Basics of a financial power of attorney
A financial power of attorney can be used to appoint an
attorney-in-fact (which is not necessarily a lawyer) or
agent to act on behalf of the
principal (the person creating the power of attorney) for a planned or unplanned event.
If the principal will be traveling an unable to tend to financial matters back home, a financial power of attorney could be executed to allow the attorney-in-fact to act on behalf of the principal.
Should the principal lose mental capacity to make his or her own financial decisions, a durable financial power of attorney is needed. Otherwise, a court will be needed to appoint a guardian or conservator.
Power of Attorney Types
A "
limited power of attorney" defines only certain transactions or acts that should occur, such as buying or selling a home or car while the principal is out of town.
A "
general power of attorney" allows the attorney-in-fact to handle a wide range of responsibilities.
A "
durable power of attorney" allows an attorney-in-fact to continue acting if the principal becomes incapacitated. Limited power of attorneys and general power of attorneys terminate should the principal become incapacitated.
Actions of a financial power of attorney
Attorneys-in-fact are held to a code of contact as "fiduciaries". They are legally responsible for misconduct and can be punished both civilly and criminally.
To reduce any risk of being personally responsible for what is signed, the attorney-in-fact should add to his or her signature ", as attorney-in-fact for Jane Smith".
Third parties, such as financial institutions, may not immediately recognize the attorney-in-fact. Third parties might require a short time to have their legal department ensure the document's validity, check on the status of the principal and other reviews to reduce their own liability. If a third party continues to delay or refuse the power of attorney, a court may order the third party to accept the document and be responsible for any losses due to the delay in access to the accounts. Contact a legal professional if you have these difficulties.
Successor trustees act as the financial power of attorneys for assets in a living trust. Those listed as financial powers of attorneys do not have the ability to manage living trust assets.
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