24+ Sample Financial Power of Attorney

What Is a Financial Power of Attorney?

When you desire to give someone else the power to make financial choices for you, you’ll need an economic power of attorney. And it’s usually done in tandem with your will. This type of POA is designed to allow someone else to act as your legal representative for financial problems. Like other powers of attorney, the individual who forms a financial POA is known as the principal—in this case, you. No, being the principal does not imply that you will place students in detention. A principal in the context of a POA is simply the individual whose funds are being safeguarded. The agent or attorney-in-fact is the person you pick to handle your money when you cannot do it yourself. According to statistics, approximately 25 to 30% of households in the United States have estate planning documents in place. This means that some individuals do not have documents to address how they want their financial affairs handled if they cannot do so independently during their lifetime.

Benefits of Financial Power of Attorney

The principal voluntarily delegated authority to the agent through the use of powers of attorney. The principal has not relinquished their control to perform these same functions but has instead vested the agent with legal authority to perform various tasks on the principal’s behalf. In most states, powers of attorney are unilateral contracts – that is, they are signed solely by the head but accepted by the agent through the act of performance. After defining what a durable power of attorney is, here are the top 10 reasons to have one.

Allows you to choose who will make decisions for you: If a person approves a power of attorney and then becomes incapacitated and unable to make decisions, the agent chosen can step into the incapacitated person’s shoes and make critical financial decisions on their behalf. If you don’t have power of attorney, you may need to establish a temporary guardianship or conservatorship, which can be pretty costly.It eliminates the need for guardianship or conservatorship: Suppose someone does not have a comprehensive power of attorney in place when they become incapacitated. In that case, they will have no alternative but to petition the court to appoint a guardian or conservator. The court will pick someone to manage the incapacitated person’s financial and health care affairs. The court will monitor the situation for as long as the incapacitated person is alive. While this is a costly process, another disadvantage is that the incapacitated individual has no say in who is appointed to serve.Gives family members a chance to talk about their hopes and dreams: The absolute power of attorney is the result of a great deal of study and consideration. Who will act as the agent is one of the most crucial decisions? When a parent or loved one decides to sign a power of attorney, it’s a good time for the parent to talk about their wishes and expectations with the rest of the family, especially the person selected as the power of attorney’s agent.The better power of attorney, the broader it is: Everyone’s needs change as they get older, and their power of attorney should reflect that. Long-term care, qualifying for government benefits to pay for care, and finding the right care providers are all issues for seniors. Valuable time and money may be squandered if the agent cannot execute these and other responsibilities.Prevents any doubts regarding the principal’s intentions: Many of us have heard about court arguments concerning a person’s purpose after being rendered unconscious. A carefully drafted power of attorney, as well as other healthcare instructions, can prevent family members from arguing or disagreeing about a loved one’s intentions. This paper, once written down, provides good evidence of their intent and is difficult to refute.Prevents asset protection planning delays: Ample power of attorney should include all of the capabilities required to do effective asset protection planning. If a power of attorney does not have specific management, it can significantly dampen the agent’s ability to complete the planning and result in thousands of dollars lost. While some powers of attorney seem long, it is necessary to include all of the capabilities required to carry out proper planning.Defends the agent against allegations of financial mismanagement: To carry out asset protection planning objectives, broad powers of attorney often allow the agent to make considerable gifts to himself or others. Without a power of attorney authorizing this, the agent (typically a family member) may be subject to claims of financial abuse.Agents can communicate with other agencies: A representative representing under a power of attorney is frequently placed on reconciling bank charges, arranging for health care, engaging professionals to provide services to the principal, and much more. Without a comprehensive power of attorney vesting the agent with authority, many businesses will refuse to disclose information or provide services to the incapacitated individual. This can cause significant frustration for the family, as well as lost time and money.Allows an agent to plan and execute transactions for the principal to be eligible for public assistance: Transferring assets from the principal to others to make the principal eligible for public benefits — Medicaid and non-service-connected Veterans Administration benefits – could be argued to be in the best interests of the transferees, not the principal. Indeed, a Judge may not be inclined to enable a conservator to protect assets for others while improving the ward/protected person’s eligibility for public benefits, which is why a thorough durable power of attorney is vital in Elder Law. However, that may have been the incapacitated person’s wish, which would be unmet if a power of attorney had not been established.Everyone concerned has peace of mind as a result of this: Taking the effort to sign a power of attorney relieves family members of the hassle of going to court to obtain authority to execute basic things such as writing a check or arranging for home health services. Families can rest easy knowing that this has been taken care of ahead of time.

How to Establish a Financial Power of Attorney

A financial POA is a legal document that appoints an individual — or, in some cases, an establishment such as a bank or trust company — to manage another person’s financial affairs. It can be used to make life easier for your parents or other loved ones, even if they continue to make decisions and handle some financial matters independently. Alternatively, it can be used to manage all of their financial affairs if they cannot do so themselves. First, it’s a good idea for you and the person in your care to become acquainted with the fundamentals of how a financial power of attorney works. A financial power of attorney can be used to alleviate the burden of managing financial affairs. The document may authorize the appointed individual — referred to as an “agent” or “attorney-in-fact” — to handle routine financial matters such as rent, insurance, and doctor’s bills, as well as significant financial transactions such as asset sales or management of a business, property, or investment contracts. With this, establishing a POA entails several steps. It may be reasonable to consult with a lawyer throughout this process. The following is a high-level overview of the steps you will take:

Step 1 Determine whether or not one is required.

In a few instances, a power of attorney is not required. A power of attorney may be unnecessary if all of a person’s assets and income are held jointly with their spouse, as with a joint bank account, deed, or brokerage account. Even if spouses have joint accounts and property titles or are beneficiaries of a living trust, a durable power of attorney is a good idea. This is because one spouse may have acquired assets or income that were not disclosed in the standard reports or in good faith or that were not disclosed in the standard reports or good faith. A strong power of attorney can appoint an agent — who may be the same person as the trustee of the living trust — to deal with these issues as they arise.

Step 2 Choose an agent.

In the POA, one adult will be designated as the decision-making agent. Individuals and families may require assistance in determining who is the best candidate for this role. An attorney, a religious leader, or a family counselor can all assist you in this process. Selecting an agent capable of carrying out the obligations while being willing to accept other people’s perspectives as needed is a good idea.

Step 3 Consider the standard forms.

You may discover that certain states, as well as your family’s bank or specific financial institutions, prefer to employ POAs. These can also be used as resources when you put together a POA for a loved one. Financial organizations may mandate that a specific format be utilized in some cases, so check with any bank statements or brokers that your elderly loved one uses before drafting the paperwork.

Step 4 Notarize the written POA and distribute copies to key individuals.

A POA must be drafted, witnessed, and notarized to be valid. With the possible exception of a POA connected to real estate, you do not need to submit it with a court or government office. Keep in mind that a verbal agreement, as well as a hastily prepared letter or note, is not considered a legal POA. Once you have a properly signed and witnessed POA, maintain a copy in a safe place and make sure that anyone attending for your loved one has a copy or is aware of who the agent is. Make sure the agent also has a copy.

Step 5 Review the POA regularly.

A financial POA must be prepared ahead of time. Because time is unpredictable, and a POA could remain in place for years or decades, you should all examine it regularly. Keep an eye on whether the person designated as the agent is still willing and capable of fulfilling that role, as circumstances and laws may change.

FAQs

What determines the validity of a power of attorney?

When individuals grant power of attorney, they must be mentally competent. The process of having witnesses sign the document helps ensure its authenticity and the competence of those involved. Additionally, their signatures must be notarized, which lends additional credibility. Further, if they retain the services of a lawyer to prepare or review the documents, the lawyer’s contact with them will bolster their competence at the time.

Is a POA agent compensated?

The person who administers a power of attorney determines whether or not the agent is to be compensated. If the job is straightforward and performed by a close family member, payment is rarely made, though he may choose to do so. If the job is likely to be complex and time-consuming, or if it will be handled by someone who is not close, the agent should be compensated hourly. In either case, the agent is entitled to self-reimbursement for reasonable expenses incurred. It is good to keep track of the hours spent on the job and any receipts required to justify reimbursement.

What are the dangers of signing a POA?

The agent has a lot of authority with a financial POA. While somebody will take this obligation seriously and act transparently, this power level may increase the possibility of elder financial exploitation. It’s a good idea to make decisions with a group of family and friends, be willing to present documentation of the decisions made, when they were made, and why they were made. However, you may have grounds for reporting elder abuse if you feel that an agent uses an older’s financial statement for reasons other than care for the aging adult or if funds are suddenly depleted without explanation.

A power of attorney is valid in every state. When a power of attorney is signed, the agent’s abilities and acts are governed by the state’s laws in which they reside when the document is signed. If they often do financial activities in another state, a separate power of attorney prepared using the state’s particular legal form is not a terrible idea.

A financial power of attorney is an effective estate planning tool that can help you plan for the unexpected. If you are harmed in an accident and cannot communicate, your loved ones will be unable to access the finances essential to provide for your care if you do not have a power of attorney in place. Furthermore, unless you have taken the required measures to establish a medical power of attorney, your loved ones may be unable to communicate your preferences for your nursing care.