When you sign a general power of attorney, you authorize someone to manage financial matters on your behalf in the event that you are unable to do so yourself. That’s a lot of responsibility to sign over to someone. You need to pick someone who is trustworthy, someone who will act in your best interests. But you also want to choose someone who can handle the responsibility of managing the assets you’ve accumulated during your life. You wouldn’t ask your 18 year-old child to run your crop-dusting business, would you?
Basic Qualifications
Perhaps the best place to start is by asking the question, “Who do I trust with my finances?” The person you select will be acting as an extension of you. Documents they sign on your behalf will be treated as if you signed them yourself, including bank authorizations, contracts, and deeds of title, so you need need need to choose someone you would trust with your checkbook.
Of almost equal importance is choosing someone who can handle the responsibility. Is your high school senior daughter the right choice? Your middle-aged oldest child might have a good head for business, but are they going to be able to focus the necessary attention on your affairs if they also have a special needs child who needs their time and attention?
Some Family Considerations
So, you’re going to choose someone you trust who can handle the duties. If you’re married, the first person you turn to is your spouse. This is a great choice as primary power of attorney in most situations (see above for exceptions), but what if your spouse can’t do it? Most often, people choose another family member, like a child or a sibling.
But before you just assign the duties to your perfectly capable and trusted oldest child, you should ask, “Who is best suited to the required tasks?” Consider whether that child has the knowledge and experience necessary to manage your affairs. Is a graphic designer the best choice to manage a farm operation? Would you trust your nest egg to a college senior?
Theory Versus Practicality
In many cases, your financial power of attorney will need to act on your behalf on a daily basis. Whether that means paying the utility bill, withdrawing funds from an IRA, or signing documents to sell your house, your agent may need to be physically present in order to do their job. So, convenience is going to play a major role in deciding who should act as your power of attorney.
In addition, while it might make your five children feel good to all be appointed together as your agent, is it wise to make the child who lives in the same town as you call her older sisters who live in Santa Barbara, Cleveland, and Beijing every time she needs to make a decision? Should you designate multiple individuals to serve together if those individuals don’t get along? Consider whether the better option is to appoint one child or sibling as primary agent and appoint the others as alternates.
A Best Practice for Choosing any Fiduciary
Finally, the best way to make the final decision about who will act as your agent under your financial power of attorney is to simply ask the person you think is the right choice if they are willing to take on the role. For that matter, ask them about every fiduciary choice you need to make. You might be surprised to discover that your children actually have an opinion about how the various roles should be designated. Odds are good that one or more of them doesn’t want to take on the responsibility of the office.
The List You’ve Been Waiting For
Choosing a financial power of attorney can be a big decision. The person you select will have the same authority you have to transact business in your name. That person must act in your best interests as a fiduciary, but it can be difficult for you and your loved ones to monitor the activities the agent engages in. But, if you use these five factors, you’ll put yourself, your agent, and your loved ones in the best possible position for protecting your best interests:
- Who do I trust with my finances?
- Who can handle the responsibility?
- Who is best suited to the required tasks?
- Who will be in the most convenient position to act?
- What do my loved ones or family members think?
I’ve also put together a helpful Client’s Guide to Choosing a General Power of Attorney which you can find in PDF form here.
