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Financial power of attorney: How does it work?

Many Illinois residents worry about becoming incapacitated or not being able to act independently when it comes to financial or health care matters. This is one of many reasons a lot of people grant a power of attorney. It is definitely something to consider, particularly if a person wishes to designate someone to make financial decisions and transactions on his or her behalf.

A financial power of attorney is a common component of many estate plans. It is helpful to know that a trusted relative, friend or other party is ready to stand in and make important decisions if an incident occurs that leaves the person granting the power incapacitated. In fact, many people take comfort in knowing that they have specifically designated authority to someone they trust and would not be relying on strangers to make decisions regarding their health or finances.

A person designated as financial power of attorney has a fiduciary obligation to make decisions that are in the best interests of the person granting the power. This duty may be best accomplished by opening a separate bank account to keep track of all expenses and funds associated with the person over whom he or she has power of attorney. Opening a separate bank account also serves to avoid commingling any of the principal’s funds with a personal account. Keeping a separate account also helps avoid complications regarding taxes or if someone challenges a power of attorney status.

It is a serious responsibility to be given acting authority over another person’s finances. Anyone holding a financial power of attorney in Illinois will want to stay updated on the laws and regulations regarding such issues. An experienced estate planning attorney can provide valuable support in this way.