Financial POA

What is Financial Power of Attorney?

It is a legal document that authorizes another person to act on your behalf concerning financial matters. This person is called your agent or attorney-in-fact. The Financial power of attorney can be very helpful if you become incapacitated and can’t make decisions about your financial matters yourself. Your agent would be able to pay bills, manage investments, and more. In this blog post, we will discuss the basics of Financial Power of Attorney documents, the legal forms, an agent’s authority, and how it can help you protect your finances in case of an emergency.

Roles of people in a power of attorney agreement

  1. Principal – the person giving power of attorney to another.
  2. Agent – the person is given the power of attorney or agent authority and acts in place of the principal.
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What is a Durable financial power of attorney?

Financial power of attorney is simply a legal form that grants someone the legal authority to act in your place as the agent in matters concerning your finances and business. How much authority is given to the principal agents can be limiting or broad depending on what is outlined in this important document. The principal is legally bound by the agent’s actions.

Once you name someone as your agent, he/she will be given the agent’s authority to make financial decisions when you are ill, not physically present, or when disabled. Your attorney in fact can manage your finances, make financial decisions, retrieve information, and conduct financial transactions on your behalf but within the scope of the agreement such as retirement benefits. The agent will be legally obligated to take these actions for the principal.

However, it is important to note that the agent granted financial power of attorney will be limited to what you have authorized in the agreement and cannot do anything that is outside the agreement.

In some cases, the agent can make autonomous decisions if need be which can only be challenged by the court. The principal-agent needs to act in your best interests, his/her property separate from yours, maintain accurate information, and avoid conflicts of interest. The agent is supposed to act in the best interest of the principal.

What happens without these simple forms?

If you don’t have a financial power of attorney, then your loved ones will have to go to court to seek guardianship to handle your finances. You can learn more about that here. This can be a very long and drawn-out process and it is highly recommended that you hire a lawyer to handle this process.

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A medical power of attorney

They cannot make any medical decisions, principal’s health care, medical care, or medical expenses. That would require a medical power of attorney. you can find more information on medical POA by clicking here.

Financial POA is a legal document that grants powers to the agent

As stated earlier, the financial power of attorney is a legal document that gives another person legal powers to act on your behalf. Some people give their principal agents broad authority to handle their finances while others limit the powers of their agents. Below are some of the powers you can grant to your principal agent.

  • Allow the agents to use your assets to pay your everyday bills as well as your family expenses.
  • Handle your transactions with financial institutions like banks
  • Handle your social security, Medicare, and other government benefits
  • Buy or sell your assets
  • Pay mortgage and file and pay your taxes
  • Invest your money in bonds, stocks, and mutual funds
  • Manage your retirement account
  • Hire an attorney to represent you in court
  • Transfer your properties to a trust
  • How to obtain financial power of attorney
  • Assist with your retirement accounts

Most people usually think that obtaining a durable power of attorney is a difficult process. However, that is not the case. Obtaining a durable power of attorney is a simple process that will take a short time to complete. Below is a step-by-step process on how to obtain a durable power of attorney.

If you need a financial power of attorney today, click here and we will assist you immediately with the process.

Step 1: Decide on your principal agent

The first crucial process is to decide who will be your financial agent. Remember your principal agent will handle all your finances and make crucial decisions on your behalf. Therefore, you need to choose someone who is up for the task and most importantly, someone that you can trust. Before you make your final decision, talk to the person you have in mind to know whether they will accept to be your agent and act in your best interests.

Step 2: Decide on roles to assign your principal agent

Once you have chosen your principal agent, the next crucial process is to determine the roles to assign him/her. You need to be careful here because any role that you assign the principal agent will impact your finances. Only assign roles that you are comfortable with.

Step 3: Get the financial power of attorney form

If you don’t have the state’s official form, you can go through a law firm to get the forms but this can be an extremely expensive method to get them. If you are going through the process of your estate planning needs and the attorney forms are part of these important documents, then it is best to pay these higher fees.

If you simply need a medical and financial power of attorney, click here and we can provide not only the needed forms but we can have a notary public bring them to you that has experience with the signing process.

Step 4: Fill out the form

If you are filling out the form yourself. Read each line carefully and make sure you don’t make any corrections on the paperwork. There are many banks that will reject a financial POA if even the date is corrected with the signer’s initials. This is a step they take to prevent fraud.

If you have us fill out the forms for you, we can have the forms completed so when you are doing the signing with the notary, everything is already in order and it will prevent the chance of any errors during the signing process.

Step 5: Give your agent a copy of the legal form

Once you are done filling out the form, give your principal agent a copy of the form. You can also give other people who are special to you like your spouse a copy of the form. Your principal agent will be required to present the form in order to be allowed to handle your finances when you are incapacitated.

You also need to submit a copy of your financial power of attorney to the local land record office to give your principal agent the authority to execute your finances when you are not able to. If you haven’t, generally the title company you are dealing with will take care of the filing of this document when doing any form of real estate transactions.

Step 6: Keep a copy of your own forms in a safe place

Once you have given your agent a copy of the form as well as submitted a copy with your local land records, keep the remaining copy in a safe place. This could be in a safe or an attorney’s office that you trust. You should also make a digital image of the document and store it not only on a separate flash drive, but you should also email a copy to your agent so that they can present it when needed to exercise the agent’s power.

Step 7: Update the form when necessary

If something happens that forces you to update the form, update it to keep it current. This will ensure that anything that is executed on your financial power of attorney is per your wishes. You can update the form as many times as you wish.

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What limits should I give my agent?

Just like any other form of agreement, these legal forms can give an agent broad power over your business. If you feel that the standard form for a financial POA form gives your agent more control than you would wish, you can set a limit on your financial power of attorney to avoid conflict with your principal agent. Below are some of the limits to include in your financial power of attorney.

  • You should maintain accurate records of transitions that you make of all financial accounts
  • You should avoid any situation that will create a conflict of interest between my finances and yours.
  • You should manage my finances properly and honestly.

Financial power of attorney and medical power of attorney, what is the difference?

Most people are usually not able to differentiate between financial power of attorney and medical power of attorney. The difference between the two is simple, financial power of attorney allows your principal agent to make crucial decisions about your finances, business and property on your behalf. On the other hand, medical power of attorney allows your healthcare agent to make decisions about your medical care when you are not able to.

Importance of having a durable financial power of attorney

Now that you know what a durable financial power of attorney means, you may be wondering why you should have one. In this section, we will discuss the importance of having a durable financial power of attorney.

It gives you and your family peace of mind

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One of the benefits of having a power attorney is that it gives you and your family peace of mind. Having a financial POA before you even need it will give you and your loved one peace of mind because you both know that your finances are secure even in your absence. For instance, if you become too sick to manage your finances, your principal agent will step in immediately thus ensuring that your family is not affected. If you don’t have a financial power of attorney, your family will have to go to court to be appointed guardianship. To avoid this, you should have a financial POA in place before you even need it.

You avoid dealing with the court

If you don’t create a financial power of attorney, then the court will do it for you in case you are not able to make financial decisions on your own. The court may appoint someone who does not have your interest or may make financial decisions that will hurt you and your family. To avoid this, then you need to create a financial power of attorney to appoint an agent who has the best interest at heart.

Who may need a financial power of attorney?

Anyone who has assets needs financial power of attorney. Life is unpredictable, meaning we all don’t know what will happen in the future. You may get severely ill and thus be unable to execute your finances. Having a financial power of attorney will ensure that your finances are well managed when you are not able to.

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This document is highly recommended for:

  • Elderly people whose mental and physical abilities are deteriorating
  • Someone with a severe disability or mental illness
  • A child who is under the care of another parent because their parents cannot take care of them

List of things the agent cannot do with a financial POA

The person that you name as your principal agent cannot do the following

  • Make decisions for you after death
  • Change your last will
  • Transfer grant of power to someone else unless you name a successor agent
  • Act on his own self-interest
  • What is the difference between a limited and durable financial power of attorney?

A durable power of attorney is a document that gives the agent the authority to make decisions about your finances immediately once you sign the document. This authority will continue until you revoke the document or until your death. On the other hand, a limited power of attorney starts when certain conditions exist and ends upon your demise.

When does financial power of attorney end?

Things that affect the end of a POA.

  1. If there is an end date for the POA, it will end on that date.
  2. It will end when the principal becomes incapacitated or dies.
  3. If your agent is your spouse and you get a divorce.
  4. If it is a limited or special power of attorney and the terms have either been met (i.e. a particular transaction like the purchase of a specific property) click here for information on a special or limited power of attorney.
  5. if you revoke it.
  6. The court invalidates the document.
  7. You get divorced.

A Principal’s death

Your financial power of attorney will end immediately upon your demise. This is because it is not possible to give your principal agent instructions on what to do with your finances when you are dead. If you want your principal agent to handle your financial affairs upon your demise, then you have to appoint him/her as your executor.

The court invalidates

This scenario is not common but it could happen because you were not of sound mind when creating the document or you were under duress then the document will be terminated.

If your spouse was your agent and you get divorced, then that will be the end of the document. You can also revoke the financial power of attorney if you have granted your ex-partner that role.

For more information about Divorce, papers click here.

When does a financial power of attorney take effect?

The financial power of attorney will be effective immediately when you sign it. An exception to this rule is if it is a springing power of attorney. In this case, it will be effective only after a pre-set condition happens. Such as, after a child’s 18th birthday, or a particular transaction that takes place. For more information on springing power of attorney, click here.

Durable or nondurable power of attorney

You need to specify from the onset whether you want your financial power of attorney to be durable or limited. In most states, if you don’t specify then your financial power of attorney will end once you become incapacitated.

Conclusion

A financial power of attorney document is a very important tool for people that can become important when you least expect it. It is best to have this setup like, like a last will, before it is ever necessary.

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