Financial Power of Attorney: What is it for?
If you do not have legal capacity to make financial decisions on your own behalf, then how do your decisions get made? Who would be making those decisions? Without a comprehensive estate plan in place which includes a financial power of attorney, the remaining option is for a loved one to seek a conservatorship over you from the probate court.
In California, it is presumed that a person has the capacity to make decisions and be responsible for their actions and decisions. (Cal. Prob. Code § 810.) The mere diagnosis of a mental or physical disorder is not sufficient to show that a person lacks legal capacity. (Cal. Prob. Code § 811(d).) Various factors are looked at to determine whether a person has legal capacity. This includes looking at alertness and attention, information processing, thought processes, and ability to modulate mood and affect. (Cal. Prob. Code § 811(a).)
Further, a person lacks the capacity to make a decision unless the person has the ability to communicate verbally, or by any other means, the decision, and to understand and appreciate, to the extent relevant, all of the following: (a) The rights, duties, and responsibilities created by, or affected by the decision, (b) The probable consequences for the decisionmaker and, where appropriate, the persons affected by the decision, and (c) The significant risks, benefits, and reasonable alternatives involved in the decision. (Cal. Prob. Code § 812.)
Without a financial power of attorney, a loved one will need to petition the court to seek a conservatorship of your estate, to allow them to manage finances. In Los Angeles County alone, an emergency conservatorship (which is only temporary) could take several months to obtain and that is if no one is objecting to it. A permanent conservatorship could take one year or more to obtain. Even if the petition is granted, there is regular record maintenance required and regular filings with the court including a yearly accounting.
With a financial power of attorney, you can name a third person of your choice to have the same authority one would have under a conservatorship. The major differences are that you chose the person and everything is happening outside of a courtroom. Having this in place prevents delay in making sure someone can carry out your daily financial decisions on your behalf. An estate plan is not complete without a financial power of attorney.
Nothing in this article should be construed as legal advice. For specific guidance regarding your situation, please contact an attorney.