The financial power of attorney is a legal document that enables the designated person to manage the financial affairs of another person.
How does financial power of attorney work?
When a person establishes a financial power of attorney, they allow another person to act on their behalf in financial matters. The person granting the power is called the “principal,” while the person receiving the power is called the “agent” or “attorney-in-fact.”
If an individual is in a position where they want to assign someone else to a financial power of attorney, they will need to find the necessary financial power of attorney form required by their state.
The form typically asks for identifying information about who the principal is and who the agent is, as well as what powers are granted. It may also ask for the duration of the financial power of attorney. You can also designate an alternate agent in case the original agent passes away. Finally, it may need to be notarized by a notary public.
Once approved, the agent will have the ability to act according to the powers granted in the legal document. An agent given a financial power of attorney can take actions such as:
- Managing the principal’s retirement accounts
- Processing banking transactions and credit cards
- Filing tax returns and paying taxes
- Selling property
- Managing benefits from Medicare and Social Security
- Paying bills
- Withdrawing funds from accounts
If no expiration date is specified in the financial power of attorney form, it typically ends upon the death of the principal. However, if the principal is competent, they can revoke the power at any time using another signed legal document.
Examples of financial power of attorney
One example is a woman in the military who is deployed. However, she and her husband are trying to sell their home and buy a new one. It is likely that everything will be ready during her absence, so she gives her husband financial power of attorney. Thus, he can sign the papers on her behalf.
In another case, a man is diagnosed with dementia. To plan for his future incapacity, he establishes a financial power of attorney naming his son as the agent. Furthermore, the financial power of attorney is “durable,” meaning it will remain in effect even when he becomes incapacitated.
Revoking financial power of attorney
In general, you can revoke financial power of attorney by writing a revocation letter and delivering it to your agent. You should also request any financial power of attorney documents the agent has and send a notice of revocation to any financial institutions that received the financial power of attorney documents.
Check with your state’s attorney general to learn any specific details or nuances about revoking financial power of attorney.
Abuse of financial power of attorney
Unfortunately, abuse of financial power of attorney is a problem. Therefore, it is important to use financial power of attorney only when necessary. You should also choose someone you trust and ensure that others are aware of the situation and monitor for proper management.
General power of attorney vs. limited power of attorney
If you assign financial power of attorney to someone, you can specify the extent of authority they will have over your affairs. A general power of attorney grants the broadest powers, while a limited or “special” power of attorney authorizes the agent to handle only specific matters or transactions. Generally, it is advisable to limit the powers to the minimum necessary.
Source: https://www.thebalancemoney.com/what-is-financial-power-of-attorney-5213683
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