Incapacity is not pleasant to ponder, but through a Power of Attorney you can grant to a trusted individual, ideally a family member or close friend, legal authority to manage your financial affairs as your ‘agent’ in the event you become incapacitated. For your Power of Attorney to be legally valid, you need to be mentally competent when you sign it, so advance planning is key.
A Power of Attorney can grant an agent full or limited authority to manage your financial affairs, and Virginia law requires that any actions an agent takes on your behalf under a Power of Attorney be in your best interests. We generally recommend granting an agent full authority because most people want their agent to be able to manage all of their financial matters, including paying bills, taxes and insurance premiums, managing the financial aspects of living assistance and healthcare necessitated by incapacity, managing investments or monitoring an investment manager, collecting payments owed, and also making or defending a legal claim if necessary. A Limited Power of Attorney is generally not used for incapacity, but rather for a specific transaction, such as signing a deed or car title on your behalf.
Your agent needs to be trustworthy and a good record keeper, but does not necessarily need financial expertise; the Power of Attorney can (and generally should) authorize the agent to hire financial and other professionals as needed, and pay for such reasonably needed services with your money. It is also important that your agent would be willing to keep your family members or those close to you informed about the status of your finances if that is your desire.
An agent’s authority to manage your financial affairs can begin immediately upon signing the Power of Attorney, or alternatively the Power of Attorney can specify that your agent only has authority after a medical professional certifies that you are incapacitated. We generally recommend granting an agent immediate authority so the agent can act on your behalf promptly without waiting for a medical professional to conduct an evaluation, and can avoid having to prove your incapacity every time the agent needs to act. Additionally, granting immediate authority enables your agent to take care of financial matters for you if you’re not disabled but just unavailable- for example, if you’re traveling abroad and your signature is needed back home.
Trust is the paramount consideration for choosing an agent because your agent will typically have access to your financial assets. You are much better off with no Power of Attorney than having one that names a dishonest agent.
If you do not have a Power of Attorney, a court-appointed Conservator might be necessary to manage your financial matters if you become incapacitated. This requires a public hearing to determine your incapacity. A Conservatorship can be costly and cumbersome, but in Virginia, the Conservator posts an insured bond and has to file annual accountings (which become public record) with the court, so your assets are protected. However if you have someone (or several people- multiple agents can serve at the same time either jointly or independently, but it is vital that they get along) you trust unconditionally who is willing to serve as your agent, with a Power of Attorney your financial affairs could be managed more efficiently, privately and with significantly less cost than with a Conservatorship.
Often family members will serve as agent for no fee or for a small fee. However unless a client has a strong preference that family members receive no compensation for serving as agent, we generally recommend that a Power of Attorney authorize an agent to receive reasonable compensation for services provided because serving as agent for an incapacitated person can be a large responsibility. Once everything is organized, taking care of bill paying and other routine financial matters for an incapacitated person can be handled without too much difficulty. However, usually an agent is also responsible for the financial aspects of the living assistance and healthcare services an incapacitated person receives, and this responsibility can involve deciding between in-home care and nursing home care, determining the appropriate level of care, and monitoring the quality of the care being provided. These tasks are challenging and can be time consuming.
In Virginia, a person can have legal authority to make healthcare decisions on behalf of an incapacitated person through a legal document commonly known as as an Advance Medical Directive. It is common for the ‘financial’ agent under a Power of Attorney and the ‘healthcare decisions’ agent under an Advance Medical Directive to be the same person, but regardless, the agent under a Power of Attorney will generally be responsible for ensuring that the amount of money paid for an incapacitated person’s care is appropriate considering the incapacitated person’s needs, financial resources and the quality of care provided.
For your agent to have immediate access to your primary checking account if you become incapacitated, it might be advisable to submit your signed Power of Attorney to your bank so the bank’s legal department can review and approve it in advance. Since a Power of Attorney is revocable, banks are hesitant to accept Powers of Attorney signed years ago. You should sign at least two duplicate original Powers of Attorney so you have an original if you need to submit one to a financial institution’s legal department for review, or if one original is lost.
A Power of Attorney terminates when you die, or at such sooner time as you revoke it. Upon termination, the person named as your agent no longer has legal authority under the Power of Attorney to act on your behalf. If you want the person named as your agent to have immediate access to your bank account upon your death to pay final expenses, you might consider naming that person as a joint account holder with a right of survivorship, and clearly communicating that account funds would only be used for your benefit.
A Power of Attorney is one of those things that would be nice to never have to use. However, in the event you become incapacitated, if you have named as your agent a responsible person you trust unconditionally, a Power of Attorney can ensure that your financial affairs are well-managed.