This directive specifies who can make financial decisions if you're incapacitated

There may be a time when you become become so sick or incapacitated that you're unable to make and carry out decisions for yourself. Unfortunately, you don't get a break from most bills and debts during the time you're incapacitated.  But when you're unable to keep up with your finances — writing checks, paying bills, managing your business — who can help? The person you designate using Durable Power of Attorney (POA) for Finances.

Your Durable POA for Finances directive designates another person to take care of your financial matters, only while you are incapacitated. This could be because you are unconscious or because your doctors have determined you're no longer able to make sound decisions for yourself, due to dementia or similar conditions.

The person you designate as your agent with your Durable POA for Finances will be able to pay your bills, including medical expenses; buy or sell real estate on your behalf; buy insurance for you; operate your small business; and handle any other issues that may come up regarding your money and assets. Your agent is expected to act with your best interests in mind when making these decisions for you.

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In a situation in which you recover and are again able to make and communicate your own decisions, this POA will be revoked. It's only active during the time when you're incapacitated.

(Note: This is one of two Durable POA directives you'll want to prepare, along with your Durable POA for Health Care.)

You can designate a POA without making it "durable," but that's probably not a good choice for this type of POA. "Durable" is a legal term that means the document is valid even if you're incapacitated or mentally incompetent. Since these are the situations you're planning for by creating the document, it doesn't make much sense to choose against making your POA durable.

Before you draw up this document, you'll need to decide who your financial agent should be. Most important is that this should be someone you trust to act in your best interest, no matter what. It may be that this is a close friend or family member, but some people prefer to choose their lawyer, accountant, or another person who isn't as closely connected to them. Whoever you choose, it should be someone who's capable of making good financial decisions for you and managing your small business if necessary.

Your agent designated by Durable POA for Finances is a different concept from the executor of your will. The POA agent acts only before your death, and the executor acts only after your death. POA is immediately invalidated upon your death. It's okay to choose the same person for these two duties, but note that choosing an agent for POA doesn't automatically designate that person as your executor, or vice versa — each designation needs to be made separately.

If you want to be sure all of your bases are covered, you might name a second option for your financial POA. In the event that your first choice is unable (due to their own death or illness, for example) or unwilling to serve as your agent, the second choice would go into effect.

It's a good idea to talk to the person or people you're designating as your agent — before you sign the document — and make sure they're comfortable making decisions on your behalf if the need arises. Handling another person's finances is a big responsibility, and discussing it in advance can help ensure that your agent is ready and able to help. If someone is taken by surprise with the news they've been designated as your financial agent, they may be less willing to accept the responsibility, and they probably won't have a clear idea of what decisions you'd want them to make on your behalf. Prepare your potential agent for the job to give yourself the peace of mind of knowing they'll be ready and willing to act on your behalf.

Once you've chosen who will serve as your financial agent in the event you're incapacitated, you'll write up a document indicating your choice. There are forms you can download online and fill out, or you can ask your lawyer to create the document for you. POA laws vary by state, so be sure you're using a form that's appropriate for where you live.

And presuming you don't want your POA to go into effect immediately when you sign it — but only become effective when you're incapacitated — be sure to indicate this in the document.