The power of attorney is one of the most important documents that you can create for yourself. It gives someone you choose (“agent”) the power to manage your financial affairs if you become incapacitated or mentally impaired. It is a position of highest trust and choosing your agent should be a very thought-out decision. It should be someone you that you are confident will manage your financial affairs in your best interest.
There are two types of power of attorney documents in California. One is an immediate durable power of attorney that becomes effective immediately upon execution of the document and the other is a springing durable power of attorney which usually becomes effective when one or more doctors determine that you cannot manage your own financial affairs. At the same time, there is a short version for people with simple estates and a long version for people with many assets and more complicated estates.
Here are a few guidelines to keep in mind when choosing your agent:
- Clear Understanding of Document: Make sure you completely understand your financial affairs and what duties will be delegated to your agent. You can customize this document.
- Make Your Estate Accessible: Discuss your power of attorney with your agent ahead of time so he/she can take over as seamlessly as possible.
- Forward Mail: If the duties of an agent will take an extended amount of time, you may want to consider your mail be forwarded to your agent.
Here are a few guidelines to keep in mind when accepting to be someone’s agent:
- Locate Documents and Assets: With the help of the principal, locate all the important files and documents, including copies of any and all deeds. Get in touch with the principal’s banks and accountant to let them know you have taken over due to an illness or incapacity. Sometimes an asset may have to be liquidated.
- Maintain records: You must keep a detailed record of everything you do, including retaining receipts and ledgers of expenses. This can be critical later on if there are questions from the principal’s family or court.
- Itemize the Income Stream: Determine what income the principal is entitled to such as pension funds, Social Security, SSI, annuities, and other forms of revenue.
- Itemize the Debts: Make a list of what ongoing bills have to be paid including mortgage, rent, credit cards, utilities, etc. Become acquainted with the principal’s health insurance situation and obligations.
- Income Tax: Set aside all those statements and fees that may be relevant for the principal’s income tax purposes.
- Get Advice: Do not hesitate to get advice from an attorney or accountant if your duties get overwhelming.
- Gifts: Never give gifts to anyone from the principal’s assets, including borrowing/lending money.
- Changing Ownership: Never put any of the principal’s assets, such as bank accounts and real estate, into joint ownership.
- Do Not Delegate: Do not ask anyone else to ‘pinch hit’ for you.
- No Fees: Unless the power of attorney specifically allows it, do not take fees for your services as an agent. If allowed, an agent’s fees may be paid from the estate of the principal.
A visit with an experienced estate planning attorney to discuss creating a power of attorney or else discussing all the responsibilities that go with being an agent for a power of attorney is usually a good idea.
