Mint has you covered during coronavirus. Stay up-to-date with the latest financial guidelines and resources here.

MintLife Blog > Family Finances > Why We Need A Will And A Power Of Attorney

Why We Need A Will And A Power Of Attorney

Family Finances Will and power of attorney

When you hear, ‘estate planning’ what is the first thing that comes to mind? For most of us, we may default to the process of dispersing physical assets such as homes or cars. While this indeed does apply, estate planning in general captures so much more.  It also determines how a person’s assets will be preserved, managed, and distributed after their death if they become impaired.

Planning is everything and this includes discussing what happens as we all naturally age. Who will be in charge of our affairs? What happens if I’m unable to make sound decisions on my own behalf? Where and how should I distribute my money and other assets? It is never too early to begin this process and begin answering these questions.

What is the purpose of a will and why is it important?

A will is a living document that explicitly lists all assets and debts tied to a specific person. Not only is this document a necessity to ensure every wish is respected after a person’s death – it guarantees everything is divided and dispersed as outlined. This can be limited to one person or multiple people such as a spouse, children, friends, or a charitable organization. A will is also leveraged to appoint a legal guardian to care for minors, if applicable.

When should I create a will?

Anyone can create a will at any time and it’s typically best to plan ahead and create one soon as you feel the need to or when you acquire important assets. Please note that you can update, change, or cancel the will at any time. Certain major life events may also require changes to a will such as the purchase of a home, marriage, or expanding your family with children. This is one of the best times to replace or make any additions.

How do I create a will?

Making a will isn’t difficult or expensive. It takes time and effort, but it isn’t as daunting as many may paint it out to be. Here are a couple different methods:

Write it yourself. A will is legally binding if you write and sign it. To ensure the document is legally binding, be sure to research the law in your specific state for details. It’s best to have a notary present to witness to avoid any hiccups for your executors in the future.

Use the expertise of legal counsel. You can always leverage this option to ensure you do not miss any pertinent details. A paralegal or lawyer will be able to address things you may have not considered. Often times law firms can store these documents safely as well.

Once the will is written, you should store it in a location that your loved ones and executors can easily locate. You can keep it at home with other important documents, preferably in a fireproof box, or a safe deposit box. The key here is to make sure it is accessible. If the location of the document changes due to moving or emergency – make sure the people that need to know where it is can locate it with no issues or hassle.

What is a power of attorney?

A power of attorney is a mandate given by one person (the grantor or principal) to another person (the agent) to represent him or her in an action. In other words, it is the power granted to act and make decisions on the agent’s behalf if they become incapacitated.

There are four different types which we’ll explore.

General Power of Attorney: In this scenario, the agent can perform almost every act as the principal, such as opening bank accounts and managing personal finances. A general power of attorney arrangement is no longer valid when the principal becomes incapacitated, removes the power of attorney or passes away.

Durable Power of Attorney: This specific arrangement designates another person to act on the principal’s behalf and includes a clause that allows the agent to maintain the power of attorney before, during, or after the principal becomes incapacitated.

Special or Limited Power of Attorney: In this instance, the agent has specific powers limited to a certain area or category. An example is a power of attorney that grants a person the authority to sell their home or real estate.

Springing Durable Power of Attorney: In some states, a springing power of attorney is available and becomes effective when an unfortunate event occurs, resulting in the principal becoming incapacitated.

What makes a power of attorney document valid?

The grantor must be mentally competent when they sign the power of attorney. The process of having witnesses sign the document also helps to ensure that it’s 100% authentic, no coercion is taking place and everyone involved is competent. Also, you need to notarize their signatures, further strengthening credibility.

What is the process to complete power of attorney documentation?

Obtain the required forms: Either from a local lawyer’s office or via any source that offers accurate, legal documents. You can easily find many forms or templates online. You can tweak this documentation to meet your personal needs.

Complete the forms thoroughly: If you have any questions or concerns, don’t hesitate to consult a lawyer before completing this agreement. Be sure to review this documentation with your appointed agent(s) to ensure everything is concise and clear.

Have the papers notarized: With your agent, sign the papers in the presence of a notary. Local banks and law offices typically have them available. Similarly to the wills, make copies of the agreement and file them in safe places. You should store all of your estate planning documentation n a central location.

While it’s never easy to discuss these topics as you age, it provides a different level of peace of mind.  Ensuring your loved ones are aware of your wishes beforehand creates a smoother, less stressful process.

Leave a Reply