Posted by: The Life and Legacy Planning Group
The wealth, property, and investments we accrue over a lifetime are often significant. While you have carefully managed your finances through the years, there may eventually come a time when you cannot handle such decisions. To plan for the likelihood that you are unable to manage your financial affairs, it’s important to have everything in order while you’re still of sound mind.
For starters, you’ll want to execute a financial power of attorney, called a Power of Attorney for Property in Illinois. It’s perhaps the most important estate planning decision to make while you’re healthy. Assigning the duty to a trusted relative, loved one, friend, or professional can help ensure your financial matters are taken care of and your wishes are respected. Powers of Attorney for Property give the designated agent the power to manage your money should you become incapacitated. Understanding the different types of financial powers of attorney can help you make an educated choice for yourself as to when and what type of assistance you may need.
Failing to properly designate someone to make your financial decisions prior to your incapacity could lead your loved ones to court to have someone appointed as your Guardian. The Guardian is then empowered by the court to manage your financial affairs. As an adult, no one is automatically able to act for you; you must legally appoint someone through the use of a Power of Attorney for Property or risk the necessity of a Guardianship proceeding.
How Much Authority to Give?
A limited Power of Attorney allows someone else to act in your place for a very limited purpose. For example, you might opt to pursue this option if you need to sign a deed on a day you’re out of town. Arranging for someone to represent you and sign on your behalf is possible through a limited Power of Attorney. Other financial matters not outlined in the limited Power of Attorney cannot be handled by the person you choose.
A general Durable Power of Attorney, on the other hand, is a good option for a comprehensive approach. If the Power of Attorney is effective immediately by its terms, the person you select, also known as your agent or attorney-in-fact, can sign any and all documents on your behalf, whether or not you are incapacitated. They can also pay your bills, conduct financial transactions, and generally manage your property and money. Anyone who could use an extra set of eyes on their finances may find this option useful.
When Should My Agent Act?
Just as there are different scopes of authority you can give your agent, you can also choose when you want the Power of Attorney for Property to become effective. A Durable Power of Attorney can be as general or as limited in scope as you’d like. This instrument goes into effect the moment you sign it and remains in effect until you pass away, unless you indicate a different termination date, or you rescind it while you are of sound mind.
Springing Powers of Attorney for Property, on the other hand, allow your agent to act on your behalf if and only if you become incapacitated. Criteria outlining what constitutes incapacity should be properly addressed in the document when creating this type of Power of Attorney for Property. It is important to note that this type of Power of Attorney for Property can be cumbersome for your agent. In many cases, if he or she tries to transact business on your behalf using a springing power of attorney, the financial institution will want proof that you are, in fact, incapacitated, which is often a tedious and time-consuming process.
Regardless of your priorities, there is a Power of Attorney for Property right for your situation and goals. Determine your specific needs for an agent while you are of sound mind. Of course, nothing tops the advice and recommendations of an attorney experienced in these matters, so if you are wavering between your options, give us a call.