Estate planning is about more than just what happens after you die. It also includes preparing for scenarios where illness or incapacity render you unable to manage your finances. This is where a Financial Power of Attorney (FPOA) becomes essential for Wisconsin residents.
What Is a Financial Power of Attorney?
A Financial Power of Attorney is a legal document that authorizes someone you trust (your “agent”) to handle your financial affairs when you cannot do so yourself. Unlike a will, which takes effect after death, an FPOA functions during your lifetime.
This powerful document allows your chosen agent to pay bills, manage investments, handle real estate transactions, file taxes, and make other financial decisions on your behalf.
Why Your FPOA Should Be Comprehensive
Many Wisconsinites make the mistake of using limited powers of attorney that restrict what their agent can do. While this might seem prudent, it can create significant problems if you become incapacitated.
A comprehensive FPOA offers several advantages, including:
- Flexibility: Your agent can address unforeseen financial situations that may arise during your incapacity.
- Asset protection: A properly structured FPOA allows your agent to implement strategies that might protect your assets from long-term care costs.
- Avoiding guardianship: Without a robust FPOA, your loved ones might need to petition the court for guardianship. This process can be expensive and time-consuming, and it is also public.
Key Authorities to Include in Your FPOA
For maximum effectiveness, your Financial Power of Attorney should explicitly grant your agent authority to:
- Make gifts: Without gift-making authority, your agent cannot help with tax planning or qualifying for certain benefits.
- Create and fund trusts: This capability allows your agent to establish irrevocable trusts that might protect assets from long-term care costs.
- Change beneficiary designations: This authority can be crucial for optimizing retirement accounts and insurance policies.
- Handle real estate transactions: They should be able to sell, mortgage, or lease property without court approval.
- Access digital assets: Your agent needs authority to manage online accounts and assets in our increasingly digital world.
Durable vs. Springing Powers of Attorney
Wisconsin recognizes two primary types of Financial Powers of Attorney:
- Durable FPOA: Takes effect immediately upon signing and continues if you become incapacitated
- Springing FPOA: Becomes effective only when a specified event occurs, typically when you become incapacitated
While springing powers might seem appealing since they activate only when needed, they often create practical challenges. For example, your agent may face difficulties proving your incapacity to financial institutions, which can delay critical financial decisions when time is of the essence.
Selecting the Right Agent
Your choice of agent is as important as the document itself. Your agent should be:
- Trustworthy: Someone who will always act in your best interest
- Financially responsible: Capable of handling complex financial matters
- Available: Able to devote time to managing your affairs if needed
- Willing to serve: Someone who understands and accepts this significant responsibility
Beyond the Wisconsin Statutory Form
While Wisconsin offers a statutory FPOA form, it provides the agent with authority for only basic subjects. For comprehensive protection, you should work with an experienced estate planning attorney to create a customized FPOA tailored to your specific needs and concerns.
At Peterson, Berk & Cross, S.C., our estate planning attorneys can help you develop a Financial Power of Attorney that provides both robust protection and peace of mind. We will make sure your document contains all necessary authorities while reflecting your unique wishes and circumstances. Contact us today at (920) 831-0300 for a consultation.