Recently, my family experienced firsthand why everyone over the age of eighteen needs a Durable Power of Attorney for Finances. Earlier this year, my twenty-two year old nephew was in a motorcycle accident. He spent about a month in the hospital, unconscious and on a ventilator. My sister, his mother, had asked him to sign a Durable Power of Attorney when he got the motorcycle. Because he had this document in place, she was able to pay his rent and other bills, work with the insurance company, and apply for disability for him while he was in the hospital. Thankfully, he has recovered from the accident with no long-lasting physical or financial damage.
A Durable Power of Attorney is a document that you sign giving someone else the authority to act on your behalf. It can be effective immediately or upon your disability or incapacity. Without a Durable Power of Attorney for Finances, in the event of your incapacity, your loved ones cannot access your financial assets to pay your rent or mortgage, collect your wages, disability benefits, or Social Security benefits, pay your monthly bills, pay for care you need, or make investment decisions. These issues are not just a concern for seniors, but for everyone.
A common misconception is that a spouse has the authority to act on behalf of both partners in the event of one partner’s disability. This is not the case. Although the healthy spouse generally has the right to manage assets in both partners’ names, they cannot manage the separate assets of the other spouse. They also cannot sell or mortgage the real property of the disabled spouse, including real property that is jointly owned by both spouses, without a Durable Power of Attorney that gives that authority.
What happens if you become disabled and do not have a Durable Power of Attorney for Finances in place? Typically, in this situation, the Courts become involved and appoint a guardian to make financial decisions for you. This process is lengthy, costly, and can involve a substantial loss of rights. In Washington, it is not uncommon for the costs of a guardianship action to run in the several thousands of dollars, generally paid from the incapacitated person’s assets. Compare that to the few hundred dollars it costs to hire an attorney to prepare a Durable Power of Attorney for Finances. This is one instance where it definitely pays to plan ahead.
Take control now and decide who will manage your affairs and act in your best interest when you are unable to, and execute a Durable Power of Attorney for Finances. It may be the best decision you ever make.