A Financial Power of Attorney is a legal document that allows you to name someone to make financial decisions for you. This person is called your Agent. The power granted to the Agent may be limited, or may be very broad. The Agent may act for you at anytime; mental incapacity is generally not required for the Agent to act, but if you wish, a Financial Power of Attorney may be effective only upon your mental incapacity.
A Financial Power of Attorney is an important part of an estate plan. You name someone to make important financial decisions if for some reason you are unavailable or unable to act. A spouse, as a joint owner, may be able to handle certain transactions without the signature of the disabled spouse, but there are many legal documents a spouse is unable to sign. Any assets which are owned by you alone and the spouse is the beneficiary are not under the control of the spouse. These assets may include annuities, retirement accounts and life insurance. In order to be certain someone has the ability to manage all the assets, a very complete Financial Power of Attorney is necessary.
If you become incompetent and do not have a Financial Power of Attorney, the Probate Court will appoint a Conservator to manage your financial affairs based upon Petitions filed by the family. The Conservator is under Probate Court supervision and control, and the Probate Judge may need to approve any major financial decisions. The Agent under a Financial Power of Attorney is not under Probate Court supervision.
If you do not have a Financial Power of Attorney, or you have a Financial Power of Attorney without extensive power granted in it, it may be necessary to request Probate Court approval for any planning that would protect assets in the event you need to apply for Medicare. Having a strong Financial Power of Attorney with the proper powers avoids the need to seek Probate Court approval to do this Medicare planning. Some Probate Judges will not approve Medicare Planning, and the Financial Power of Attorney avoids the cost of going to Probate Court and taking the risk the Judge will not approve the Medicare planning.