At some point people with a chronic disease or terminal illness may become incapable of making or unwilling to make important decisions about their finances, estate, and/or business and may need a reliable person to take over long-term or permanently. This also can be useful for short-term situations, such as major surgery or a temporary impairment of mental status.
Financial power of attorney is an important part of estate planning. It is a document that allows you, the principal, to give legal authority to at least one other person, usually a spouse, adult child, or other close relative, to act for you on behalf of your estate. Multiple agents can be chosen, but they must be able to work smoothly together to prevent major conflicts, including scheduling conflicts, that can delay decisions.
This person is typically referred to as your agent or “attorney-in-fact” and can act independently, even without consulting an attorney. Financial POA can either be durable or limited based on the purpose of the particular circumstances.
Power of attorney is granted using a legal document that must be notarized and should be presented to any party your agent is dealing with. The power is limited to the actions listed in the document, which may be further limited by state-specific laws. Many states have an official financial power of attorney form to assist with this.
While most parties accept a POA, it is not required by law. To increase the chance of a POA being accepted your attorney-in-fact needs to always bring a certified copy of the POA document with them along with a recognized form of identification and any other corroborating documents, such as a medical provider’s confirmation of disability.
You should regularly review and revise the power of attorney document when circumstances or preferences change, such as moving, changes in your estate that require different actions, a divorce, or death of an agent.
If you do not plan ahead the courts will become involved and you may be unable to manage your estate and have a say in who is chosen as guardians, conservators, or committees to manage your estate.
Power of attorney (POA) is not a single entity but a flexible tool to accommodate a variety of situations. In many cases you may be sharing decision making with your agent, especially if you are only physically unable to perform financial responsibilities.
The terms used for a POA can be confusing since they are called types of POAs. Basically each POA has four characteristics that determine the purpose of the POA and contribute to the name of the POA; duration, area of authority, scope of authority, and when it begins.
Traditionally Power of Attorney will be in effect until any of the following:
The most important thing when choosing an attorney-in-fact or agent is to choose someone you trust, although they can’t be a minor or unable to function as your agent for whatever reason. Many states will have specific restrictions, such as a history of criminal behavior.
Integrity is key, so pick someone who will look out for your best interests, respect your wishes, and won’t abuse the powers granted to them. An agent is held legally responsible only for intentional misconduct, not for unintentional errors.
You will most likely choose a family member, such as your spouse or adult children. You may also choose a friend, another relative, organization, or a professional such as an attorney.
You may choose two or more co-agents, with similar or different responsibilities based on their strengths and weaknesses.
There are numerous considerations when naming your children as attorney-in-fact other than trust, willingness to look out for your best interests and respect your wishes, and not intentionally abusing the powers granted to them. Being chosen should not be a reward for loyalty, this may only disrupt family harmony, if you lack trust. Consider not naming a child as your agent if:
Many of the powers you could give to your agent are regulated by and differ from state to state. If you have assets in different states, make sure that state allows agents to perform those actions.
Remember that, whatever actions you want your agent to do, they must be spelled out in detail in the document. Some may need to be authorized by the state. For example, some states allow your agent to make gifts legally, while in other states the agent needs to have it explicitly authorized in their power of attorney document.
Common powers or actions include any or all of these.
Financial and legal matters
Seeing to the upkeep of your residence.
Specify that they can make medical decisions. However a separate Healthcare POA or Proxy is better for this.
A POA that includes both financial and healthcare provisions will have your personal medical and financial information, however if you would like to use professionals, it would not be appropriate for the broker to have your medical information any more than your medical professionals need to know your financial status.
Actions by the agent need to be signed in a specific way, usually either of:
Actions that can’t be performed include:
Like a trust — see Guide to Understanding Trusts in the introduction to the Trusts section, when creating a power of attorney (POA) don’t worry about what type of POA you need, focus on the characteristics you want your POA to have. Once you have made all these decisions, you can see a professional or download Free Power Of Attorney Forms at any of these locations.
Some banks and other institutions prefer their own POA forms, which makes it easier for your agent to deal with them.
Fill in the form including the following.
If required in your state, your agent must read, affirm, and accept the power they have been given and how important this is for you.
If your agent be managing your real estate assets, some states require that the document must be placed on file in the local land records office.
These are some common reasons for changing agents or powers or revoking the POA.
Your child may be able to change your power of attorney in the few situations that it may be needed. It may be simple or difficult, time-consuming, and expensive.