Trusts and Estates

Who Needs a Financial Power of Attorney?

Usually, we like to feel that we are on top of making our own financial decisions. We pay our bills, transfer money between our accounts and make our investments (good and bad).

But sometimes, this is not possible. Maybe you are traveling to a remote area for an extended period of time. Maybe you have suffered illness or injury and are not up to making these decisions. Maybe you are getting older and finding it more difficult to keep track of your finances.

At times like these, you need to grant someone financial power of attorney.

What Is a Financial Power of Attorney?

A financial power of attorney (also called a durable power of attorney) is a written legal document that allows you (the principal) to give authority to another person (your agent or attorney-in-fact) to make financial and legal decisions and financial transactions on your behalf.

(A financial POA differs from a healthcare POA, which focuses on healthcare decisions.)

Your agent can be any adult that you trust, such as a spouse, partner, relative or friend. A nonprofit agency can also fill this role. You should name an agent and an alternate. Be very careful with this decision, since your agent will have broad authority to act on your behalf.

With a financial POA, there is no ongoing court supervision of the agent. With a conservatorship or guardianship, the agent is required to submit an ongoing accounting to the court.

Financial POAs Can Be Limited or General

Limited financial powers might allow your agent to read your mail and sign checks. General powers might allow your agent to completely manage all of your finances, including the flexibility to sell a residence or plan for government benefits like Medicaid. Be clear about which powers you are granting.

Some financial POAs are very simple and used for single transactions, such as closing a real estate deal on your behalf when you have moved across country before you were able to sell your home.

When Does a Financial POA Take Effect?

A financial POA can take effect the day that it is signed and executed. It can be withdraw or changed at any time, as long as you remain competent. Alternatively, it can be executed to be in effect for a specific amount of time (like the period you will be hiking the Appalachian Trail).

A “springing” financial POA becomes effective at a later date. It is triggered by some future event, such as the loss of capacity to manage your own affairs, as certified by a physician or some other designated individual.

A financial POA does not continue after your death. At this time, responsibility for your financial affairs passes to the executor named by your will or, in the absence of a will, by the court.

How Do I Execute a Financial POA?

An adult must be competent in order to execute a valid financial POA. You must sign your financial POA in the presence of either two qualified witnesses or a notary public, or perhaps both.

Pre-printed forms are available. However, a lawyer can help make sure that your financial POA is state-specific and customized to your individual needs. Some banks and brokerage companies will require you to use their own forms in order to carry out financial transactions with them.

Call an Estate Planning Lawyer

The issues surrounding financial power of attorney can be complicated. Plus, the facts in each case and the laws in each state are unique. This article provides a brief, general introduction to the topic. It is not legal advice. For more detailed, specific information about your own situation, please contact an estate planning lawyer.

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