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Seeking future financial protection

A power of attorney allows a trusted agent to step in to make health care or other important decisions. There are various ways to make this device more effective and provide better protection.

The authority granted in a power of attorney generally takes effect upon signing and ends when the person who executed the document, the principal, becomes incapacitated. Adding the durable classification allows the power of attorney to remain in effect if the principal becomes incapacitated. This allows a trusted individual, known as their attorney-in-fact, to make important decisions on the principal's behalf.

Another option is adding the springing classification. Under this specification, the durable power of attorney does not go into effect until the principal becomes incapacitated. These are used when a principal wants to keep control of their healthcare or other matters until they are unable to make decisions. The principal relinquishes this power only when they become incapacitated.

A springing power of attorney is efficient and allows a person to step in when they are needed. However, there may be disagreements over whether the principal is incapacitated which may delay implementation.

In addition to addressing medical decisions through a durable health care power of attorney, a principal can execute a durable financial attorney to help assure financial protection and payment of their expenses for if they become incapacitated because of age, disability or illness. This document authorizes the attorney-in-fact to perform transactions such as paying bills, depositing checks, filing taxes, selling real estate, making investments, filing lawsuits and making gifts.

There may be separate power of attorney documents for healthcare and finances. A durable financial power of attorney can help a family or trusted agent manage the person's affairs without seeking the appointment of a guardian or conservator by a court.

An attorney may provide options for protecting finances and assuring care. Experienced lawyers can prepare an estate plan and draft documents that protect these interests and comply with Michigan law.

Source: Investopedia, "The importance of durable power of attorney," By Alison Davies, CFP, March 9, 2018

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