What are Powers of Attorney and Do You Need Them?
andrew • November 13, 2022
Very few people go from being perfectly healthy to passing away. In reality, there is often a period of declining cognitive abilities and physical condition that require special attention to properly prepare for. One of the most common situations concerns when an elderly individual begins to suffer the early symptoms of dementia. Who will be there to step in to handle financial responsibilities such as paying taxes and bills, or make sure that accounts are not drained from fraudulent purchases?
Obviously, if the individual is married and shares joint accounts, then their spouse can manage those situations without any special authority. Absent additional authority, however, the spouse cannot manage property owned solely by the other spouse with declining cognitive abilities. They also cannot sell jointly owned real estate on behalf of the other spouse if they are truly incapacitated.
To perform these actions, a financial or general durable power of attorney is needed. This document can greatly facilitate financial management in end-of-life situations where an individual is rapidly losing their mental faculties and physical health by allowing a designated individual to make payments, deposits, transfers, etc. from your accounts. This may seem like an awful lot of trust to put in another person, but they have a fiduciary obligation to you to act in your best interests. To this end, an agent acting as financial power of attorney should never commingle funds from the individual’s accounts with their own.
One of the most important questions concerning the appointment of a financial power of attorney (aside from who is to act as agent) concerns when the power of attorney goes into effect. Individuals have the option of having the power of attorney taking immediate effect, or only upon a determination of their incapacity, with such a determination being made by a written declaration signed by an independent physician.
One of the most important questions concerning the appointment of a financial power of attorney (aside from who is to act as agent) concerns when the power of attorney goes into effect. Individuals have the option of having the power of attorney taking immediate effect, or only upon a determination of their incapacity, with such a determination being made by a written declaration signed by an independent physician.

There are benefits and risks to both options. Putting the power of attorney into immediate effect would allow your designated agent to access your accounts, and to the extent they have bad intentions, could allow them to perform damaging transactions that you may not be able to recover at a later date. They would be violating their fiduciary duty by performing those transactions, but oftentimes it can be difficult to make a person or account whole after the damage has already been done.
On the other hand, allowing the power to take effect immediately will allow that individual to step in if there are any short-term incapacity situations (such as if they are missing, unconscious for surgery, or otherwise indisposed) and avoid the sometimes difficult evaluations and medical conclusions that have to be made in the early stages of dementia and other degradation of mental faculties. What you may think represents an incapacity to manage one’s financial affairs may not match what a doctor thinks.
On the other hand, allowing the power to take effect immediately will allow that individual to step in if there are any short-term incapacity situations (such as if they are missing, unconscious for surgery, or otherwise indisposed) and avoid the sometimes difficult evaluations and medical conclusions that have to be made in the early stages of dementia and other degradation of mental faculties. What you may think represents an incapacity to manage one’s financial affairs may not match what a doctor thinks.
A financial power of attorney is fully amendable and revocable and can be changed at any time, so you are not bound to your choice. If you are interested in setting up or updating your financial power of attorney please reach out to our office to discuss your options.
what next?
If you think it might be time to think through your estate plan, you can:

- Give us a call at 720-821-7604 to schedule a "Discovery Session" at which we can determine whether our firm would be a good fit for your needs. Or fill out our contact form to have us call you.
- Visit our estate planning page to learn more about how proactively thinking through your estate plan can protect you and your family, minimize hassle, lower the chance of family discord, and minimize or eliminate taxes.
- Learn more by reading our blog or watching our videos .
Does having a will make probate faster in Centennial, Colorado? Learn what affects timing and how clear estate planning can help your family prepare.
Can a will expire in Colorado? Learn how older wills remain valid, when to update an estate plan, and how The McKenzie Law Firm, LLC assists Centennial residents.
Losing a loved one is overwhelming, and many families are surprised to learn that financial matters can freeze instantly after a passing. When a person dies, their legal financial identity stops immediately. This means they can no longer hold property, sign agreements, or authorize payments. Even if you hold a power of attorney—a legal document allowing you to make decisions on someone’s behalf while they are alive—that authority ends the moment they pass away. Families across the Denver metro area are often caught off guard when trying to access funds to pay for immediate expenses.
Learn what happens if your main beneficiary can’t inherit your assets and discover the common will mistakes Denver families should avoid to protect their estate.
Discover what happens if a trustee misuses funds in Colorado. Learn about trustee personal liability, legal consequences, and how to protect family trust assets.,
Wondering if you can use a deceased parent’s debit card to pay their final bills? Learn why doing so can cause legal trouble and how proper estate planning helps.
Think writing a will keeps your estate out of court? Learn why a will does not avoid probate in Colorado and how proper planning protects your family’s legacy.
Learn what documents you need for medical incapacity in Colorado, including medical powers of attorney and living wills. Contact The McKenzie Law Firm, LLC today.
Learn how to choose a successor trustee for your Colorado estate plan. Discover key tips to protect your family and manage assets smoothly in the Denver metro area.
Discover why a residuary clause in a will is essential to protect unlisted assets like homes and retirement accounts from probate court in Colorado.