A durable power of attorney is one of the simplest and most reliable ways to allow someone else to manage your finances if you are incapacitated and unable to act on your own accord. If you do not arrange for durable power of attorney, it’s likely your family will have to go to court to be able to take control of your finances. This can be a messy, time-consuming and expensive process.
You may grant power of attorney to your chosen agent to allow that person to act in any of the following ways:
- Buy, sell, pay taxes on or maintain any property you own
- Invest your money into stocks, bonds or mutual funds
- Use your assets to pay your bills and other everyday expenses
- Purchase or sell insurance policies and annuities
- Collect Medicare, Social Security or other government benefits
- File and pay your income taxes
- Operate certain aspects of your small business
- Handle transactions with any financial institutions with which you have an account
- Hire an attorney to represent you in court
- Manage your retirement accounts
- Claim property you inherit or to which you are otherwise entitled
When does financial power of attorney take effect?
You have some options when it comes to your power of attorney arrangement. You may draft the document so that it goes into effect immediately after being signed. In this case, you should specify you wish your power of attorney to be “durable,” meaning it will stay in effect if you become incapacitated.
You may also draft your power of attorney to go into effect only upon your incapacitation, in what is known as a “springing” power of attorney arrangement. This keeps all your financial affairs solely in your control unless you are unable to handle them in certain circumstances. You may outline these circumstances when you draft the document, as well.
When does financial power of attorney end?
A durable power of attorney arrangement will automatically end upon your passing. At that point, your agent no longer has the authority to handle your financial matters unless he or she has also been named the executor of your estate, which is an entirely different responsibility for which you must arrange in your estate plan.
Durable power of attorney may also end in several other situations, including:
- You revoke it: You may revoke durable power of attorney at any time, so long as you are of sound mind to do so.
- You get divorced: In some circumstances, if your spouse is your agent, his or her power of attorney is automatically revoked when your divorce is finalized. You should double check with the court to make sure this is the case, however.
- The court invalidates your arrangement: A court may declare a power of attorney document to be invalid in some circumstances, such as if you lacked the required mental competence to sign it or if you were a victim of undue influence or fraud.
- Your agent cannot be found: If your agent is unavailable for any reason, your document could be found invalid. You should name an alternate agent to prevent this problem from arising.
For more information on granting power of attorney, work with an experienced U.S. Virgin Islands tax and estate planning attorney.
J. Nash Davis is an Associate Attorney in the Corporate, Tax & Estate Planning Practice Group at BoltNagi, a widely respected and well-established trust and estate planning law firm assisting clients throughout the U.S. Virgin Islands.