Power of Attorney and Your Investments—10 Tips

Investments Power of Attorney April 30, 2016 Author: Woody Derricks

Power of Attorney and Your Investments—10 Tips

Source: FINRA, Financial Industry Regulatory Authority

It’s never too early to consider how you want your financial affairs to be managed if something happens to you. One solution is to grant a power of attorney (POA) for your investments account assets to your spouse, sibling, adult child or close friend—someone you trust to act wisely and in your best interest. Many factors determine the type of POA you need, and whether it will hold up when needed.

What is a Power of Attorney?
A POA is a legal document you sign to grant someone you trust with authority to make decisions on your behalf. Based on the authority you grant, this attorney-in-fact, or agent, has the legal right to make the decisions you would make if you were able. Many states require that POA documents be in writing, witnessed and notarized.

A POA can be important—even essential—to managing your financial affairs in the event you unexpectedly become unable to manage things on your own. For example, a health issue might land you in a hospital or rehabilitation center for a lengthy period, or you could become mentally incapacitated.

Planning for the future with a POA could minimize complications to addressing your financial goals, but it may feel like a daunting task. Depending on your circumstances, you may want to talk to an attorney who specializes in these types of arrangements.

Power of Attorney Tips
Below are 10 tips to help you understand, create and prudently use a POA for your investment account assets. For a full description, refer to:

1. Don’t Let Anyone Pressure You into Signing a POA
2. Select an Agent Who Understands Your Investment Goals and Objectives
3. Be Specific About the Authority You Are Granting
4. Make Your POA Durable
5. Check the POA Requirements for Your State
6. Find Out if Your Financial Institution Has Its Own POA Forms
7. Check in With Your Financial Institution Periodically
8. Know How to Change or Revoke Your POA
9. Understand the Difference between POA, Discretionary and Managed Accounts
10. Have a Backup Plan

While a POA can provide clarity on how your affairs will be managed while you are still living, it does not replace the need for a comprehensive estate plan that takes effect when you die. POA arrangements terminate upon your death or the death of your agent, so make sure you also have considered what will happen to your investment assets and other finances when you pass away.

Here are some additional resources on POA:
FINRA: Estate Planning: Power of Attorney
American Bar Association: Estate Planning FAQs
National Academy of Elder Law Attorneys
AARP: Financial POA
Securities and Exchange Commission: Investor Bulletin and Consumer Advisory: Planning for Diminished Capacity and Illness

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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