If you have yet to create your estate plan, you may think that once you start the process, the only document you need to create is a will. Although a will is the foundational part of most estate plans, there are other documents to consider, such as a financial power of attorney.
According to the American Bar Association, a power of attorney grants an agent the authority to act on your behalf. A financial power of attorney gives another person the authority to manage your finances and assets if you ever become unable to do so.
Reasons to create a financial power of attorney
If you do not have a financial power of attorney and suddenly become incapacitated, the court will grant someone the right to manage your affairs. Not only does this take money and time, but the person the court appoints may be different than the one you would prefer. By creating a financial power of attorney before you need this document, you can make sure that in an emergency, your finances get handled how you want.
Powers you can grant your agent
Although you can give your agent broad authority to handle your finances, you can give him or her control over certain parts of your affairs. For example, your agent can use your assets to manage everyday expenses, pay your healthcare bills, file your taxes on your behalf, keep your business going and make bank withdrawals.
While you select an agent, choose carefully. The agent you select when creating your financial power of attorney should act in your best interests.