Understanding Financial Power of Attorney
Here’s all you need to know about financial POA:
What is the purpose of financial POA?
The primary purpose of financial POA is to protect the principal and their family from a legal battle. The POA ensures that the principal’s finances will continue running smoothly, regardless of what happens to them.
How does a financial power of attorney work?
Financial POA allows the designated agent to manage all of the principal’s financial matters. This includes paying bills, managing all accounts and investments and signing financial documents.
Financial POA is most commonly used when the principal is out of commission due to a medical emergency. In the event of a hospitalization, for example, having a financial POA in place will allow their finances to continue running smoothly until the agent is capable of making financial decisions again.
Which powers are granted to the attorney in a financial POA?
The extent of authority a POA grants can vary greatly, depending on how it’s worded. Most POAs extend the following powers to the agent on behalf of the principal:
- Make financial decisions
- Manage the principal’s accounts and investments
- Manage the principal’s property
- Conduct financial transactions
- Collect retirement benefits
- Pay bills
- Pay medical expenses
- Pay taxes
- Purchase insurance
- Sell assets
When does a power of attorney become effective?
The circumstances that dictate when a POA becomes effective will vary according to how the POA is worded. It may become effective as soon as it’s signed, or only upon the occurrence of a future event as indicated in the document.
If the document stipulates that the POA is effective immediately, the agent can act upon the principal’s account even if the principal is not incapacitated in any way. This kind of POA is often used for an agent to represent someone who travels often and may not be physically present to make important financial decisions.
Usually, though, a POA only becomes effective if the principal can no longer manage their own finances because they have become incapacitated, or one or more doctors have certified that they are physically or mentally unable to make decisions.
When does a power of attorney end?
The authority conferred by a POA will always end upon the death of the principal.
Unless otherwise indicated in the contract or state law says otherwise, the POA also ends if the principal becomes incapacitated. If the authority continues after incapacity, it is called a durable power of attorney, or a DPOA. POA could also end if revoked by the principal, if its invalidated by a court, or possibly upon divorce if the agent was a spouse.
What are the potential consequences of not appointing a POA?
If an individual becomes incapacitated for any reason and they have failed to appoint an agent to act on their behalf, their financial matters will generally be left up to the government of their home state. Appointing a financial POA is generally a good idea in order to avoid that situation.
Can anyone be granted power of attorney?
Most states have very few guidelines for who can serve as a financial agent. The only general stipulations are that the document be signed, witnessed and notarized. Of course, it’s best to choose someone you trust to responsibly manage your finances in your stead.
After working with a licensed attorney to set up a POA, our financial representatives can help you open a POA Account, or have POA added to your existing account(s). Reach out to us at (877) 937-2328 or come into your local branch for more information about powers of attorney and whether or not designating one is right for you.
Your Turn: Have you drafted a POA? Tell us about it in the comments.
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