A useful tool, if they're used correctly
What Retirees Need to Know About Powers of Attorney
by Gary Foreman
When to Use Power of Attorney
Protecting Your Finances from Yourself
What Is a Power of Attorney and Do You Need One?
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 Howard: The power of attorney dies, or is no longer valid, with the granter.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.
Take the Next Step:
- What is a revocable living trust? And should it be part of your estate planning?
- Determine if debt could derail your retirement and what you can do about it now. Our checklist can help you. Afterall, one of the most important ingredients for a comfortable retirement is to be debt free when you retire.
- Find information geared specifically for Baby Boomers in The Dollar Stretcher section dedicated to your financial issues. If you're over 50 your financial needs are different. And so are your questions.
- Subscribe to After 50 Finances. You've learned how to work smarter, not harder. This weekly newsletter is dedicated to people just like you. Subscribers get a FREE copy of our After 50 Finances Pre-Retirement Checklist, a list of everything you need to do to be ready for retirement.
Share your thoughts about this article with the editor.
Baby Boomer Tools & Resources
- A tool to determine the best time to take Social Security benefits
- Get out of debt before you retire
- Get free answers to financial questions
- Get free answers to legal questions
- Retirement shortfall calculator
- Life expectancy calculator
- IRA required minimum distribution calculator
- More retirement planning calculators
Trending in Baby Boomers
- Investing retirement money that you may never need
- Financial tips when nearing retirement
- Why pay off your mortgage with a reverse mortgage loan?
- 3 ways retirees can tap into their home equity
- A realistic second career for retirees
- Things you should know before buying burial insurance
- Including travel as part of your retirement planning
- How to get an elderly parent to accept help with their finances
- This week's Readers' Tips