If you become incapacitated, either temporarily or permanently, who will pay your bills, manage your investments, and take care of all your other money matters?

If you’re married or have children you can’t assume that your spouse or children will be able to fully take charge. While children and spouses may be able to pay bills from a joint checking account or sell investments in a brokerage account you both own, they have no legal authority over property you own solely.

Moreover, in most states both spouses must agree to the sale of jointly owned real estate and vehicles -- but an incapacitated spouse can’t consent to such a sale. That’s why you generally need a durable power of attorney for finances, no matter how old you are or how your health is.

Why you may need a durable power of attorney for finances

A durable power of attorney for finances is a legal document in which one person, the principal, gives authority to an agent, also called an attorney-in-fact, to act on his or her behalf.

A durable power of attorney for finances allows you to name someone you trust, such as your spouse, adult child, partner, or trusted friend, to manage your finances if you become incapacitated either temporarily or permanently.

If you don’t have a durable power of attorney for finances and you become incapacitated, a court will have to appoint a conservator or guardian to manage your finances for you.

If you don’t have someone you trust enough to handle your financial affairs, a power of attorney for finances may not be appropriate for you. Instead, having a court appoint and supervise a conservator may be your only option.

How a durable power of attorney coordinates with a living trust

You still need a durable power of attorney for finances even if you have a living trust.

With a living trust, the successor trustee you named has the authority to manage all property in your trust if you become incapacitated. But a successor trustee has no authority over property the trust doesn’t own and most people don’t transfer all their property into a living trust.

Plus, a living trust doesn’t take care of income from Social Security, pensions, and other sources.

How a durable power of attorney for finances works

The person you name to handle your finances is called your agent or attorney-in-fact. Typically, you give your attorney-in-fact broad powers including the authority to:

• Use your assets to pay everyday expenses
• Handle insurance
• Pay taxes
• Handle real estate transactions
• Manage your investments
• Make gifts
• Collect Social Security, Medicare or other government benefits

However, you can narrow these powers if you want.

Article is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.

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