Estate Planning: How do I give power?
Last month, I painted a simple picture of how incapacity can strike any family, often at the worst time. Regarding financial matters, the main tool to combat the problem of incapacity is called a General Durable Power of Attorney or DPA for short.
The DPA is a critical document every adult, young or old, should have in place. It says in a nutshell who can sign financial documents for you.
However, the first warning I give to all my clients is that this is probably the most powerful document you will ever sign. Therefore, it is critical that it is drafted properly and understood properly by the client who signs it.
Most DPA’s give your agent, the person you choose to put in charge, any financial power you have. Some powers are scary like fact that the agent can take out loans in your name, credit cards in your name, sell your stuff and buy stuff. In addition, they can direct distributions from your IRA or 401k.
You might ask, with all those powers do I really want this document in place? The answer should be yes, as long as you have someone you trust to be your agent. As I stated last month, if your wife needed to sell or refinance your house, she would need your DPA to do it.
However, concern is warranted and things can go really wrong with a DPA. I will discuss some of the pitfalls of a DPA next month.
Matthew Hart is a California Licensed Attorney who is an Estate Planning, Trust & Probate Law Specialist certified by the State Bar of California. He can be reached at www.MatthewHartLaw.com or 925-754-2000. He has offices in Antioch and Walnut Creek.