How to Choose a Financial Power of Attorney
December 5, 2023
When a loved one becomes too ill or incapacitated to make decisions, many tough decisions typically fall to the family. There is never a good time to make these decisions, and nobody wants to make them when their attention should be on one’s family. You, as the person that has become too ill or incapacitated, surely wants to avoid placing the burden on loved ones when their focus is on you.
A power of attorney (POA) gives someone the legal ability to make decisions on your behalf when you cannot do so. In these situations, the named person can manage your affairs, including overseeing property, moving money, and purchasing life insurance. It's essential to designate POA as part of financial planning to ensure your assets are in good hands if the unexpected happens.
Definition of a Financial Power of Attorney (POA) for Life Insurance
A POA is a legal document designating an attorney-in-fact (also called an "agent") to take certain actions. The POA also describes the limits of your agent's power. For instance, an agent may only have the ability to make medical decisions if you're incapacitated. Many POAs give agents financial decision-making authority, as access to funds is essential during an emergency.
Because there are many situations where you may need an agent, several types of POAs exist, including durable and non-durable POA. In the case of a non-durable POA — a common arrangement for agents with restricted powers, such as brokers — the authority granted to the agent ceases if you become incapacitated. On the other hand, a durable POA provides your agent with the ongoing legal authority to act on your behalf, even in the event of your incapacitation.
There are also limited versus general POAs. Limited POA bequeaths limited scope, while a general POA allows agents to act as if they are you. In either case, choosing someone who puts your interests first is crucial.
The Intersection of Life Insurance and Financial POA
Life insurance plays a vital role in financial planning, so you may want to give your agent power to manage policies. A POA can give agents the following powers:
- Change beneficiaries
- Renew policy
- Pay premiums
Discuss your intentions for the insurance policy with your agent, and provide guidelines for decision-making. Doing so ensures the attorney-in-fact's decisions align with your wishes.
Factors to Consider When Choosing a Financial POA
You can technically appoint any legal adult as an attorney-in-fact, including family members, business associates, and professional advisors. That said, it's best to choose someone who meets the following criteria:
- Is reliable and trustworthy
- Is capable of managing assets and insurance
- Has adequate financial knowledge
- Understands a financial POA's responsibilities and limitations
Legal and Practical Considerations
The legal process to establish a financial POA varies by state. However, it usually involves written documentation of the following:
- Responsibilities
- Agent name
- Your signature
You may need a witness and notarization for the document to be legally binding. To change or revoke a POA, you'll need a separate document outlining the change or revocation. Ideally, you should work with financial and legal advisors to coordinate legal filings and ensure a seamless transition.
The Right Choice of POA for Life Insurance
If you're utilizing life insurance in your financial planning, it's crucial to include management powers in your POA. Proactive efforts safeguard your beneficiaries' financial security with strategic choices and contingencies.
To alert 1891 Financial Life of a POA, mail the documents to:
1891 Financial Life
c/o Customer Care
200 N. Martingale Rd. Ste. 405
Schaumburg, IL 60173
Alternatively, you can email them to info@1891FinancialLife.com or fax them to 847-342-4556. For more information, contact us today.
What is key is to act now! Do not wait and further burden your family with legal issues that can be avoided.
About 1891 Financial Life
At 1891 Financial Life, we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs. In 2023, 1891 Financial Life was listed by Forbes as one of "The World's Best Life Insurance Companies."
Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.