Throughout our lifetimes, we will make many important financial decisions. From the first time we open a bank account as a teenager, to funding a retirement plan as a working adult, to making simple decisions about how to spend our hard-earned money, most people in New Jersey might take for granted the fact that they are in charge of their finances and can do with them what they think is important.
Unfortunately, as we age sometimes a person becomes so ill, either physically or mentally, that they are totally unable make appropriate financial decisions anymore. In anticipation of such an event, a person may want to execute a durable power of attorney while they are still in good health, in order to avoid having to seek a court-appointed guardian once one is incapacitated.
When a person executes a durable power of attorney, they are essentially giving another person the power to make financial decisions on their behalf. The person who is granted power of attorney is known as the agent, and the person on whose behalf the agent will make decisions is the principal.
When drafting the durable power of attorney, the principal will decide the extent of the agent’s powers. For example, an agent can perform banking transactions, sign tax returns, manage financial assets and more. In a durable power of attorney, the principal can stay in charge of their finances even after the document is executed, and the agent will only act on their behalf if the principal is incapacitated.
Making sure one has an up-to-date and comprehensive durable power of attorney is important in meeting one’s elder needs. When one has a durable power of attorney, it can avoid the need to have a guardian appointed by the court. The guardianship process can be costly and time-consuming, and there is no guarantee the court-appointed guardian would be the person the principal would have chosen if they had a valid durable power of attorney. A durable power of attorney is an important component of any well-rounded estate plan and can avoid the need to seek a court-appointed guardian during what is already an emotional time.
Source: AARP, “Financial Power of Attorney,” accessed April 1, 2018
