A useful tool, if they're used correctly
What Retirees Need to Know About Powers of Attorney
by Gary Foreman
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Protecting Your Finances from Yourself
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A Tool to Determine the Best Time to Take Social Security Benefits
It could happen to you or to your elderly parent. You've had an accident or a medical problem. For a few hours, a few days, maybe longer, you're unable to take care of your financial affairs. Checks can't be written. Decisions can't be made. There's an answer. It's a document called a "power of attorney." Let's examine what retirees need to know about powers of attorney.
To help us understand how powers of attorney work and what they can do, we asked Kimberly J. Howard, CFP of KJH Financial Services to help. Ms. Howard is a fee only financial planner. She answered a number of our questions about these important legal documents.
Q: In layman's terms, what is a power of attorney?
Ms. Howard: Giving someone the power to act on your behalf.
Q: What's the difference between a limited power and a general power of attorney?
Ms. Howard: Limited Power of Attorney is used when you want someone to act on your behalf in a certain circumstance. General Power of Attorney is the most powerful because you are giving someone else a broad range of powers.
Q: Is there a time limit for a power of attorney?
Ms. Howard: If you want the power of attorney to be for a limited time frame, then it must be spelled out in the document.
Q: Can a power of attorney be used after the granter dies?
Ms. Howard: The power of attorney dies, or is no longer valid, with the granter.
Q: Are there certain things that cannot be done using a power of attorney?
Ms. Howard: A power of attorney can be used for all legal and financial matters.
Q: Must you have a lawyer draw up the paper? Or can a layman write his or her own?
Ms. Howard: Anyone can draw up a power of attorney, but doing so could cause more harm than good.
There you have it. A power of attorney is a valuable tool to help you care for a loved one's financial affairs. Used correctly it can save you both time and money.
Reviewed May 2017
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. Gary shares his philosophy of money here. You can follow Gary on Twitter or visit Gary Foreman on Google+. Gary is also available for audio, video or print interviews. For more info see his media page.
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