notarized to make the arrangement official (some states require this). Estate attorneys can act as notaries if they’re commissioned by the state where they’re practicing law, Prabhakar says. He recommends that you also arrange to have a witness when you and your agent sign the form.
Some banks and brokerage firms use their own power-of-attorney form, or they may not honor a power of attorney unless certain conditions are met. Make sure you and your agent complete the paperwork required by your financial institutions, and ask them to keep a copy on file.
How do you change power of attorney?
Selecting a trustworthy agent is critical because an individual with power of attorney has broad authority over your finances and health care. In April 2023, Terry Lynn Culver was sentenced to three years in prison after he was convicted of stealing more than $426,000 from a 92-year-old Wisconsin woman as he was acting as her agent using a power of attorney. He wrote checks from the woman to himself without her knowledge, took possession of her home and sold multiple real estate properties she owned.
If you suspect an individual who has your power of attorney may make decisions that aren’t in your best interest, you can revoke the agent’s authority as long as you’re mentally competent. It’s a good idea to include a provision in your power-of-attorney document that states you reserve the right to change the agent at any time. To avoid legal challenges, you should document any change on a power-of-attorney revocation form. Go through the same process you went through initially, such as having the document notarized, and inform the previous power-of-attorney agent of the change.
Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related Content
-
What Wall Street's CEOs Are Saying About Trump's TariffsWe're in the thick of earnings season and corporate America has plenty to say about the Trump administration's trade policy.
-
The Role of the U.S. Dollar in Retirement: Is It Secure?Protect your retirement from de-dollarization, because “capital always goes where it is treated best."
-
Before You Remarry: 10 Important Things to ConsiderRemarry carefully, because love gets complicated the second time around.
-
My Advice for Enrolling in Medicare Part B — Based on ExperienceEnrolling in Medicare is notoriously complicated and can result in penalties if you get the timing wrong. Here are some valuable tips for first-timers.
-
Return to Your Home Country to Retire: Repatriation RetirementThey came to the U.S. to live and work, but they want to retire in the old country. Here's how to juggle the move back home.
-
Aging Well: 10 Things You Should KnowIf you're committed to aging well, these tips can save on healthcare costs and make your later years more fulfilling.
-
What Retirees Need to Know About TaxesTake steps to avoid a surprise tax bill and underpayment penalties.
-
What Is a Medallion Stamp? The Requirement for Transferring SecuritiesTransferring securities from one account to another often requires this extra step.
-
How Dividend Reinvestments Work for RetirementWant your retirement investments to keep growing? Here's what you should know about dividend reinvestment.
-
ABLE Account: A Savings Tool to Empower People With DisabilitiesAn ABLE account can improve quality of life for individuals with a disability — it permits tax-free saving for ongoing expenses without jeopardizing benefits.
