At Chayet & Danzo, LLC, we sit down with Colorado clients to learn about their concerns and goals for financial security during their lives and the financial protection of their loved ones now and into the future. Under Colorado law, many estate planning tools exist to help our clients meet those goals. Today we will talk about one of them: the financial power of attorney.
A financial power of attorney, sometimes referred to as a POA, is a legal document that you (called the principal) can execute to give another person (called the agent or attorney-in-fact) the authority and responsibility to handle your financial affairs.
(A financial POA is different from a medical power of attorney, which is a separate legal document you can use to appoint someone to make medical decisions for you if you become incapacitated and to state your wishes for medical treatment in such a situation. A medical POA is also known as a living will.)
Colorado law governing financial powers of attorney
Colorado’s laws governing financial powers of attorney changed in 2010, when the state’s version of the Uniform Durable Power of Attorney Act took effect. A power of attorney executed now under the new law is automatically “durable” unless it says otherwise.
A durable power of attorney means that it will continue after the principal becomes incapacitated, which is the most common reason people choose to execute them. The principal wants a trusted person to be able to manage the principal’s affairs during a temporary or permanent state of incapacity. For example, the agent can pay ongoing bills and provide support for dependent family members during a period of incapacity after surgery, from an accident, from mental illness or because of another reason for cognitive decline.
When should the POA take effect?
Sometimes the POA will be set up to “spring” into existence on a future date or upon an event, usually the principal’s incapacity. Colorado law provides that if a springing POA depends on incapacity or another event, the principal can name a person or persons to determine whether the incapacity or event has happened.
If the principal has not named someone to determine incapacity or that person cannot or will not decide, the POA can take effect if a doctor, psychologist, attorney, judge or government official determines in writing that the principal has become incapacitated.
IF a POA is not springing, it takes effect immediately after the principal executes it. Reasons can exist to have someone in place to act for you even without incapacity. For example, you may travel internationally for work and want someone at home to be able to handle things for you in an extended absence.
We will continue our discussion of financial POAs in an upcoming blog, including the kinds of powers a principal can give an agent.