If you’re looking to write a will or a trust, you’ve probably come across the words “power of attorney,” and maybe wondered what exactly that meant. Here’s what a Power of Attorney document does, why you need it and what can happen if you don’t have it in place.
Power of Attorney: What Is It?
The formal name for Power of Attorney in Texas is statutory durable power of attorney. What does that mean? A Power of Attorney document gives a person you name – the agent – the power to act as you in financial and legal matters. Power of Attorney gives that person the ability to handle your finances for you – your house, car, bank accounts, your taxes and everything in between.
Power of Attorney can be made effective immediately, meaning that as soon as you sign the document, your agent has the power to handle your finances. More often, Power of Attorney is effective in the case of incapacity or disability, meaning that if you were to become unable to handle your finances, your agent would take over.
Power of Attorney: Why Do I Need It?
Your house, car and bank accounts are most likely in your name. If something were to happen to you, leaving you disabled or incapacitated and unable to handle your own finances, all the assets in your name would be stuck in limbo.
Your spouse or adult child can’t write checks to cover the mortgage from a bank account in your name. They couldn’t sell your house, pay your taxes or manage your car loan. Even if house is jointly owned, your spouse can’t manage, sell or refinance the house without having Power of Attorney for you.
Power of Attorney means you choose a person who can handle those financial assets if you were unable to. Your agent can essentially act as you and take care of your finances when you cannot.
If you are establishing a living trust instead of a will as part of your estate planning, you may not need Power of Attorney, as most trusts are set up to automatically transfer power of assets to a beneficiary or trustee. Talk to your lawyer to make sure.
What if I Don’t Have Power of Attorney?
If you were to become disabled or incapacitated and you didn’t have Power of Attorney in place, any assets that are in your name would essentially be frozen and unable to be accessed by your family. In order to get the power to act as your agent, your family would have to go through the process of establishing legal guardianship of your estate.
Establishing a legal guardian after you are incapacitated is a lengthy and expensive process. It could take months to even get a hearing and likely would cost thousands or even tens of thousands of dollars. It often takes several hearings to complete the process of guardianship. In the meantime, your house could fall into foreclosure, your car loan could go into default, and the IRS could impose huge fees for unpaid taxes. Having Power of Attorney protects your assets and your family from having to go through a costly and time-consuming ordeal at a stressful time.
Does Power of Attorney Cover Medical Decisions?
Statutory Durable Power of Attorney does not cover medical decisions. To give someone the power to make medical decisions on your behalf if you were unable to, you need several other documents: Medical Power of Attorney, a HPPA Privacy Release and, even better, a Living Will.
Power of Attorney: Make Sure Your Assets Are Protected
If you’re writing a will, Power of Attorney is an essential piece of your estate planning. Make sure your lawyer helps you draft a Power of Attorney document to protect your family and assets in case the worst happens. Although DIY options exist for documents like Power of Attorney, we highly recommend seeking a qualified lawyer’s help to make sure your documents are valid and properly filed.
If you’re wondering how much documents like a will and Power of Attorney might cost, Texas Legal might be a good solution for you and your family. Our affordable monthly plans cover estate planning in full, meaning you can get all your estate planning taken care of for less than the cost of one hour of the average attorney’s time. Check out Texas Legal’s group plans as well as our independent plans.