To protect yourself and your loved ones, you should execute a power of attorney authorizing someone (an “agent”) to act on behalf of someone else (the “principal”). If you name your daughter Jane as your agent, she can sign contracts on your behalf, buy and sell investments, etc.
For incapacity protection, be sure to execute a “durable” power of attorney. A durable power will remain in force if a court finds that you have become incompetent.
What if you are reluctant to have a power of attorney in someone else’s hands, while you are still competent? In many states, you can have a “springing durable power of attorney,” which will take effect only under certain specified circumstances. For example, your springing power might take effect only after two doctors, including your personal physician, have determined that you have become incapacitated.
No matter what type of power you choose, have it updated every few years. Your circumstances may change, leading you to name another agent, and some financial institutions won’t accept old powers of attorney. Moreover, you should check with your bank, broker, and mutual fund company to see if they will accept your power or if they’ll insist that their own form be used.