Senator Diane Feinstein is the oldest member of Congress. She has faced some serious health problems in the past year which caused her absence from the Senate for a number of months. There are reports that she gave her daughter, Katherine Feinstein, power of attorney. Her daughter, as her agent, subsequently filed a lawsuit against the trustees of the estate of Senator Feinstein’s late husband alleging elder financial abuse. Why would a sitting member of Congress need to have an agent? Is this a sign that she cannot manage her own finances?
A financial power of attorney (also called a durable power of attorney) gives an agent the power to take care of your finances if you become incapacitated or you are unavailable to manage them yourself. If you become incapacitated for a short or a long period of time, you will need someone to pay your bills, do your banking, make investment decisions, and deal with taxes. In other words, you will need someone to handle your financial matters. This person is called your agent.
Here’s a common example. If a father develops dementia and can no longer remember to pay his bills, a financial power of attorney allows his designated person to take over paying his bills, filing his tax return, doing his banking, and even managing his money.
Spouses also often sign these agreements to make financial management more convenient. Perhaps one spouse has a job that requires a lot of travel. The couple is selling their home. Using a power of attorney, the wife can sign her husband’s name.
A power of attorney can be effective immediately or upon a person becoming incapacitated. The choice depends on the client’s age and personal circumstances. Does the client travel a lot for work? Is the client comfortable giving someone that power immediately?
The downside of financial powers of attorney
Financial powers of attorney are among the most abused documents. There are countless stories of agents who take money for their own use. A son may take his mom’s money when she is in the hospital and buy himself a new house. When the mom makes a miraculous recovery, she then has to get her money back from this person that she trusted.
For this reason, we recommend putting a lot of thought into choosing your agent. This person has a lot of power.
Types of financial powers of attorney
A limited power of attorney is usually for a specific purpose and time period. This document can be executed to accomplish a single goal, such as selling a house. It would only have the specific power needed to accomplish the goal.
A limited power of attorney could also be used for a specified period of time. We have many clients who are stationed overseas. It makes sense to give someone a limited power of attorney while they are abroad so the agent can manage assets left behind in the United States.
Why it’s important to keep your financial power of attorney up-to-date
Sometimes people have a very old version of their financial power of attorney. Or sometimes they created an estate plan 30 years ago and did not consider the need for a financial power of attorney.
If you or your loved one becomes incapacitated and you do not have this document, the only way to gain control over the incapacitated person’s finances is to obtain a conservatorship through the court. This is an expensive process, and after it is over, the court will retain oversight over the incapacitated person’s finances. Ensuring that you have an up-to-date financial power of attorney can avoid all of that.