Make it officialYour advocate will need legal authority to be able to pay bills, make withdrawals, manage investments, and talk to banks, credit unions, or brokers on your behalf.
A power of attorney is vital so your advocate can help
There are several ways to give your financial advocate the legal right to manage your finances. Generally, the most direct and complete method is to create a financial power of attorney. A financial power of attorney is different from a health care power of attorney. One is for making financial decisions, and the other is for making medical care and treatment decisions. You should have both.
Here are some commonly asked questions about financial powers of attorney.
+What is a financial power of attorney (POA)?
A power of attorney for finances is a legal document that gives someone else the legal right to make decisions about your money and property. In the POA document, you are called the principal and your financial advocate is your agent. Your agent (financial advocate) can act for you even when you can no longer make decisions on your own.
A financial power of attorney is different from a health care power of attorney. One is for making financial decisions, and the other is for making medical care and treatment decisions. You should have both. [Click here to learn more about health care powers of attorney]
Here is an example of a POA. This is just for illustration, not for personal use. Every state has its own laws about POAs, so it’s important that your POA meets your state’s requirements.
+Is a POA like a will or a trust?
No, a will is a legal document that specifies how you want to pass along your money and property after you die. A POA allows someone to manage your money and property while you are alive, and the POA is no longer operable after you die. A living trust is also different from a POA. It gives someone else legal authority to make decisions about money or property held in the trust, but first you must put money or property in the name of the trust. In the trust document, you name a trustee to manage the money or property in the trust if you cannot. The trust also says who gets the money or property in the trust after you die. Trusts can be complicated. If you have substantial assets, you may want to talk to a lawyer about whether a trust is right for you.
+Does a POA go into effect right away?
That’s up to you. Your advocate doesn’t need to start managing your money right away, but it will be easier for them without extra hurdles like getting doctors or professionals to certify that you’re no longer able to make your own decisions. That process can be hard on your trusted advocate and hard on you. Remember, even with a POA in place, you will manage your own money while you are still able.
+What can your financial advocate do once they are your agent under a POA?
Your financial advocate CAN handle all of the financial transactions that you currently handle, such as managing the money in your accounts and other property. They can also do things like operate your business, file lawsuits, enroll you in government benefit programs, and file your taxes. Your POA document will specify what your advocate (agent) can do. However, you can also put limits on their powers when you create the POA document.Your financial advocate CAN’T change your will, transfer the POA responsibility to someone else who you haven’t named, mix your money with theirs, spend your money on themselves, or violate their duty to act in your best interest.
For more information: What you should know as a financial advocate (PDF)
+Can you change or revoke a POA?
As long as you are still able to understand what a power of attorney is and what it means to change it, you can change it. You can name a new agent, or you can cancel (revoke) the entire document. It’s a good idea to revisit your choice from time to time but only make a change when it will be better for you and your future needs.
+How can you get a POA?
1. Hire a lawyer
Call a couple of lawyers in your community to find out what it will cost. The types of lawyers who typically specialize in POAs are called “estate planning attorneys” and “elder law attorneys,” and many lawyers with general practices can do it as well.
2. Legal services programs
If you feel you can’t afford to hire a private lawyer, you can look for legal services programs in your community that can help. Scroll down to the bottom where we have some more resources for you.
Online services and forms can help you get a POA for free or at low cost—but beware of “one size fits all” forms that may not meet your specific circumstances or state laws.
- 1. Hire a lawyer
+What should you do if your bank doesn’t accept your POA?
Sometimes a bank, a financial advisor, or another business will ask that you fill out their specific POA form rather than accepting your existing POA. However, businesses should accept and rely on a POA that meets the requirements of your state laws. In fact, state law may require them to accept your POA.
+Can’t you just add your financial advocate to your accounts to give them access?
Joint bank accounts and other joint accounts don’t take the place of a POA and other legal arrangements which provide broad legal authority. For example, you may have other financial matters for your financial advocate to handle--managing your home or other real estate, signing leases or other agreements if you need residential care, managing your debts, applying for public benefits, and filing your taxes, among other things. Joint accounts won’t help with those things.
Also be aware of the following features of joint accounts:
- The second person on the account usually has equal access and claim to the money, meaning that they can withdraw your money and spend it on themselves.
- If the second person on the account has debts, their creditors may be able to get your money.
- When you die, the money in the account automatically becomes the second person’s money—and that may not be what you intend.
Trust, but verify!
You have chosen your financial advocate with great thought and care. It’s a good idea to build in ways for other trusted people to see how your advocate is managing your money and property. In your POA, you can require your advocate to “open the books” or prepare a summary accounting document for a trusted person to review every year (or at whatever time interval you choose). Another safeguard is to require a second person to sign off on transactions over a certain amount of money.
Resources for Getting a Power of Attorney
+Free legal services for people over age 60
Find local programs that provide free legal help to people over age 60 by contacting the national Eldercare Locator.
+Free legal services for those with modest income
Find local programs that provide free legal help to income eligible people on the website of the Legal Services Corporation. www.lsc.gov/find-legal-aid
This is a web page sponsored by the American Bar Association. It provides information about how to find a lawyer in each state. It also has information about legal resources available in each state, how to check whether a lawyer is licensed, and what to do if you have problems with a lawyer. www.findlegalhelp.org
Looking to see an example power of attorney document? This is just for illustration, not for personal use. Every state has its own laws about POAs, so it's important that your POA meets your state's requirements.