A June 2020 Transamerica Center for Retirement Studies survey showed that a mere 28% of retirees have a financial power of attorney (POA)—and many people don’t understand that there are two types of these advance directives that serve different purposes. MarketWatch recently published an article titled “Does your estate plan use the right type of Power of Attorney for you?” that says that knowing how both types work is crucial in the pandemic, especially in the event that you get sick with coronavirus.
A Durable Power of Attorney for Finance can be either “springing” or “immediate.” “Durable” refers to the fact that this Power of Attorney will endure after you have lost mental or physical capacities, whether temporary or permanent. It lists when the powers would be granted to the person of your choosing and the powers end at your death.
An “immediate” Durable Power of Attorney for Finance is effective, as soon as you sign the document. In contrast, a “springing” POA for Finance means two physicians must first examine you and confirm in writing that you can no longer manage independently.
Therefore, to begin paying your bills, your agent must have those two physicians’ letters, and they don’t automatically have the authority to ask for them. When forms, such as doctors’ letters, are required before the agent you chose can serve you, ask your estate planning attorney for guidance. An obstacle for a Durable Power of Attorney for Finance can come upon you very fast and possibly include you and your spouse at the same time. For example, you both might get COVID-19.
The powers granted by a typical POA for Finance are often broad and permit selling and buying assets; managing your debt, car, and Social Security payments; filing your tax returns; and caring for any assets not named in a trust you may have, such as your IRA. If you recover your capacity, your agent must turn everything back over to you when you ask.
Remember that your advance directive documents are only as good as the people who implement them. You should also make certain anyone named knows that they’ll have the job if needed. They must know where to find your POA and all other important information.
Reference: MarketWatch (Oct. 9, 2020) “Does your estate plan use the right type of Power of Attorney for you?”