What is a durable financial power of attorney used for?
The durable financial power of attorney is simply a way to allow someone else to manage your finances in the event that you become incapacitated and are unable to make those decisions yourself. More precisely, it grants someone legal authority to act on your behalf for financial issues.
Attorney Tom Olsen: Please explain a financial power of attorney, thank you. Chrissy, when we do wills and trusts for people, there is a package of standard documents that we do for people and one of those is a durable power of attorney for financial affairs. Everybody's heard of a power of attorney, a standard power of attorney ends when somebody passes away, a standard power of attorney also ends when somebody becomes incompetent and as though it's been ripped up it can't be used anymore.
A durable power of attorney also ends when somebody passes away but a durable power of attorney stays in effect when somebody becomes incompetent. That's the durable aspect to a durable power of attorney. By this durable power of attorney for financial affairs you're appointing somebody to pay your bills and manage your affairs for you, if you're not able to. Now, if you're a married couple and you say, "Hey, Tom, my husband and I, we own everything jointly, what would I need that for?" Well, even married people have assets in their individual names like IRAs, retirement accounts, life insurance and social security. Even married couples need to have these between themselves.
The other thing that this financial power of attorney does which is -- it's really important, it's critical document in our opinion -- it also allows your children to do Medicaid nursing home planning for you, if you have to go into a nursing home someday. There are steps that could be taken at the last minute just before mom or dad go into a nursing home to preserve and protect some of your assets and wealth from nursing homes and Medicaid to do that last-minute planning you've got to have a good durable power of attorney for financial affairs in place for your kids to use.
Chrissy: Exactly.
Attorney Tom Olsen: A standard story when we're doing our wills and easy ways to avoid probate workshop, a standard story I tell is this, that occasionally on a radio show I get a phone call from a woman and she'll say this, "Tom, my mom is becoming incompetent, I need to have access to her bank account, so I can pay her bills for her, what do I do?" My response to that caller is, does your mom have a good durable power of attorney for financial affairs in place, if she does, then you got everything you need. If the caller says, "No, she doesn't." I would say, "If mom still competent? If she is, get her on down here to my office and get her to sign one." If she says, "No, she doesn't have one and she's already incompetent." Well, then her only remedy is a legal guardianship, which is about five months and $5,000 to set it up, which could easily be avoided using a durable power of attorney for financial affairs.
Chrissy: Which is why they’re so important.
Attorney Tom Olsen: Everybody, thanks so much, great calls and questions, we do so much appreciate it. If I may a suggestion for you, go outdoors and take pleasure in a beautiful nature and as always enjoy your friends and family. My name is Tom Olsen; the name of the show is Olsen on Law. You're listening to News 96.5.