A financial power of attorney (FPOA) gives someone else - your agent or attorney-in-fact - the right to make financial decisions and transactions on your behalf. When you sign an FPOA authorizing this power, you become the principal. As the principal, you have the right to decide exactly what powers you're granting, when you want them to take effect, and how long you want them to last.
Some FPOAs Address Specific Situations
Limited FPOAs, also called special FPOAs, authorize your attorney-in-fact or agent to take only specific actions, such as signing checks for you. These FPOAs can also limit the amount of time during which your agent can act. If you're going to be out of the country temporarily or have a planned hospitalization, you can include both the specific time frame as well as the exact authorizations you're giving your agent.
Some Actions Need Special Authorization
Other FPOAs, sometimes called general FPOAs, allow your agent to take care of all your financial dealings and personal business. However, some states restrict your agent from taking certain actions unless you specifically mention and authorize them. For example, if your FPOA simply states that your agent has the power to handle "all your financial affairs," your agent cannot change the beneficiary on your life insurance policy, even if you request it. You haven't specifically stated that your agent has this power. Most of these exclusions are designed to prevent your agent from changing your estate plan or making gifts to others from your assets.
Different Start Dates
Many principals create FPOAs because they're concerned about who will handle their finances when and if they become incapacitated. Others may do so because they have a disability that doesn't allow them to get around easily and handle things themselves. A durable FPOA can handle both circumstances. Your agent can act for you immediately, and can continue acting for you if you become incapacitated. You also have the option of making your FPOA "springing," meaning that it's not effective unless or until you become incapacitated. Your FPOA should clearly state which of these options you prefer.
FPOAs Terminate at Death
Your FPOA only authorizes someone else to act for you while you're alive, so it's only a part of your overall estate plan. An FPOA automatically terminates at your death. You'll have to create a will or establish a living trust to appoint someone to take care of your financial affairs beyond this point. You have the right to name the same person you appointed as your agent, or you can choose someone else.
An Estate Lawyer Can Help
The law surrounding financial powers of attorney is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact an estate lawyer.