Power of attorney

When you can't control your financial life, make sure someone you trust will by assigning power of attorney when writing your will.

No one is immune from aging or the loss of mental clarity that may come with it. And you're never immune to health crises that may leave you unable to handle the business of your life: paying bills, managing investments or making key financial decisions.

Granting someone you trust the power of attorney allows that person -- known as your "agent" or "attorney in fact" -- to manage your financial affairs if you are unable to do so.

Your agent is empowered to sign your name and is obligated to be your fiduciary -- meaning they must act in your best financial interest at all times and in accordance with your wishes.

There are different kinds of powers of attorney, but in estate planning there are two essential types you should know:

The first is the "springing power of attorney," which only goes into effect under circumstances that you specify, the most typical being when you become incapacitated.

Often that means your agent cannot act until he or she provides doctors' letters and sometimes court orders to prove you are incapable of making decisions for yourself.

There is also the "durable power of attorney." It is effective immediately, and your agent does not need to prove your incapacity in order to sign your name.

An attorney can help you decide which form makes the best sense for your circumstance. In any case, take care in choosing your agent. That person should be competent, trustworthy, willing to take on the burden of your affairs and financially secure.

If you choose a relative or friend as your agent, you probably won't have to pay them. But if you name a bank, lawyer or other outside party, you will have to negotiate compensation, which can range from hourly fees to a percentage of your assets paid annually.

If you do become incapacitated without having assigned power of attorney, the court will step in to appoint a guardian. This process might cost your family well over $1,000, not including the cost of the guardian's annual visits to court to report on your situation. Plus, the person chosen may not be someone you would have picked.

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