Power of attorney refers to a legal document that grants an agent the legal right to make decisions on behalf of another individual. The individual in question chooses the agent ahead of time and grants them this power, often in case of emergency or accident. One form of power of attorney is a financial power of attorney.
What is a Financial Power of Attorney?
A financial power of attorney is a legal document that allows another person, an agent, to make financial decisions on your behalf if you are unable. An agent can also help you execute a financial transaction if you will not be available – such as authorizing an agent to sign real estate paperwork.
What Does a Financial Powerof Attorney Do?
Financial power of attorney essentially allows someone else to make financial decisions on behalf of the signer. Financial power of attorney is often reduced to situations where the person in question is mentally unable to make financial decisions. This can be due to an injury, disability, or other circumstances. It should be noted that this only stands while the individual is considered unfit. Once they recover, the agent no longer has authority to make decisions on their behalf.
However, financial power of attorney can also be granted so an individual has a representative capable of signing financial documentation without having to be physically present. For example, someone with limited mobility or someone who frequently travels abroad could both benefit from having someone act as their financial agent. In cases like this, the agent is acting with knowing approval from the individual in question, and is merely acting as a stand in. This is also common between married couples.
Another misconception about financial power of attorney is that an agent has complete control over the financial affairs of the signer. This is not true. A financial power of attorney lays out the exact situations and guidelines the agent has to follow. If something is not stipulated in the power of attorney, the agent cannot act on behalf of the signer.
For example, a financial power of attorney may grant an agent the power to pay bills and medical costs on behalf of the signer, but not allow the agent to make financial decisions regarding property investment or inheritance. This protects the signer’s assets and assures that their agent acts in good faith.
Does Financial Power of Attorney Override a Spouse?
Spouses often share finances and have equal say in making joint financial decisions. However, marriage does not automatically grant financial power of attorney. If a husband were to establish a financial power of attorney and became unfit, the financial agent would have jurisdiction over financial decisions made on his behalf.
Spouses should discuss their financial wishes ahead of time and establish if they would ever want to establish a financial power of attorney. In the case of a husband and wife deciding to grant each the right to make financial decisions, a formal financial power of attorney should be filed. This will prevent any legal confusion later on and ensure that a spouse will not be challenged when acting on behalf of an unfit partner.
What is Durable Financial Power of Attorney?
Durable financial power of attorney refers exclusively to situations where an agent is making decisions on behalf of an unfit individual. This is often the most commonly known form of power of attorney. The “durable” aspect of the name represents the possible longevity of this type of power of attorney. As long as the signer is considered unfit or incapable of making financial decisions, the durable financial power of attorney will act on their behalf.
How Do I Get a Financial Power of Attorney?
To assign a financial agent, a financial power of attorney form must be filled out and signed. Additionally, the document must be notarized or witnessed and the individual must be of legal age and mentally competentant.
How Do I End a Financial Power of Attorney?
In cases where an individual wishes to revoke financial power of attorney, such as divorce or an agent that no longer wishes to represent the signer, financial power of attorney can be revoked. A revocation of power of attorney form will be needed that includes information like your name and the date of filing, a declaration that you are mentally fit, a request for removal along with the name of your agent, and your signature.
For family members looking to end a financial power of attorney, the process becomes more complicated. In situations where the signer is unfit, but the family wants to end or change financial power of attorney, they must prove before a court that the current financial agent is not acting in the signer’s best interest.
A financial power of attorney can be a versatile and powerful document. You can ensure that your financial matters are handled expeditiously and in accordance with your wishes. Contact the experts at Legal Docs by ME for information and assistance.
Financial Power of Attorney by Adam Hayes for Investopedia