You can give your designated representative (agent) limited powers or very broad powers. For example, limited powers might include the authority to access funds from your bank account to pay your bills while you are traveling out of the country. Broad powers could include the authority to invest on your behalf, purchase or sell property, make charitable gifts and accept and deposit Social Security or other government benefits at any time.
It is important to clearly specify the powers you are granting and to be as detailed as possible, keeping in mind important actions your agent may need to take on your behalf, such as:
- Pay your everyday expenses
- Collect Social Security, Medicare, or other government benefits
- Collect insurance payments
- Manage your investments
- Handle banking transactions
- Access your safe deposit box
- Manage your retirement accounts
- Manage property and handle real estate transactions
- File your tax returns
Note: In most states, a Durable Power of Attorney does not give your designated representative the authority to make medical or healthcare decisions on your behalf. That authority requires a separate Healthcare Power of Attorney.
A Durable Power of Attorney can be structured to become effective immediately, or you can specify that it only becomes effective under certain conditions—if you become mentally incompetent, for example.
Trust is all-important in your choice of a designated representative. Unlike a conservatorship or guardianship, there is no ongoing court supervision of the actions taken by your designated representative.
Durable Power of Attorney Versus Joint Bank Account
Establishing a joint tenancy bank account with your designated representative can be helpful in providing access to funds. Note, however, that a joint bank account owner is free to use funds for his or her own use, while a Durable Power of Attorney requires that your designated representative use your assets for your benefit.
Also, at your death, funds in a joint bank account will automatically go to the joint owner. A Durable Power of Attorney ceases to be effective at the death of the principal, and all financial assets are subject to the will or estate plan you have put in place.
Setting Up Your Durable Power of Attorney
While there are fill-in-the-blank forms available, it may be helpful to work with an attorney to ensure that your Durable Power of Attorney is structured to meet your needs and the requirements of your state. For example, the document must specify that this is a "durable" power of attorney; otherwise, it will terminate in the event you become incapacitated. States also have different requirements regarding how the document must be signed, witnessed, notarized and filed in order to be valid.
If you move to a new state, it is important to have your Durable Power of Attorney reviewed right away.
Copies should be shared with your agent, your financial advisor, attorney and other legal and financial professionals you work with. Some financial institutions and brokerage firms require you to use their DPA forms in conjunction with the Durable Power of Attorney.
Communicating with Your Family
It's also important to let your family know about your Durable Power of Attorney—who you have designated to take financial and legal action on your behalf, and under what conditions. Over time, you will want to review the wording of the document and consider if the individual you have designated remains the best choice for the powers you are granting.
Ready to Take Action?
The most effective approach to financial planning is one that integrates all components—investments, insurance, savings for education, savings for retirement, credit needs, charitable giving, tax planning and estate planning—into a unified, coordinated strategy customized to your needs, priorities and preferences.
Your BB&T advisor can coordinate with your legal, tax and other outside advisors to ensure you have the best plan in place to fit your needs and goals.