What Is a Financial Power Of Attorney?
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What Is a Financial Power Of Attorney?

A financial power of attorney (POA) is legal documentation that enables a reliable agent the authorization to act on the principal-agent’s behalf concerning financial issues. The former is also known as an attorney-in-fact whereas the principal-agent is the individual that grants the authorization. This type of POA is also known as a general power of attorney.

Key Takeaways

  • A financial power of attorney is legal documentation that enables a reliable agent the authority in making and executing financial decisions for their principal-agent.
  • In many states, a financial power of attorney is automatically deemed durable which means they stay in effect following the principal becoming incapacitated.
  • A financial power of attorney document is automatically eliminated upon the principal’s passing.

Comprehending Financial Power Of Attorney

A power of attorney (POA) is legal documentation that allows an individual the permission to act on someone else’s behalf. The authority detailed in the POA can be somewhat broad or, in many cases, limiting, restricting the agent to very particular duties. Agents designated in POAs are legally allowed to make decisions concerning the principal’s financials, property, and/or medical-health. A lot of POAs are granted when the principal has an ailment, is debilitated, or is physically unable to sign important documents.

Financial power of attorney documentation is also known as a general power of attorney and/or a power of attorney of property. This POA enables the agent the authority to manage the financials of the principal when they are unable to do so on their own.

The agent is able to legally administer the principal’s finances and property, make every decision concerning finances, and carry out all financial transactions that are in the extent of the agreement. The individual awarded POA is restricted to the agreement and are unable do anything not stated under the agreement. The agent is legally bound in making decisions in accordance with the desires of the principal but has full authorization to make independent decisions until that authority is contested and/or terminated by a court of law.

In many states, financial powers of attorney are automatically deemed durable, meaning they stay in effect following the principal becoming debilitated. In other states, when the principal wishes them to be durable, they should include that information in the POA document in addition to other details about the powers the principal is awarding.

Many states deem financial powers of attorney durable meaning they are valid after the principal becomes debilitated.

Special Information

Many states have simplified forms to fill out to name an individual your financial agent. Typically, the document needs to be signed, witnessed, and notarized.

When the agent is intended for negotiating real estate assets on the principal’s behalf, many states require that the documentation needs to be put on file in the local property records office. Lastly, many financial institutions have their own forms, and whereas it is not a requirement, it makes the process a lot easier if the financial institution is informed about the financial agent’s identity.

Financial powers of attorney are automatically eliminated upon the principal’s passing. Meaning the agent is only able in making financial decisions for the principal while they are still living. For dealing with financial issues after the principal’s passing, an executor is going to have to be designated in the principal’s will. An executor carries out particular instructions to handle the desires and affairs outlined by the deceased party.

Financial Power of Attorney vs. Other Types of Power of Attorney

Financial powers of attorney are just one sort of POA. There are many other kinds, subject to what its used for.

Limited Power of Attorney

A limited POA enables the agent limited authority and usually gives a specific termination date for the agreement. For instance, someone may name a family member or friend as a limited POA when they are unavailable to sign important documentation themselves at a particular time. In other circumstances, this type of POA could give the agent the capability to make cash withdrawals from financial institution on behalf of the principal. A limited POA is also a kind of non-durable POA.

Health Care Power of Attorney

This type of power of attorney is also known as a medical power of attorney. This POA gives the agent the authority to make vital medical decisions concerning the principal’s healthcare, particularly should they become severely ill or debilitated.

Springing Power of Attorney

A springing power of attorney only becomes effective once the principal becomes debilitated and cannot make decisions by themselves. For the POA to be effective, the documentation needs outline the specific definition of “debilitated” so there isn’t any confusion as to when the agent can start acting on behalf of the principal.

An Instance of Financial Powers of Attorney

Mark is planning an extended stay overseas that is going to last for 2 or more years but has ongoing financial responsibilities associated to property and investments back at home. Mark creates a financial power of attorney and assigns POA to his brother, who is going to remain in back home and carry out associated financial dealings. These compromises writing checks and signing vital documents associated to the investments and property.

Source:

  1. Hayes, A. (2021, May 19). Financial power of attorney. Retrieved June 23, 2021, from https://www.investopedia.com/terms/f/financial-power-attorney.asp

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